Insurer Does Not Owe Prompt-Payment Damages to Insured, Texas Appeals Court Affirms

HOUSTON — An insurer does not owe prompt-payment damages to a policyholder whose attorney converted an appraisal award check, a Texas appeals court has affirmed, holding that under Texas law, constructive delivery of the check to the policyholder’s attorney/agent tolls prompt payment penalties.

In a Dec. 29 opinion, the Texas 14th Court of Appeals noted that no Texas court has held that prompt payment penalties accrue solely because the insured does not receive the payment directly.

Travelers Lloyds Insurance Co. insured five buildings owned by Gusma Properties, L.P. that were damaged by Hurricane Ike. After Gusma Properties filed a claim …