Penalties for Insurer Noncompliance
When Insurance Companies Do Not Act in Good Faith
Insurers have to abide by certain rules when it comes to serving their clients. In essence, insurers are required to respond within a “reasonable amount of time” to insurance claims. For Texas, this window is exactly 15 days, so for the other states “reasonable” may mean within a month at the most. Insurers are also required to “deal in good faith,” providing honest processes and payment to clients.
Payment for claims that include proof of loss must be disbursed within two to three months, or the insurance company must provide official, honest explanation as to why payment is delayed or denied. Because the stakes of economic, physical, and mental health are at stake in health and accident claims, state law protects clients from fraudulent or negligent insurance companies through strict punishments and legal liability.
Insurance Companies Pay for Failing to Comply
If an insurance company is found guilty of not investigating claims promptly, delaying payment, or denying payment for unjustifiable reasons, they must pay damages to their client.
Texas and Louisiana law use the amount withheld from the client as a calculator; Texas insurers must provide three times the payment withheld, and Louisiana must pay two times the payment. In both states, insurers must also pay for attorney fees. In Texas and Mississippi, insurers are also liable to be sued for breach of contract. In Mississippi in particular, insurers are also vulnerable to paying for punitive damages in extreme cases of negligence, as well as mental anguish damages when the insurer has “no arguable reason” to deny benefits. Through these laws, all three states acknowledge that insured individuals have the right to prompt benefits, or at the very least an arguable and legitimate reason for denial.
Insurance Noncompliance Penalty FAQ
Can Insurance Companies Be Penalized for Late Payments?
Yes. State laws exist that provide a limit on how long an insurance company must pay out a claim. If they’re late, they face penalties, interest charges, and other fees for the delay.
Are Insurance Companies Required to Respond to a Claim Quickly?
Yes. Insurance companies are required to respond within a “reasonable amount of time” to a claim. If they delay responding to a claim for too long, they are acting in bad faith. For example, in Texas, state law requires insurers to respond to a claim within 15 days of receiving it.
Why Do Insurance Companies Delay Claims?
If you feel like your insurance company is purposefully taking as long as legally possible to handle your claim, it’s likely because they are. Delaying claims is an old insurance tactic that’s designed to frustrate claimants and place stress on them because of their need for money. Insurance companies hope that delaying a claim will get a person to accept a lower payment out of desperation. If you think your insurance company is using delay tactics, you should speak with an insurance delay lawyer as soon as possible.
Get the Help of Skilled Insurance Noncompliance Attorneys
Arnold & Itkin's team of insurance claim lawyers represent individuals who have been robbed of their rightful coverage. Our experience with insurance companies across the nation has allowed us powerful insight into insurance law and insurer tactics. We fight on behalf of our clients to ensure that they receive the compensation and help they deserve in challenging times. If you have experienced a delay or denial of coverage that resulted in losses for you, financial or medical, do not hesitate to reach out to us as soon as you can.
If you have reason to believe that your insurance company has breached the contract, you have the right to hold them liable. Contact us for a free case evaluation. We're here to help.