The unfair claims settlement provisions of the Texas Insurance Code and Chapter 17 of the Texas Business and Commerce Act are tied together so a violation of the Texas Insurance Code is also a violation of the Texas Deceptive Trade Practices Act.
The Texas DTPA allows a jury to award up to treble the actual damages if the policyholder can prove knowing conduct. Both statutes have notice provisions, which generally provide that a policyholder must send written notice to the insurance company sixty days before filing suit. We refer to this as the “sixty-day notice letter.” Sending written notice sixty days before suit is a condition precedent. If the policyholder files suit without first sending written notice, the insurance company has grounds to abate the case until sixty days after the insurance company received written notice of the claim.
Some of my Hurricane Ike cases came to me very close to the two-year deadline to file suit and, out of an abundance of caution, I filed suit before sending written notice. In each case the insurance company filed a Plea in Abatement and in each case the court granted it. I would then have to send a notice letter and wait sixty-days to file a motion to set aside the abatement. Precious time was lost.
I have two points upon which we should rethink the sixty-day notice letter. First, it is natural for lawyers to plead their case wherever they can and the sixty-day notice letter is certainly a place where I have taken great pains to set out my client’s claim in every detail. My sixty-day notice letters have become very detailed and argumentative sixty-day demand letters of five or six pages. I am now of the opinion those types of letters are unnecessary. Second, when I get hired on a new case, it is very frustrating for me and my new client to have to wait sixty-days to file suit when the facts show that the insurance company has set its jaw not to pay and we know that my notice letter will do nothing to cause the carrier to pay more money on the claim. The sixty-day letter is a useless waste of time. It would be nice if my client’s sixty-day notice letter were already in the insurance company’s hands when I get hired so I can file suit immediately.
Texas Insurance Code Section 541.154 provides that the sixty-day letter must advise the insurance company of (1) the specific complaint, and (2) the amount of actual damages and expenses, including attorney fees reasonably incurred. Texas Business and Commerce Code Section 17.505 provides that a DTPA notice letter must advise the insurance company in “reasonable detail” (1) the consumer’s specific complaint, and (2) the amount of economic damages, damages for mental anguish, and expenses, including attorney fees, if any. Thus, both sections mirror each other. The policyholder must advise the insurance company of his or her specific complaint and the amount of actual damages incurred. Neither section requires the sixty-day letter be written by a lawyer or sent after hiring a lawyer. Neither section requires the sixty-day letter be overly detailed or full of legal citations. These notice letters can be written and sent by a policyholder or a public insurance adjuster long before an attorney is hired. If the insurance company pays in response to the notice, which is the idea behind the notice statute, then the policyholder avoids having to hire a lawyer altogether.
Texas Insurance Code Section 542.058 is not a notice provision, but rather is part of the Prompt Payment Act. However, this section provides that the insurance company is liable under the Prompt Payment Act if it delays payment more than sixty days after it receives “all items, statements, and forms reasonably requested and required under Section 542.055.” I think it is important that this provision uses the terms “reasonably requested and required.” Some insurance companies will drag along a claim for months and years telling the policyholder it just needs “one more thing” before it can make a decision on the claim. However, Section 542.055 does not talk in terms of everything the insurance company could possibly think to ask for. Rather it talks in terms of items reasonably requested and required. Section 542.058 is cited in Section 542.055 and it refers to items the insurance company “reasonably believes” it will need to adjust the claim. What is reasonable? Depending on the size of the claim the universe of “reasonable” materials should be limited to: the contractor/public adjuster estimates, paid receipts for work completed, cancelled checks for work completed, an itemization of business or personal property damages with prices to replace the items, photos, and a copy of the last mortgage or lender statement. If the house or building is newly constructed, or recently underwent major remodeling, then you may also want to include plans, drawings, and evidence of what you paid for the construction. Weather data is not necessary, but if you have that then include it too.
I would strongly urge policyholders or their public insurance adjusters to send the written notice as soon as possible in the claim handling process. Don’t wait until the matter must go to a lawyer. Quickly gather all the “reasonable” materials I have listed above so you can enclose it with your notice letter. Don’t wait around for the insurance company to ask you for information. The Texas Insurance Code places many deadlines on insurance companies and the sooner you send the notice letter and “reasonable” materials, the sooner those deadlines begin to run. In the notice letter you should set out your specific complaint and the specific amount of damages you seek. Don’t worry about attorney fees or extra damages. Those come later if the insurance company does not reasonably pay the claim. The specific complaint should not be a long narrative with legal language. Rather is should be short and specific. A simple chronology of events works fine. Even if you are frustrated with the process, try to omit argument or sarcastic language. As Joe Friday used to say, “Just the facts ma’am.” The letter should conclude with the amount of damages you say you are still owed. There is no need to put a deadline in the letter, but if you feel you must, then say that the damages must be paid within sixty days of the insurance company receiving the letter. Try to keep the letter to one page, two at most. Enclose with that letter copies of all the “reasonable” items I mention above. Make a copy of your letter and all the materials you enclosed for your file. Make sure you send the letter via certified mail, return receipt requested, or FEDEX, or UPS, or by fax so you can prove you sent it and that the insurance company received it.
As a lawyer, I am certainly going to follow my own advice when I write sixty-day notice letters. “Brevity is the soul of wit.”1
1 William Shakespeare, Hamlet.