Insurance company violated Texas Prompt Payment Claims Act, suit alleges

Michelle Massey, East Texas Bureau Mar. 15, 2010, 7:28am

TEXARKANA, Texas -- Two weeks after her husband died from cancer, Jenny Tefft filed the necessary documentation to receive his life insurance proceeds, but claims the insurance company did not pay until it was threatened with a lawsuit.

Although the insurance company did pay the benefits, Tefft states the delay in paying life insurance benefits racked up interest charges on her late husband's small business loans.

Alleging violations of the Texas Prompt Payment Claims Act, Jenny Lind Tefft filed a breach of contract lawsuit against Farmers New World Life Insurance Co. on March 8 in the Texarkana Division of the Eastern District of Texas.

Under the Texas legislation, insurance companies are required to promptly pay claims or pay interest on the claims at a rate of 18 percent per annum, plus attorney's fees.

When Farmers New World Life paid the benefits to the plaintiff and other beneficiaries, the company also paid an additional 3 percent in interest.

However, the delay in payment caused interest and other charges to build on a small business loan which was listed as a beneficiary under one policy.

The plaintiff is seeking $157,839 in unpaid interest, plus pre-and post-judgment interest, court costs, and attorney's fees.

Texarkana attorney David Potter is representing the plaintiff.

U.S. District Judge David Folsom is assigned to the litigation.

Case No 5:10cv00046

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