This is the chapter that governs an adjuster's working day in Texas. The Insurance Code sets deadlines measured in days and business days, lists practices that are unfair as a matter of law, and attaches a price — 18 percent interest plus attorney's fees — to missing a deadline. The exam tests the numbers and the lists; the job tests whether you can apply them to a file.
III.C.1 Functions of an adjuster
An adjuster "investigates or adjusts losses on behalf of an insurer" or "supervises the handling of claims"[1]. In practice the functions follow the claim's life: acknowledge the claim and request what is needed; investigate the facts (inspection, statements, documents, experts); determine coverage by reading the policy; evaluate the amount of the loss; communicate a decision with the reasons; negotiate and settle; and, where someone else caused the loss, preserve subrogation. Chapter 8 lists who is exempt from licensing — technical experts, clerical staff, agents processing undisputed losses on their own policies[1]. The dividing line is negotiation and judgment on disputed claims.
III.B.1.a Claims methods and practices — the prompt-payment law (Chapter 542, Subchapter B)
Scope
Subchapter B applies to first-party claims — a claim made by an insured, policyholder or named beneficiary that "must be paid by the insurer directly to the insured or beneficiary"[2]. It applies to nearly every kind of insurer, including "an eligible surplus lines insurer"[2], but not to "(1) workers' compensation insurance; (2) mortgage guaranty insurance; (3) title insurance; (4) fidelity, surety, or guaranty bonds; (5) marine insurance"[2]. It "shall be liberally construed to promote the prompt payment of insurance claims"[2].
Two definitions start every clock. Notice of claim is "any written notification provided by a claimant to an insurer that reasonably apprises the insurer of the facts relating to the claim"[2]. Business day is "a day other than a Saturday, Sunday, or holiday recognized by this state"[2].
The four deadlines
| Step | Deadline | Source |
|---|---|---|
| 1. Acknowledge, begin investigating, request all items the insurer then reasonably believes it needs | Not later than the 15th day after notice of claim (30th business day for an eligible surplus lines insurer) | [2] |
| 2. Accept or reject in writing | Not later than the 15th business day after receiving all items, statements and forms required to secure final proof of loss | [2] |
| 2a. Suspected arson | Not later than the 30th day after receiving all items | [2] |
| 2b. Needs more time | Tell the claimant the reasons within the same period, then accept or reject not later than the 45th day after that notice | [2] |
| 3. Pay | Not later than the 5th business day after notifying the claimant it will pay (or after the claimant performs a required act); 20th business day for an eligible surplus lines insurer | [2] |
| 4. Outside limit | Delay beyond the period set by other statutes or, if none, more than 60 days after receiving all items triggers statutory damages | [2] |
Details the exam likes:
- The first deadline is 15 days; the decision deadline is 15 business days. Read the question for the word "business."
- If the acknowledgment is not in writing, the insurer "shall make a record of the date, manner, and content of the acknowledgment"[2].
- The insurer may make additional requests later "if during the investigation of the claim the additional requests are necessary"[2] — but not as a device to restart the clock.
- A rejection "must state the reasons for the rejection"[2].
- "In the event of a weather-related catastrophe or major natural disaster, as defined by the commissioner, the claim-handling deadlines imposed under this subchapter are extended for an additional 15 days"[2].
Worked example. Notice of a hail claim arrives Monday, March 2. By March 17 (15 days) the insurer acknowledges it, assigns an adjuster and requests photos, the contractor's estimate and a signed proof of loss. The insured delivers the last item on Thursday, April 9. The insurer must accept or reject in writing within 15 business days — by Thursday, April 30, if there are no state holidays. It accepts on April 28; payment is due within five business days, by Tuesday, May 5.
What a violation costs
An insurer that is liable for a claim and does not comply with the subchapter must pay, in addition to the claim, "interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney's fees"[2]. In actions governed by Chapter 542A, a different rate applies instead: simple interest at the Finance Code judgment rate plus five percent[2]. These remedies "are in addition to any other remedy or procedure provided by law or at common law"[2].
Liability claims: telling the insured about settlements (Subchapter D)
On a casualty (liability) policy, the insurer must tell its own insured what it is doing with claims against him: "Not later than the 10th day after the date an initial offer to settle a claim against a named insured ... is made, the insurer shall notify the insured in writing of the offer"[2], and "Not later than the 30th day after the date a claim against a named insured ... is settled, the insurer shall notify the insured in writing of the settlement"[2]. The subchapter does not apply to a policy "that requires the insured's consent to settle a claim against the insured"[2], to bonds or to marine insurance.
III.B.1 Unfair claim settlement practices (Chapter 542, Subchapter A; 28 TAC §§21.201–21.205; Chapter 541)
The statutory list
Section 542.003 lists acts that are unfair claim settlement practices, including "knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to coverage at issue"[2], failing to acknowledge pertinent communications with reasonable promptness, failing to adopt reasonable standards for prompt investigation, "not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear"[2], and compelling a policyholder to sue by offering substantially less than the amount ultimately recovered.
Tax returns. An insurer may not require a claimant to produce federal income tax returns as a condition of settlement unless "(1) the claimant is ordered to produce the tax returns by a court; or (2) the claim involves: (A) a fire loss; or (B) a loss of profits or income"[2]. A violation is also "a deceptive trade practice" under the Business & Commerce Code[2].
The rule: 28 TAC §21.203
TDI's "Unfair Claims Settlement Practices Rules"[3] expand the list to nineteen items, and the minimum standard of performance for all insurers is to comply with §21.203[4]. The items an adjuster meets every day:
- (1) Misrepresenting to claimants "pertinent facts or policy provisions relating to coverages at issue"[5].
- (2) Failing to acknowledge pertinent communications with reasonable promptness — "An acknowledgment within 15 business days is presumed to be reasonably prompt"[5].
- (3) "failing to adopt and implement reasonable standards for prompt investigation of claims"[5].
- (4) Not attempting in good faith to settle when liability is reasonably clear.
- (5) "compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered"[5].
- (7) Failing to provide claim forms promptly when the insurer requires them[5].
- (8) Not settling a clear claim under one coverage "in order to influence settlement under other portions of the policy coverage"[5].
- (9) "failing to promptly provide to a policyholder a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement"[5].
- (10) Failing to affirm or deny coverage within a reasonable time — where a timely reservation of rights letter "is deemed compliance"[5].
- (11) Delaying a first-party payment "on the basis that other coverage may be available or third parties are responsible"[5].
- (13) "undertaking to enforce a full and final release from a policyholder when, in fact, only a partial payment has been made"[5].
- (15) "refusing to pay claims without conducting a reasonable investigation based upon all available information"[5].
- (16) "failing to respond promptly to a request by a claimant for personal contact about or review of the claim"[5].
- (17) On the Texas personal auto policy, the claimant who can recover from either or both insurers "is entitled to choose under which coverage and in what order payment is to be made"[5].
- (19) Requiring federal income tax returns except by court order or for fire or loss-of-income claims[5].
Chapter 541 makes the same core practices actionable as unfair or deceptive acts, including "refusing to pay a claim without conducting a reasonable investigation with respect to the claim"[6] and enforcing "a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim"[6]. When the department finds from complaints that an insurer needs closer supervision, it may require periodic reports of claims filed, denied, settled and litigated[7].
III.B.1.b Misrepresentation
TDI's rule defines misrepresentation as "any untrue statement of a material fact; (2) any omission to state a material fact necessary to make the statements made (considered in the light of the circumstances under which they are made) not misleading"[8], the making of a statement "in such manner or order as to mislead a reasonably prudent person to a false conclusion of a material fact," and "any material misstatement of law"[8]. Section 541.061 makes each of these an unfair or deceptive act when it misrepresents an insurance policy, including "making a statement in a manner that would mislead a reasonably prudent person to a false conclusion of a material fact"[6] and "(4) making a material misstatement of law"[6].
Worked example. A policyholder asks whether her policy covers a burst pipe. The adjuster says, truthfully, that "water damage from floods is excluded" and stops there, knowing the policy does cover sudden discharge from plumbing. Every word was true, but the omission of a material fact necessary to make the statement not misleading is itself a misrepresentation under the rule.
III.B.1.c Defamation
It is an unfair or deceptive act to make or circulate a statement that "(1) is false, maliciously critical of, or derogatory to the financial condition of an insurer; and (2) is calculated to injure a person engaged in the business of insurance"[6]. The rule reaches "any oral or written statement, including a statement in any pamphlet, circular, article, or literature"[6]. An adjuster who tells a claimant that a competitor "is about to go broke, so settle with us" commits defamation of an insurer.
III.C.2 Prohibited conduct — contractors as adjusters
The outline cites §4102.163, the public-adjuster conflict rule: "A contractor may not act as a public adjuster or advertise to adjust claims for any property for which the contractor is providing or may provide contracting services, regardless of whether the contractor" holds a public adjuster license[9] or "is authorized to act on behalf of the insured under a power of attorney or other agreement"[9]. A licensed public adjuster also "may not accept a fee, commission, or other valuable consideration ... in exchange for the referral" of an insured to a contractor, attorney, appraiser, umpire or salvage company[9].
Chapter 4101 imposes the same wall on company-side adjusters: a licensed adjuster "may not adjust a loss related to roofing damage on behalf of an insurer if the adjuster is a roofing contractor or otherwise provides roofing services or roofing products for compensation"[1], and a roofing contractor may not act as an adjuster on property it is or may be roofing[1]. The principle is the same on both sides: the person who values the loss may not be the person paid to repair it.
Sources cited in this excerpt
- Texas Insurance Code Chapter 4101, Insurance Adjusters. Texas Legislature, Current text as served 2026-09-25. https://tcss.legis.texas.gov/resources/IN/htm/IN.4101.htm
- Texas Insurance Code Chapter 542, Processing and Settlement of Claims. Texas Legislature, Current text as served 2026-09-25. https://tcss.legis.texas.gov/resources/IN/htm/IN.542.htm
- 28 Tex. Admin. Code § 21.201, Title (as reproduced by LII). Texas Department of Insurance / Cornell LII, read 2026-09-25. https://www.law.cornell.edu/regulations/texas/28-Tex-Admin-Code-SS-21-201
- 28 Tex. Admin. Code § 21.205, Minimum Standard of Performance (as reproduced by LII). Texas Department of Insurance / Cornell LII, read 2026-09-25. https://www.law.cornell.edu/regulations/texas/28-Tex-Admin-Code-SS-21-205
- 28 Tex. Admin. Code § 21.203, Unfair Claim Settlement Practices (as reproduced by LII). Texas Department of Insurance / Cornell LII, read 2026-09-25. https://www.law.cornell.edu/regulations/texas/28-Tex-Admin-Code-SS-21-203
- Texas Insurance Code Chapter 541, Unfair Methods of Competition and Unfair or Deceptive Acts or Practices. Texas Legislature, Current text as served 2026-09-25. https://tcss.legis.texas.gov/resources/IN/htm/IN.541.htm
- 28 Tex. Admin. Code § 21.204, Insurer Reports (as reproduced by LII). Texas Department of Insurance / Cornell LII, read 2026-09-25. https://www.law.cornell.edu/regulations/texas/28-Tex-Admin-Code-SS-21-204
- 28 Tex. Admin. Code § 21.4, Misrepresentation Defined (as reproduced by LII). Texas Department of Insurance / Cornell LII, read 2026-09-25. https://www.law.cornell.edu/regulations/texas/28-Tex-Admin-Code-SS-21-4
- Texas Insurance Code Chapter 4102, Public Insurance Adjusters. Texas Legislature, Current text as served 2026-09-25. https://tcss.legis.texas.gov/resources/IN/htm/IN.4102.htm