The Texas House of Representatives on Friday voted 91-50 in favor of an invoice requiring insurers to include appraisal clauses within their auto policies.
House Bill 2534, if went by the Senate and signed into law, would require that language to declare that the loser covers most or all of the winner’s appraisal costs. If the to appraisal action described in the bill reaches the stage where an umpire is needed, both the insurer and policyholder would still split those costs.
The bill’s language implies that if insurer’s total loss or repairable vehicle estimate were short by $1 or even more, the carrier would need to cover the price of the customer’s appraiser. However, if the insurer’s estimate was “just,” the customer would pay the insurer’s bill.
“Loser pays,” sponsor Rep. Travis Clardy, R-Nacogdoches, described it to the House Insurance Committee April 20. The committee approved the bill without amendment April 27 in a 5-4 vote.
Companion legislation Senate Bill 1706 was already created by Sen. César Blanco, D-El Paso.
House Bill 2534 would would work Sept. 1, but policies “delivered, issued for delivery, or renewed” wouldn’t need to comply until Jan. 1, 2022.
Under things as they are, Texas insurers hadn’t been required to carry appraisal clauses at all, according to the Texas Department of Insurance. About four years ago, Texas’ largest insurer, State Farm, revamped its policy to strip the right to appraisal from customers with repairable vehicles. State Farm policyholders could only exercise the rewritten appraisal clause on total loss claims.
Texas public adjuster Robert McDorman, general manager of Auto Claim Specialists, said he and members of the Auto Body Association of Texas met with the TDI about 2 yrs ago. He explained that at first, the TDI insisted a situation Farm policyholder could use their appraisal clause.
“During this meeting, in the correct time, I requested TDI review a particular complaint file against State Farm which was one of these simple,” McDorman wrote. “This insured complaint was within the use of pre-owned suspension parts around the insured's vehicle. The TDI management turned to the complaint in the binder and told us they'd taken care of immediately the insured and noted their state Farm policy contains an appraisal provision within the policy. TDI further noted they informed the insured if they are not satisfied using the loss statement by State Farm, their recommendation towards the insured ended up being to invoke their right of appraisal in a contest of the loss statement.”
McDorman said he told the agency then this advice was incorrect.
“I told TDI, the insured found Auto Claim Specialists before turning in the complaint to TDI about their loss,” he wrote. “… I informed TDI their advice to the insured to solve losing dispute was not an insurance policy right under policy 9843A.”
Numerous Texas repairers filed public comments supporting the bill. Some warned that other insurers would follow State Farm’s lead and remove the right to appraisal without them.
“Our customers are needing to invoke their appraisal clause a minimum of 50% of times to obtain proper repairs,” Griffin’s Paint & Body owner Crystal Griffin wrote to lawmakers. “If it weren't for that option our customers could be left to foot the bill by 1000s of dollars and/or we'd go into our pockets much more than we already do in order to help our community. The general public is of the opinion that when they pay their deductible, the insurers will handle the rest that's active in the proper repair of the vehicle. As it is now, that’s simply not the case and also the appraisal clause may be the only option they have to make them whole per anything they applied for with their insurance company. If you don’t require this option in most policy’s, the insurers will ultimately remove this option just as State Farm has with repairs and the consumers of Texas will be left holding the bag. The only other choice is to obtain a lawyer, that is next to impossible since lawyers don’t take cases of this nature, without bodily injury, and very few individuals have the money to employ a lawyer.”
“I support this bill since the right to appraisal is in all Texas insurance policies aside from State Farm,” ABAT Vice President Eric McKenzie wrote. “It's been used successfully by many in our clients to settle disputes to safe and proper repairs in addition to total loss value disputes. I'm asking that you pass this bill onto calendars to ensure that other insurance companies are not lured to follow state farm’s lead of removing the repair area of the appraisal clause from their policies that is harmful to Texas consumers.
With the exception of the “loser pays” concept — appraisal clauses often leave both sides accountable for their individual costs and split the umpire bill — HB 2534 would need a fairly standard form of the right to appraisal. The process it describes isn’t much different than State Farm had originally carried in the auto policies.
If the insurer and customer can't agree with the amount the carrier owes in a loss, HB 2534 would allow either party to invoke their to appraisal inside the first 3 months following a claim's filing.
Both sides need to hire a “competent appraiser” within 15 times of the appraisal clause being exercised, and those appraisers must “determine the amount of loss.”
If the 2 appraisers can agree with $ 1 value, that amount is going to be binding. If they can't agree, then the appraisers work together to choose an “umpire.” If they can't agree with an umpire within 15 days, the insurer or policyholder “may request that a court within the county in which the named insured resides choose the umpire.”
The umpire under HB 2534 also “shall determine the quantity of loss.” If either appraiser will follow the umpire, then that amount is binding.
Clardy told the Insurance Committee his bill represented a chance for an “amicable resolution” to a total loss or repair bill dispute and an “alternative path to lawsuits.” He said losing could be calculated by “unbiased professionals.”
“It is important that this bill be passed so that the consumers of Texas have an avenue to solve disputed automobile claims,” McDaniel’s Quality Body Works President Darrell Smith wrote to lawmakers. “Without it provision within the policy, it gives insurers the freedom to walk out on claim payments and challenge the policyholder to take the dispute to the court for resolution. Every policy sold in Texas should provide the policyholder the right to the appraisal process so that insurance companies are attributed for his or her actions.”
Under HB 2534, if the right-to-appraisal process creates a total loss or repair cost valuation $1 higher than the insurer's last offer, the insurer must pay the customer's “reasonable out-of-pocket expenses for that insured 's appraiser 's fees and expenses.” When the insurer's last offer was deemed “just,” House Bill 2534 might have the customer pay the “insurer’s appraiser’s fees and expenses.”
For a little context, Texas public adjuster Robert McDorman, gm of Auto Claim Specialists, told the House Insurance Committee an appraisal at his firm typically costs $800.
Auto Body Association of Texas President Burl Richards earlier this season said he has “never, ever” had a customer awarded the quantity of the insurer's last offer. While the appraisal clause might not always reach something up to his repair plan, it's always more than the insurer had offered.
As noted above, both sides still split the price of the umpire. But Richards told us that in “most instances,” the two appraisers wind up agreeing, as well as an umpire isn't necessary.
