American Property Casualty Insurance Association state government relations V . p . Joe Woods last week last week challenged a Texas bill mandating “loser pays” appraisal clauses in auto insurance policies on the grounds the appraisal process inherently returns a value greater than the insurer’s original offer.
“The appraisal process is about discovering that number above exactly what the company offered and below what the claimant requested,” Woods told the Texas House Insurance Committee throughout an April 20 hearing on House Bill 2534. The purpose was to reach a deal that makes everyone “minimal unhappy,” said Woods.
But Texas Watch Executive Director Ware Wendell challenged that assessment.
“Appraisal isn't mediation,” Wendell told the committee. “This is not creating a number among the 2 sides. Appraisal can there be to get at the right valuation, to get to the right number. That’s what the umpire can there be to do.”
HB 2534 allows both the policyholder and insurer to pick their own “competent appraiser,” who “shall determine the quantity of loss.” If the appraisers agree with a number, it’s binding on the insurer and policyholder. When the two appraisers can’t agree, either they or the courts can select an “umpire,” who also “shall determine the amount of loss.” Anywhere agreed to by both appraisers or perhaps a combination of either appraiser and the umpire is binding. The law would affect total losses and repairable vehicle claims.
This is a reasonably standard depiction from the process. However, HB 2534’s process is different from standard for the reason that the loser would pay both parties’ costs, except for the umpire’s bill. That might be split evenly regardless of what. Auto Body Association of Texas Vice President Eric McKenzie told us earlier this year that in the experience, most RTAs are able to be resolved through the two appraisers, without needing to hire an umpire.
If the insurer’s pre-appraisal estimate was found to be less than $1 too low, the insurer covers the customer’s appraisal bill. If the insurer’s “proposed undisputed loss statement is decided to be just,” the customer owes the insurer its appraisal costs. “Loser pays,” HB 2534 sponsor Rep. Travis Clardy, R-Nacogdoches, told the committee.
Woods argued that HB 2534’s language would give consumers a “hammer.” An insurer could be risking having to pay a lot more than $1,000 over a $500 disagreement should the appraisal process discover the insurer off by $1, based on Woods.
Premiums would rise, he explained. Jon Schnautz, regional vice president from the National Association of Mutual Insurance providers, agreed this could happen if the appraisal clause process found from the insurer.
However, Oregon has for any decade carried ORS 742.466, which only permits the consumer to extract “reasonable appraisal costs” if the insurer's last offer was find to become lower than the total amount awarded within the appraisal process. There’s no requirement the consumer are obligated to repay the insurer if the insurer’s offer was at or higher compared to amount awarded. Yet Oregon’s auto premiums for years have remained lower than the national average, in line with the most current National Association of Insurance Commissioners data.
Though the APICA feels that insurers will always lose an appraisal clause action, a minimum of in terms of having to pay a lot more than the carrier decided, witnesses indicated the Texas auto insurance industry has frequently incorporated a right to appraisal to their policies.
According to bill opponent Jon Schnautz, National Association of Mutual Insurance providers regional vice president, most policies do include an appraisal clause. Bill supporter Gary Vucekovich, president of gap insurer ForeSight Services Group, agreed that many auto contracts do.
Nobody’s forcing insurers to incorporate that language, according to the Texas Department of Insurance.
“Insurance companies offer appraisal as an option to resolve complaints, but they aren't required to offer it,” TDI spokesman Ben Gonzalez wrote in an email recently.
According to Clardy, it was insurers who pushed for appraisal clauses in Texas more than Fifteen years ago.
“What’s great for the goose ought to be for the gander,” he explained.
“It’s the carriers who wanted appraisal make the policies,” Wendell agreed. He established that a job reversal had occurred since then: He, the customer advocate, wanted the appraisal clauses, while the insurance industry argued, “‘Wait a second, wait another. Let’s not do that,'” Wendell said.
Clardy said insurers cope with claims daily, while a consumer rarely gets into a wreck.
“It is not a good fight,” he said. He argued insurers didn’t like his bill because “it requires an excessive amount of proper care of our insureds.”
The Insurance Committee voted 5-4 to recommend lawmakers pass the bill without amendments.
Oliverson; Romero; Committee Vice Chairman Hubert Vo, D-Alief; and Reps. Jessica González, D-Dallas, and Celia Israel, D-Austin, voted for. Reps. Lacey Hull, R-Houston; Mayes Middleton, R-Wallisville; Dennis Paul, R-Houston; and Scott Sandford, R-McKinney, voted against the idea.
The companion legislation Senate Bill 1706 has been introduced in the other chamber.
