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Reasonable Payment Prior to Appraisal Not a Defense to Prompt Pay Penalties:

Today Texas Supreme Court extended its holding in Barbara Tech. Corp. v. State Farm Lloyds that payment of an appraisal award does not extinguish penalty interest or attorney’s fees under the Prompt Payment of Claims Act. 589 S.W.3d 806 (Tex. 2019). The Court categorically rejected the “reasonable undisputed payment” defense as inconsistent with Barbara Tech. See Hinojos v. State Farm Lloyds, No. 19-0280 (Tex. Mar. 19, 2021):

As for the “reasonableness” argument, the Court found no such language in the Prompt Payment Act and in fact cited to its prior decision on unconditional payments as having rejected such an approach. See id. at 6-7. However, as in Barbara Tech., the Court held that the insured must still prove entitlement to Prompt Payment fees and interest on remand. Id. at 11.

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