The Texas Department of Insurance on Monday confirmed that auto insurers aren’t necessary to offer Texans an appraisal clause choice to resolve a dispute over repair bill reimbursement.
The agency also has rewritten its web site to remove what at least as late as Friday had been advice to people who “you can ask for an appraisal.” It now states that consumers’ policies “may include an appraisal process.”
We had asked the TDI in regards to a report from public adjuster Robert McDorman that State Farm around 2021 had reworked its auto policy to limit the insurer and policyholder’s to appraisal. Prior to the change, the appraisal clause from Texas’ largest insurer applied to both repairable vehicles and total losses. State Farm’s revision limited this appraisal option to total loss valuations.
McDorman, gm of Auto Claim Specialists, said he alerted the TDI to this fact about 2 yrs ago and found the agency surprised by the modification.
According to McDorman, he was relayed through a deputy commissioner: “That was an interesting overview you presented in how State Farm policy 9843A and 9843T affect the results of the loss. This got past us.”
We had asked the company about McDorman’s account, why it permitted State Farm to alter its appraisal clause change, and why it hadn’t addressed the problem. We mentioned the agency’s website had even told customers: “Should you and your insurance company can’t agree with the amount of your settlement, you can ask for an appraisal.”
“Insurance companies offer appraisal as an choice to resolve complaints, but they aren't necessary to offer it,” TDI spokesman Ben Gonzalez wrote in an email Monday. “We'll update our website to clarify that time.”
An older State Farm policy provided by McDorman states:
A revised State Farm policy he provided places the appraisal clause language within State Farm’s option to “Pay the cash value of the covered vehicle minus any applicable deductible” — i.e., limiting the appraisal clause to total losses.
Asked about his insurer’s thinking in removing an alternate dispute resolution option for itself and its policyholders, State Farm public affairs specialist Benjamin Palmer wrote Friday, ‘We have nothing to tell RDN.”
McDorman said he and people in the Auto Body Association of Texas met using the TDI about 2 yrs ago. He explained that at first, the TDI insisted a State Farm policyholder can use their appraisal clause.
“In this meeting, in the proper time, I requested TDI review a particular complaint file against State Farm that was one of these,” McDorman wrote. “This insured complaint was over the utilization of pre-owned suspension parts around the insured’s vehicle. The TDI management turned to the complaint in the binder and told us they had responded to the insured and noted the State Farm policy contains an appraisal provision in the policy. TDI further noted they informed the insured if they're unsatisfied with the loss statement by State Farm, their recommendation to the insured ended up being to invoke their right of appraisal inside a contest of the loss statement.”
McDorman said he told the agency these tips was incorrect.
“I explained to TDI, the insured found Auto Claim Specialists before submiting the complaint to TDI regarding their loss,” he wrote. “I told TDI, I informed the insured we could not represent them with the appraisal clause process on the dispute from the repair function of losing with State Farm under policy number 9843A. After our conversation, I emailed the customer a copy of the State Farm policy and pointed them to the highlighted section on the rights State Farm had within the repair process and where the only contractual right the insured needed to contest losing money is for that total loss value. I informed TDI their advice to the insured to solve the loss dispute was not an insurance policy right under policy 9843A.”
According to McDorman, the TDI then did a 180-degree turn and stated, “‘The right of appraisal is not mandatory in Texas and is limited to the word what within the policy. If the policy does not permit the appraisal as a relief to contest the loss, then the insured agreed to this once they purchased the policy.'”
“Following the meeting, the deputy commissioner walked us out,” McDorman continued. “While in the elevator he told me this ‘Which was a fascinating overview you presented in how State Farm policy 9843A and 9843T modify the results of losing. This got past us.’ My response was, ‘Yes Sir it did. Will you look into this and find out what we can do to solve this sensitive situation before someone gets hurt?’ I had been told he would. However, often hear nothing more.”
ABAT President Burl Richards said Monday his customers hadn’t needed to make use of the appraisal clause prior to the removal, for State Farm had been one of the better insurers to work with. However, it's since become extremely difficult and it is refusing to reimburse items it had previously covered, he explained. Richards said he finds “third-rate” insurance providers who do a more satisfactory job of indemnifying consumers than State Farm.
“They’re a totally different insurance company” than a couple of years ago, he explained of State Farm.
State Farm didn't react to a separate inquiry Tuesday on Richards’ allegations.
ABAT is supporting a bill that will require car insurance policies to hold appraisal clauses applicable to both total loss and reimbursable repair bill valuations.
“The spirit from the appraisal clause is to resolve loss disputes fairly and to do so in a timely and cost-effective manner,” McDorman said inside a statement Saturday. “The invoking from the appraisal clause removes inexperienced and biased carrier appraisers and claims handlers from the process, undermining their management’s many tricks to undervalue the loss settlement and under-indemnify the insured. Through the appraisal clause, loss disputes could be resolved relatively quickly, economically, equitably, and amicably by unbiased, experienced, and independent third-party appraisers instead of more costly and time-consuming methods, such as mediation, arbitration, and litigation.”
House Bill 2534 would establish an appraiser-appraiser-umpire process like the version described above.
However, if the to appraisal produced an overall total loss or repair cost valuation $1 greater than the insurer's last offer, the insurer must pay the customer's appraiser fees and expenses. If the insurer's last offer was deemed “just,” HB 2534 would have the customer pay the insurer's appraiser fees and expenses.
Richards said he's “never, ever” had a customer awarded the quantity of the insurer’s last offer. While the appraisal clause might not always reach a value as high as his repair plan, it’s always more than the insurer had offered.
He said in “most instances,” the 2 appraisers wind up agreeing, and an umpire isn’t necessary.
The TDI website offers four steps for consumers with a complaint against a Texas insurer. “Talk to the insurance company. … Ask for an appraisal. … File a complaint around. … Get legal help.”
But should an insurer’s practices follow what Richards alleges regarding State Farm, policyholders with repairable vehicles might wind up needing to dive towards the TDI complaint or legal stages.
State Farm offers no repairable vehicle appraisal clause, and Richards described the insurer as issuing take-it-or-leave-it settlement offers. “There’s no negotiating,” he said. And the body shops in Texas technically can’t negotiate claims on behalf of consumers, he explained.
While the TDI encourages complaints, additionally, it says, “We can't make a company pay a claim unless the failure to pay for violates a law or the relation to your policy.” The TDI has additionally previously said it lacks the authority to help in some car insurance issues.
However, ABAT still encourages complaints to alert the agency to the existence of problems.
In the courts, Richards said customers “just don’t possess the stomach for this.” However, then TDI has recommendations for people who do. Appraisal clause experts also have suggested that small-claims court would actually be a more sensible choice than an RTA in certain circumstances.
