A Washington legislative hearing Monday suggested Oregon's consumer-friendly appraisal clause law as one solution to an imbalance of power between policyholders as well as their auto insurers.
Oregon requires an insurer to pay a policyholder's appraisal costs if the amount awarded in right to appraisal proceedings exceeds the carrier's last offer prior to the initiation from the RTA.
Both an expert appraiser along with a consumer attorney supported by using their concept in Washington state during Monday's Consumer Protection & Business Committee discussion of House Bill 1428. Bill sponsor and committee Chairman Steve Kirby, D-Tacoma, who intends to use HB 1428 as a vessel for many form of auto insurance reform bill, also expressed interest Monday.
Kirby seeks to repair what he referred to as the issue of the process “heavily weighted” in favor of a car insurer's opinion on what should be paid for a collision repair.
Mike Harber, an authorized professional appraiser who represented the Professional Automotive Repair Alliance, told the committee he represented 87 insureds in disputes with their carrier in 2021.
“We won every single one of those claims,” he said.
The lowest-dollar case saw his client receiving another $1,200 the insurer owed around the claim, he said. The largest recouped more than than $65,000 underpaid through the carrier, based on Harber.
But clients have to pay for his help, and the average consumer couldn't pay the cost of exercising their auto policy appraisal clause, he said.
Harber argued that Washington consumers were spending to gather money these were already owed – by virtue of already having paid premiums along with a deductible.
“Why will we have to pay again?” said Harber, who proposed a reform much like Oregon's.
Appraisal clauses
Appraisal clauses, also known as “right to appraisal” or RTA, allow disputes over the amount the insurer owes in a loss to become resolved without everyone visiting court.
They're certainly not likely to be contained in every insurance policy, as well as their parameters can differ based upon the wording of the individual policy. But the general concept goes something like this:
After reaching an impasse around the balance due the customer, either the insurer or policyholder can invoke the appraisal clause. Both sides hires an appraiser, and both appraisers agree upon a third appraiser for everyone being an “umpire,” with the umpire's costs split between your policyholder and insurer. If any two from the three agree on a dollar value for that loss, that quantity is binding.
Note that the consumer must pay their appraiser, and potentially 1 / 2 of the bill for an umpire.
ORS 742.466
But Oregon Revised Statutes 742.466 says the insurer has to spend the money for customer's costs if the appraisal process produces a higher amount compared to carrier's last offer before the right to appraisal is invoked.
“When an automobile liability policy contains a provision for resolving a dispute through appraisal of a automobile insured underneath the policy, the insurer shall reimburse the insured for the reasonable appraisal costs if the final appraisal decision underneath the policy provision is greater than the amount of the insurer's last offer prior to the incurrence of the appraisal costs,” ORS 742.466 states.
Thus, if the insurer mistakenly or intentionally lowballs consumers, the customer isn't forced to go out-of-pocket to be made whole – which in additional to being unfair might be counterproductive.
During a recent Collision Hub broadcast, Vehicle Collision Experts CEO and professional appraiser Mark Olson stated how exercising an appraisal clause could result in a pyrrhic victory for that customer.
As Olson put it: Suppose the appraisal clause process costs the customer $1,000 and finds the customer's appraisal $3,000 above the insurer's. The umpire “splits the baby” and produces an appraisal $1,500 higher than the insurer's.
“You spent a grand to chase $1,500,” Olson said. Small-claims court will work better, according to Olson.
Tacoma, Wash.-based attorney Steve Hansen from the Law Offices of Stephen M. Hansen told the hearing Monday he's spent three decades representing consumers in vehicle repair dispute.
Hansen said clients “so many times” tell him they'd never hire a lawyer but they are motivated to achieve this by insurers' unfair treatment. This frequently involves a “lowball offer” for any repair or a total loss.
Consumers lack a “fair and economical” – he defined the latter term as “cost-effective” – way of handing insurance disputes, Hansen said. He too advocated the Oregon appraisal clause option, later observing that the current appraisal process might be prohibitive given the consumer's inability to recoup the costs of the appraisal or umpire.
Kirby said Monday he'd an interest in the Oregon appraisal law and said it would be possible to incorporate because of his placeholder bill's title.
There's a couple of practical arguments supporting applying the Oregon concept in Washington or any other states:
First, the customer can't collect in Oregon unless they were first vindicated by either the insurer's own appraiser or an umpire decided to through the insurer's appraiser. The client is being recouped for money they definitely shouldn't have experienced to invest in the first place – according to the insurer's own representation.
This is not a situation where some mythical ambulance-chasing lawyer hoodwinked a jury or nuisanced a settlement for that consumer. It's the insurer's own individuals who confirmed the carrier's offer to the consumer was lacking and, ergo, the customer was at the right.
Second, the inevitable lawmaker and insurer concern that “premiums will skyrocket” doesn't fly.
ORS 742.466 has been around devote Oregon for 11 years, since Jan. 1, 2010. We can scrutinize its effects while using most recent National Association of Insurance Commissioners premium data, which tracks time 2021-17 – well into the law's tenure.
Oregon's average auto premium and average combined premium were lower than Washington state during those five years. The average Oregon collision premium seemed to be lower than Washington's all five years.
Oregon's average premium, average combined premium, and average collision premium were even lower than the nation's averages all five of these years. And in fact, Oregon's collision premiums were actually among the lowest in the country.
Northwest Insurance Council President Kenton Brine said Monday he thought the Oregon statute only put on total losses, not repairable vehicles, and it might be problematic applying it to the latter.
However, the three-shop Oregon MSO Precision Body and Paint told us Thursday their customers have experienced no issue while using law on repairable vehicles.
Owner Ron Reichen asserted prior to COVID-19, his company saw its customers averaging one or two appraisal clause actions per month – and “never not having success.”
He described many RTA proceedings as handled without needing to hire an umpire.
Rep.: Status quo in Wash. 'unfair'
Kirby is seeking to fix a problem he linked to Portion of Washington Administrative Code 284-30-390.
If the claimant chooses to accept loss vehicle to some repair facility in which the total cost to restore losing vehicle to the condition before the loss exceeds the insurer's estimate, the claimant must be advised that she or he might be accountable for any additional amount over the insurer's estimate.“To me, saying, as well as in practice it has actually been used, to mean that 'that's just the way it's gonna be,” Kirby said.
If the insurer doesn't accept the amount estimated by the customer's preferred shop, “'there's not anything that you can do about it.' Ultimately, that's how it keeps ending up,” Kirby said.
A consumer could sue the carrier, but insurers have “armies of lawyers” and also the policyholder may not, he said. Also, he argued that no attorney would take a case over a $2,500 claim.
“It's just unfair,” Kirby said. He said he wasn't attempting to make the process unfair for insurers, but “I just want to level this playing field.”
House Bill 1428's placeholder text carries the word what Kirby's committee endorsed 7-6 in last year's HB 2782.
That bill ultimately died without further action in Rules Committee. Its primary solution for addressing the imbalance Kirby described involved declaring OEM procedures necessary and placing the responsibility of proof on an insurer to dispute a charge's reasonableness.
The initial version of HB 2782 did have a concept much like Oregon's, but that draft might have taken the idea further than the neighboring state's law. Kirby's committee finished up stripping the word what from the bill it advanced.
Unlike Oregon's ORS 742.466, that old HB 2782 language mandated an appraisal clause be placed in Washington insurance policies. This clause must state:
ORS 742.466 merely says insurers be forced to pay “reasonable appraisal costs”; it does not define them this specifically.
Oregon doesn't require insurers to provide an appraisal clause, and ORS 742.466's consumer-recoups-costs language only pertains to policies that.
“If an automobile liability policy does not have a provision described in subsection of the section, then notwithstanding every other provision from the policy, any resolution of the dispute will be susceptible to rules adopted by the Director of the Department of Consumer and Business Services,” the law also states.
