Texas Prompt Payment Act
Claims · Cloudbreak team · Updated October 29, 2026 · 6 sources
Definition
The Texas Prompt Payment Act is the common name for Subchapter B, "Prompt Payment of Claims," of Texas Insurance Code Chapter 542. It sets deadlines for an insurer to acknowledge, investigate, accept or reject, and pay a first-party claim, and adds interest and attorney's fees when an insurer liable for the claim does not comply.1,2
How it works
The act puts a first-party claim, one a policyholder makes on its own policy, on a timeline. Written notice of the claim starts the first deadline, and each later step by the insurer or the claimant starts the next one. An insurer that is liable for the claim and misses a deadline owes interest on the claim and attorney's fees.
In Texas, the subchapter covers first-party claims by an insured, policyholder or named beneficiary that the insurer must pay directly to that person. It applies to any insurer authorized to do business in Texas, including Lloyd's plans, county mutuals and eligible surplus lines insurers. Workers' compensation, mortgage guaranty, title and marine insurance and fidelity, surety and guaranty bonds are excluded.1
A notice of claim is any written notice from the claimant that reasonably tells the insurer the facts of the claim. A business day is any day other than a Saturday, Sunday or holiday recognized by Texas.1
Deadlines
| Step | Deadline | Section |
|---|---|---|
| Acknowledge the claim, begin the investigation, request needed items | 15 days after notice of claim (30 business days for an eligible surplus lines insurer); further requests allowed if needed during the investigation | 542.055 |
| Accept or reject in writing | 15 business days after receiving all items, statements and forms required to secure final proof of loss; a rejection must state the reasons | 542.056(a), (c) |
| Suspected arson | 30 days after receiving the required items | 542.056(b) |
| More time needed | Notice of the reasons within the same period, then a decision by the 45th day after that notice | 542.056(d) |
| Payment | 5 business days after notice that the insurer will pay, or after a required act by the claimant (20 business days for an eligible surplus lines insurer) | 542.057 |
| Delay | More than 60 days after receiving all requested items, unless another statute sets a period, triggers damages under 542.060 | 542.058(a) |
| Catastrophe | Every deadline extended 15 days in a weather-related catastrophe or major natural disaster, as defined by the commissioner | 542.059(b) |
Catastrophe extensions
When the commissioner declares a weather-related catastrophe or major natural disaster, every deadline in the subchapter runs longer, as the last row of the table shows.
Commissioner's Order 2017-5014 (March 31, 2017) summarizes the rule, 28 TAC 5.9303: an insurer or group of insurers may petition TDI for a catastrophe declaration, and an event qualifies if, in a reasonably defined area, it produces estimates of at least 3,000 claims and $5 million in losses across all insurers.3
Interest and attorney's fees
If an insurer liable for a claim does not comply, Section 542.060 adds interest at 18% a year on the amount of the claim, plus reasonable and necessary attorney's fees. In an action under Chapter 542A, which covers property claims caused by forces of nature such as hail, wind and hurricanes, the rate is simple interest at the Finance Code 304.003 rate on the date of judgment plus 5%, running from the date the claim was required to be paid.1,4
The 304.003 rate is the Federal Reserve prime rate, with a 5% floor and 15% cap, so the Chapter 542A rate falls between 10% and 20%.5,1
Example
Example dates for a commercial property claim with an insurer that is not a surplus lines insurer, and no catastrophe declaration. No Texas national or state holiday falls on a business day counted below.1,6
| Event | Date | Rule |
|---|---|---|
| Insurer receives written notice of claim | Monday, July 6, 2026 | Example input |
| Acknowledge, begin investigating, request items | By Tuesday, July 21, 2026 | 15th day, 542.055(a) |
| Insurer receives the last required item | Friday, July 24, 2026 | Example input |
| Written acceptance or rejection | By Friday, August 14, 2026 | 15th business day, 542.056(a) |
| Payment, if accepted on August 14 | By Friday, August 21, 2026 | 5th business day, 542.057(a) |
| Decision, if the insurer gives notice on August 14 that it needs more time | By Monday, September 28, 2026 | 45th day, 542.056(d) |
| 60th day after the last required item | Tuesday, September 22, 2026 | 542.058(a) |
Where it is written
- Texas Insurance Code Chapter 542, Subchapter B, Sections 542.051 to 542.061.1
- Insurer claim letters: the acknowledgment and requests for items under Section 542.055, and the written acceptance or rejection under Section 542.056.1
- TDI's consumer rights page for commercial property insurance, which summarizes these deadlines.2
- Commissioner's orders declaring a weather-related event a catastrophe for claims processing under Section 542.059 and 28 TAC 5.9303.3
- Chapter 542A, which governs actions under Subchapter B on claims for damage from forces of nature, except actions against the Texas Windstorm Insurance Association.4
Questions
- How long does an insurance company have to pay a claim in Texas?
- Under Section 542.057, 5 business days after it tells the claimant it will pay all or part of the claim, or 5 business days after a required act by the claimant. An eligible surplus lines insurer has 20 business days.1
- What interest applies under the Texas Prompt Payment Act?
- Section 542.060 sets interest of 18% a year on the amount of the claim plus reasonable and necessary attorney's fees. In actions under Chapter 542A, it is simple interest at the Finance Code 304.003 rate plus 5%.1,5
- Does the Prompt Payment Act apply to surplus lines insurers?
- Yes. Eligible surplus lines insurers are listed in Section 542.052. They have 30 business days to acknowledge a claim and 20 business days to pay.1
- Can claim deadlines be extended after a storm in Texas?
- Yes. When the commissioner declares a weather-related catastrophe or major natural disaster, Section 542.059 extends the subchapter's deadlines by 15 days.1
Sources
Written by the Cloudbreak team. Numbers, dates and rules cite the published sources below.
- 1. Texas Legislature: Texas Insurance Code Chapter 542, Processing and Settlement of Claims
- 2. Texas Department of Insurance: Consumer rights for commercial property insurance
- 3. Texas Department of Insurance: Commissioner's Order 2017-5014: Weather-Related Event that Occurred March 26, 2017, through March 27, 2017
- 4. Texas Legislature: Texas Insurance Code Chapter 542A, Certain Consumer Actions Related to Claims for Property Damage
- 5. Texas Legislature: Texas Finance Code Chapter 304, Judgment Interest
- 6. Texas Legislature: Texas Government Code Chapter 662, Holidays and Recognition Days, Weeks, and Months