Failure To Timely Decide Claim Leads to Large Interest Penalty Under Texas Prompt Payment Statute When Insurer Knew That The Insured Had In Fact Suffered A Loss
The insured, Weiser-Brown, had a loss of control oil well insurance policy with St. Paul. Under this policy, St. Paul is required to pay if insured suffers a subsurface loss of control on one of its oil wells. Weiser-Brown made a claim under the policy in March 2009 and St. Paul’s claims representative requested seventeen categories of information from Weiser-Brown. Within one month Weiser-Brown sent some but not all of the requested documentation to St. Paul. On September 29, 2009, St. Paul informed the insured that its independent expert had reached the preliminary conclusion that there was not a subsurface loss of control and additional information was requested from the insured, who supplied most key documents by early November. By the following February, St. Paul confirmed its earlier preliminary conclusion that there was no loss of control. Thereafter, Weiser-Brown sued St. Paul for breach of the insurance agreement and for bad faith in violation of Texas Insurance Code § 541. The insured also claimed that St. Paul was liable under the Prompt Payment statute for 18% interest on damages awarded.