Texas Bill Requires Auto Insurance Policies to Allow Appraisal Challenges

A bill recently passed out of the Texas House of Representatives Insurance Committee would secure the right of an auto insurance policyholder to challenge their insurance company’s appraisal of a loss if they don’t agree with it.

House Bill 2534 was filed by Rep. Travis Clardy, District 11; Sen. Cesar Blanco, District 29, filed the Senate companion legislation, Senate Bill 1706, which is identical to HB2534.

The legislation seeks to address the problems that arise when insurer loss statements or estimates that are too small result in unsafe vehicle repairs.

According to the author’s statement: “When a dispute arises over the proper repair plan or loss settlement, a policy with limited or restricted appraisal rights can leave the policy holder with an unsafe vehicle and expensive losses.”

The legislation would require auto insurance policies to contain an appraisal clause allowing an insured to contest an insurer’s appraisal. It would “authorize an insurer or the named insured to demand an appraisal not later than the 90th day after the date a proof of loss is filed with the insurer if the insurer and insured do not agree on the amount of the loss.”

Under HB2534, with respect to the appraisal :

• each party must appoint a competent appraiser and notify the other party of that appraiser’s identity not later than the 15th day after the date an appraisal is demanded;
• the appraisers appointed by the parties must determine the amount of loss;
• the appraisers must select a qualified umpire and the appraisers and umpire must
• determine the amount of loss if the appraisers fail to agree;· the determination of the amount of loss agreed to by both appraisers or by one appraiser and the umpire is binding on both parties; and
• the insurer or the named insured may request that a court in the county in which the named insured resides select the umpire if the two appraisers are unable to agree on an umpire on or before the 15th day after the date the appraisers determine an umpire is needed.

Each party would be responsible for paying its own appraisal costs but the bill notes circumstances in which one party may be required to refund the other party’s expenses. Other expenses, such as the cost of an umpire, would be shared.

Neither party would be required to “waive any rights under the policy that is the subject of the appraisal by demanding an appraisal.”

It would apply to auto insurance policies in effect on or after Jan. 1, 2022. If signed into law, its effective date is Sept. 1, 2021.

Representatives of the auto dealership and vehicle repair industries have spoken in favor of the legislation. Insurance industry trade groups have expressed opposition to it.