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Claims Handling Process

When a member insurer becomes insolvent and is designated as an impaired insurer by the Commissioner of Insurance, Texas Property and Casualty Insurance Guaranty Association takes over responsibility for processing its covered claims. The insolvent company’s claim files are forwarded to Texas Property and Casualty Insurance Guaranty Association so we can begin handling them. While some delays are inevitable during this process, we prioritize timely review of all claims and strive to ensure that workers' compensation payments are not delayed.

Claim Coverage Overview & Defense Responsibilities

Definition of Covered Claims

Covered claims are defined by Texas Property and Casualty Insurance Guaranty Association’s statute in Chapter 462 of the Texas Insurance Code. Key points include:

  • The full amount of statutory workers' compensation benefits under a workers' compensation policy are covered.
  • Other claims are capped at $300,000 or the insurance policy limit, whichever is less.
  • Unearned premiums—premiums paid in advance but unearned at policy cancellation—are covered up to $25,000.

Limitations and Exclusions

As the insurer of last resort, Texas Property and Casualty Insurance Guaranty Association has restrictions on claim payments:

  • Does not cover punitive damages, including those under employer liability portions of workers' compensation policies.
  • Do not pay claims for bad faith, interest, or penalties.
  • Claimants must exhaust other applicable insurance before seeking payment from Texas Property and Casualty Insurance Guaranty Association.

For a full list of covered and excluded claims, please refer to the statute.

Duty to Defend

Texas Property and Casualty Insurance Guaranty Association defends insureds under liability policies only when no other insurance provides coverage and the lawsuit involves a covered claim. When an insurer is impaired, all related Texas court proceedings involving that insurer are automatically stayed for at least six months. This pause allows Texas Property and Casualty Insurance Guaranty Association to obtain necessary files from the receiver, review claims, and, if needed, retain attorneys to continue litigation.