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COMMISSIONER'S BULLETIN # B-0035-10

August 31, 2010

 

TO: ALL COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, COUNTY MUTUALS, RECIPROCALS, ASSOCIATIONS, LLOYDS, OR OTHER INSURERS WRITING INSURANCE IN THE STATE OF TEXAS AND TO ATTORNEYS, OTHER AGENTS AND REPRESENTATIVES AND THE PUBLIC GENERALLY

RE: ISSUANCE OF CLAIM SETTLEMENT PAYMENTS - PAYEE NOTIFICATION

The Texas Department of Insurance (Department) issues this bulletin regarding the misdirection, misapplication and improper use of insurance claim settlements.

The State Bar of Texas (Bar) has informed the Department that incidents of misdirection, misapplication and improper use of insurance settlement payments are on the rise. In the one-year period ending in August 2009, the Bar's Client Security Fund, which compensates clients whose funds were misdirected, misapplied or used improperly, paid over $266,800 in grants to such clients. To address the issue, the Bar has requested the Department's assistance with its efforts to prevent such incidents.

The Department strongly encourages all insurance companies issuing settlement payments, payable to both the insurance claimant and the claimant's representative, to provide written notice to the claimant at the same time payment is made to a claimant's representative. Such notice should state the amount and method of the payment and the name and address of the party to whom the payment is made.

This process, called "Payee Notification," notifies claimants whenever a settlement payment is made payable to both the insurance claimant and the claimant's representative, but is issued or delivered to the claimant's representative. Currently, fourteen states require payee notification by statute, rule, or bulletin. States that have enacted payee notification report a dramatic decrease in misapplication, misdirection and improper use of settlement payments made by insurance companies.

The Department urges all parties and persons participating or engaged in the resolution of claims to use every prudent effort, including but not limited to Payee Notification, to eliminate those instances of the misdirection, misapplication or improper use of insurance settlements.

Please direct questions regarding payee notification to David Durden, Associate Commissioner, Public Affairs, 512-463-6410.

Mike Geeslin
Commissioner of Insurance



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