RTA proponent says Texas proposed rule would give insurers control over umpire process

A proposed final rule from the Texas Department of Insurance for a right to appraisal (RTA) bill passed last year would give insurance companies control over the umpire process, ultimately stripping the bill of proponents’ intentions, according to Robert McDorman, Auto Claims Specialists’ general manager, who advocated for the RTA bill. 

SB 458 (98R, 2025) requires property insurance policies in Texas to include an appraisal provision. The bill also directed the TDI to adopt rules for the code changes. 

McDorman says in an email that the rule language removes the consumer’s judicial right to have a court-appointed umpire. 

The rule authorizes insurers to include, in addition to judicial appointment, other methods of umpire appointment. A TDI explanation states that some residential property appraisal provisions currently provide for the umpire to be chosen by an independent vendor if the appraisers cannot agree. 

According to the explanation, the insurer must include at least two vendors and let the policyholder select the vendor, or allow only the policyholder to invoke this option. 

It continues to explain that it allows an insurer to provide an umpire appointment through any alternative method that both parties mutually agree to in writing after appraisal has been demanded. 

“By allowing these options in addition to judicial appointment, the proposed rule gives insurers added flexibility and efficiency in the appointment process while still ensuring a level of policyholder choice, regardless of the method,” the TDI explanation states. 

McDorman sent comments to TDI explaining his concerns. 

“The insured, not the carrier, should elect between umpire selection mechanisms at the time of the dispute,” McDorman said. 

He adds that policyholders should be informed that the vendor is being compensated by the insurer when a carrier lists a vendor. He also notes that if the vendor option is used, the carrier should bear the full cost of the vendor-appointed umpire. 

“Vendors seeking placement on carrier-approved lists face an institutional incentive to produce results favorable to insurers, regardless of whether any individual acts in bad faith,” he writes. “Litigation is currently pending against major auto valuation firms alleging exactly this kind of financial entanglement with carriers.”

McDorman said that the mandatory judicial appointment option does not cure this because when both mechanisms are in the policy, the rule is silent on which prevails if the parties disagree. 

“Most policyholders lack the resources or sophistication to invoke judicial appointment as a counter to a carrier-embedded default,” McDorman says. “To resolve this issue, the agency should leave both options in the policy but give the insured the express authority to make the election at claim time.”

While the rule requires individual appraisers and umpires to be independent and disinterested, McDorman draws attention to the rule not imposing transparency requirements on vendor entities that carriers select and list in their policies. 

“A policyholder who receives a policy containing a vendor umpire mechanism has no way of knowing whether a vendor is financially dependent on the same insurer it will serve in a dispute,” he writes. “The disclosure obligation should rest with the insurer and should appear in the policy itself, rather than at the point of dispute.”

McDorman notes that the umpire cost is split between both parties for a standard appraisal. 

If a vendor mechanism is chosen, the carrier controls the process and should bear the cost, he writes. 

“Requiring the insured to share in the cost of a vendor-appointed umpire compounds the structural disadvantage the insured already faces under that mechanism,” McDorman says. 

McDorman provides multiple amendment to §5.9806(b)(3)(C) and (D): 

“(C) If an appraisal provision includes an option for umpire appointment by an independent vendor under paragraph (B) of this subsection, the provision must state:

(i) that the policyholder shall have the sole right to select which option will be used; and

(ii) whether each vendor listed receives compensation from the insurer or its affiliate in connection with umpire appointment services.

(D) If the policyholder elects to accept umpire appointment by an independent vendor under paragraph (B) of this subsection, the insurer shall bear the full cost of the vendor’s services and the umpire’s compensation.”

He closes the comments by saying that transparency and consumer protection are the core of TDI’s regulatory mission. 

“The legislature gave TDI broad rulemaking authority under SB 458 precisely to ensure that the appraisal process works for policyholders, not just for insurers,” the comments say.

“The proposed rule is a significant step in the right direction, but these three amendments would close a remaining gap. We respectfully urge the department to adopt them.”

McDorman also has praised other parts of the rule. This includes a portion of the rule that requires an insurer to provide an appraisal process notice to the policyholder at the same time the insurer provides the notice of acceptance or rejection of the claim. 

He also notes that the rule states that either party has the right to unilaterally demand an appraisal. Previously, some policies in Texas required both parties to consent to appraisals.

Criteria for appraisers and umpires are also outlined, including that they have the competency to evaluate the type of loss, are independent of the parties, and have no interest in the appraisal’s outcome.

A TDI hearing in which public comments will be collected will be held on June 2 from 10 a.m. to noon at the Barbara Jordan State Office Building, Room 2.035, 1601 Congress Ave. in Austin, Texas.  

Those who wish to attend virtually may join by Zoom here. A public participation form can be submitted to speak virtually during the meeting. 

Written comments can also be sent to TDI by 5 p.m. on June 8. They can be emailed to [email protected] or mailed to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711.

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