There are moments when an argument sounds sophisticated at first blush. Then it begins to collapse under its own weight. This was my thought while listening to Steve Badger raise the question of whether late payment interest could legally be claimed by a public adjuster during his debate with Rene Sigman at TAPIA’s Annual Convention yesterday.
Badger made the suggestion that calculating statutory interest on a late-paid claim may constitute the practice of law. The implication is that adjusters for insurers or policyholders should not calculate prompt payment interest without involving legal counsel.
My opinion is that the position is not just overstated, it is misguided.
Under Texas Insurance Code Chapter 542, prompt payment interest is statutory. When an insurer misses the statutory deadline for payment, interest accrues at the statutory rate. It is not discretionary. It is not a negotiation tactic. It is not a bad faith penalty requiring judicial interpretation in every instance. It is a compliance process that insurance company adjusters should be trained to pay.
The calculation details are mechanical. When was notice of the claim received? When was payment due under the statute? When was payment actually made? What is the statutory rate? Most middle school children could figure out the answer. It is arithmetic and not legal.
Insurance adjusters perform statutory and policy-driven calculations every day. They calculate depreciation. They apply deductibles. They evaluate coinsurance penalties. They compute replacement cost holdbacks. They assess ordinance and law limitations. Each of those determinations flows from policy language layered over statutory requirements and common law, which they must know to do their job.
No one argues that applying a deductible is the practice of law. No one suggests that calculating overhead and profit requires a bar license. Yet somehow, when it comes to statutory interest, Badger says that mathematics transforms into legal representation.
Are there scenarios where legal input is prudent? Of course. If there are disputed triggering dates, tolling arguments, competing coverage positions, or complicated sequences of partial payments, legal analysis may be warranted. Those are edge cases. But they are not every case.
If an insurer adopts the operational posture that “we cannot pay statutory interest without attorney review,” two predictable consequences follow. First, payment is delayed further. Second, the insurer increases its own exposure under the very statute designed to incentivize prompt compliance.
Texas Chapter 542 was enacted to discourage delay. It creates a financial consequence for missing deadlines. Adding an attorney to be a checkpoint to routine calculations undercuts the statute’s purpose.
There is also an uncomfortable inconsistency embedded in this debate. If calculating statutory interest is supposedly the practice of law when a public adjuster does it, but insurers claim their own adjusters cannot calculate it without attorneys, what exactly are we saying? Is this a routine compliance calculation or a complex legal exercise? It cannot be both, depending on who is holding the calculator.
When insurance company counsel suggests that statutory interest requires attorney oversight, it implies one of three things. First, the statute is too complicated for trained adjusters to determine without a legal opinion. Second, the carrier fears exposure in routine compliance. Third, the legal review functions as a procedural buffer against late interest payment. None of those messages inspires public confidence in the insurance company’s compliance with late payment interest payments.
Statutory interest is not a courtesy. It is not a bonus. It is the legislatively imposed consequence of delay. Under Texas law, when a claim is paid late, interest accrues. The cleanest and most professional response is a straightforward calculation of the amount and its prompt payment. Then, the file should be closed.
If it truly takes a lawyer to do that math every time, then the issue is not the statute. It is the legal system and lawyers trying to overstate what it means to practice law.
Thought For The Day
“Simplicity is the ultimate sophistication.”
— Leonardo da Vinci