The U.S. Fifth Circuit Court of Appeals affirmed a judgment against an insurer after the insurer failed to accept or reject the insured’s claim within fifteen days after receiving some, but not all, of the requested information from the insured in violation of the Texas Prompt Payment of Claims statute. Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co., No. 13-20442 (5th Cir. Sept. 16, 2015).
An oil and gas exploration and production company lost control of a well and incurred costs in unsuccessfully attempting to regain control. It provided notice of the claim under its control of well policy. The insurer appointed an adjuster who initially sent a request for seventeen categories of information. Within one month of the request, the insured sent some, but not all, of the requested information. After an additional request for information, also only partially fulfilled by the insured, the adjuster sent the insured an email stating that an independent expert had reached a preliminary conclusion that there was not a loss of control of the well and requested additional information. The insured provided that information, and three months later, the adjuster informed the insured that the opinion of the expert had not changed and requested a response from the insured. The insured challenged the expert’s opinion, and the insurer indicated that it would forward the insured’s response to the expert for further review and comment. Shortly thereafter, the insured filed suit.
The Texas Insurance Code requires an insurer to provide written notice of acceptance or rejection of a claim “not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer to secure final proof of loss.” The trial court held that because the insurer did not accept or reject the insured’s claim within fifteen days of receiving the insured’s additional information used to “confirm” the expert’s opinion that the well was never out of control, the insurer violated this provision. The insurer appealed, arguing that the insured did not provide all of the requested information, including proof of its extra expenses.
The Fifth Circuit affirmed, reasoning that by the time the lawsuit was filed, the insured had provided enough information to establish that an actual loss had occurred, when, where, and how it occurred, as well as supporting invoices, even though the insured had not provided all of the requested information. In addition, it concluded that the insurer’s expert had concluded that the loss was not covered by the policy, but that the insurer never communicated its position to the insured in a formal notice of rejection.