Texas Department of Insurance holds right-to-appraisal public hearing
The Texas Department of Insurance (TDI) held a public hearing on Tuesday regarding its proposed requirements for a right-to-appraisal (RTA) law that was passed last year, during which most speakers were proponents.
SB 458 (98R, 2025) requires property insurance policies in Texas to include an appraisal provision and directs TDI to adopt implementation rules for the new law.
Before opening the hearing, TDI staff explained that under the new law, the rules must mandate appraisal and establish the period in which they are completed. It also directs the commissioner to consider the qualifications and selection of appraisers and umpires, according to TDI.
TDI acknowledged that appraisals have been a topic of public discussion in Texas for some time, resulting in a call for appraisal data from the 10 largest auto insurers and 10 largest home insurers in 2024.
The data call results from the 10 auto insurers showed that appraisal was used in fewer than 0.02% of payable personal auto claims.
When appraisal was used, claimants initiated it in 94% of the claims. Nearly half of the personal auto appraisal awards were for settlements ranging from $13,000 to $38,000, resulting in $2,100 to $5,900 more than the insurer’s initial offer.
TDI first acknowledged the need for legislators to establish appraisal guidance policy in its 2022 Biennial Report. And in its Report to the 88th Texas Legislature, the Office of Public Insurance Counsel (OPIC) expressed increasing concern with “restrictions on appraisal in policy forms filed by top insurers [which] can adversely impact consumers who buy insurance to make sure damage to their property will be repaired or replaced. Without appraisal, they may be forced to choose between accepting the insurer’s offer and paying out-of-pocket for any disputed amount or taking on the costly and time-consuming burden of going to court.”
OPIC reiterated those concerns in its report to the 89th Texas Legislature, listing appraisal as its first recommendation.
Associations, consumer advocacy groups, and others within the collision repair industry pushed for the passage of RTA legislation for six years.
TDI said Tuesday that the proposed rules:
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- Allow either party to unilaterally demand appraisal
- Clarify that appraisal is available for partial losses, not just total losses
- Require insurers to give an appraisal process notice
- Set minimum qualifications for appraisers and umpires
- Provide basic timeframes for the appraisal process
Robert McDorman, Auto Claims Specialists general manager who advocated for the RTA bill, testified that the independent officer rule without the election of the parties to see a judicial umpire would allow insurance carriers to have systematic control of the appraisal outcome and harm the insured.
“I think we need to have some accountability in these rules… if the rules are broken,” he said. “There needs to be some ethics.”
Auto Body Association of Texas (ABAT) President Burl Richards testified that he is concerned about insurance companies having control of directing third-party vendor appraisers.
“We want to make sure that this is a fair and transparent process, not dictated or directed by the insurance company,” he said.
Richards added that Texans deserve safe, proper vehicle repairs without incurring any additional out-of-pocket expenses beyond the deductible.
“My concern is that if the insurance company is in control of selecting an umpire, they will continue to systematically be in control of the process by directing the third-party vendor appraiser on what and what not to pay for.”
Texas Watch Executive Director Ware Wendell noted in his testimony that SB 458 is the product of “many years of effort.”
“I think it is the most consequential legislation that came from the Business, Commerce, and Insurance committees for people out there on the ground who need help when they have an insurance dispute,” he said. “We produced a report in 2023 surveying over 1,200 auto claims that showed that appraisal makes a real difference on auto repair claims — an over $5,000 difference.”
He added, however, that TDI’s rules need to include actionable and defined deadlines. They should also require umpires to disclose how often they’re working with particular insurance carriers.
“The consumer must retain their right to have courts appoint the umpire if there’s a dispute there,” Wendell said. “We need our independent courts to exercise their judgment. We also agree that we need an enforcement mechanism in this rule. Otherwise, I fear that will continue.”
Ben Brown, a representative for the American Adjuster Association, testified that if TDI’s rules are to be instituted, there should be collective work to ensure the intended goal is achieved, reducing litigation to protect consumers rather than waiting for case law to clarify the rules’ intent.
Brown shared four aspects of the rules the association agrees with and noted that 11 issues it has with the rules as currently written are fully described in its 59-page written comment and memo submitted to TDI. It also includes recommended alternative language to resolve the issues. He shares a few of the concerns.
“The proposed appraisal timeline is vulnerable to gamesmanship on both sides,” he said. “The current deadline begins running before the appraisal panel is fully formed. In practice, the most common delay in appraisal is the selection of an umpire. If the clock for appraisal to occur is already running while the parties are still attempting to appoint and agree on an umpire, then time could expire before the panel is ever in a position to perform its work at all. Parties would be incentivized, potentially, to delay the umpire process, likely through litigation tactics in order to run out the clock.”
Instead, the deadline should begin only after the umpire has been appointed and the entire appraisal panel has fully formed, he added.
Brown also said the association believes the proposed appraisal demand deadline creates an imbalance between the parties.
“The proposed rule would effectively create a one-year appraisal deadline for policyholders while also creating circumstances under which appraisal may still be pursued after litigation begins, potentially allowing insurers double the time allowed for insureds to invoke that right to appraisal,” he said. “We do not believe that is consistent with traditional common law treatment of appraisal, nor do we believe it reflects the intent of SB 458.”
Lastly, he said the association supports the appraisal notice requirement, but without being tied to claim decision letters under Section 542.056 C.
Rep. Matt Morgan (R-District 26), who said he’s worked on both sides of the insurance industry for more than 25 years, asked TDI to make some changes to the proposed rules, including ensuring appraisers and umpires are held accountable for their own work rather than having to seek secondary approval, such as by a manager. He also asked that ethics guidelines and requirements be added to the rules language.
TDI will receive written public comments until 5 p.m. on June 8. They may be sent via email 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.
Washington State also passed RTA legislation last year. The Washington Office of the Insurance Commissioner (OIC) released a pre-publication draft of its requirements for appraisal umpires to register on its site in September following the passage of an RTA bill.
RTA legislation passed by the Illinois House and Senate is now on its way to the governor’s desk for signature.
The amended HB 4160 would require every auto insurance policy that includes first-party coverage for physical damage to include a provision granting the insured, without the company’s consent or agreement, and the insurer, the right to invoke appraisal if there is a dispute over the amount of a loss.
If passed, the bill would become effective July 1, 2027, and apply to every auto insurance policy issued, renewed, or delivered on or after that date.
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