TDI drafts rules for new mandatory appraisal clause

The Texas Department of Insurance (TDI) has published draft mandatory appraisal rules for personal auto and residential property insurance in the state, with public comment open until Oct. 6.

The mandatory right to appraisal became Texas law in June, effective Sept. 1, following nearly a decade of advocacy from collision repair professionals.

The law, carried through as Senate Bill 458, states that it is “intended to provide a type of dispute resolution process solely to determine the amount of loss when that amount is in dispute between the policyholder and the insurer.”

SB 458 was fast-tracked through the process, obtaining unanimous approval from both the Senate and the House during every review.

TDI’s draft rules state that every insurance policy subject to the appraisal provision must:

• • Allow either party to unilaterally demand an appraisal;
  • Apply it to disputes between parties about the amount of loss or damage to property, including partial or total loss or damage;
  • Require the appraisal award to be binding as to the amount of loss or damage; and
  • Not in conflict with appraisal requirements or other state law.

There would be exceptions to the third rule, as stated in the new appraisal law, including if the award was made without authority, isn’t in compliance with the appraisal provision, or if there was fraud, accident, or a material mistake.

According to TDI’s draft rules, appraisers and umpires would have to be competent to evaluate the type of property loss or damage in dispute, independent from the parties, and disinterested in the outcome of the appraisal.

Specific to personal auto appraisals, the rules state that a demand for appraisal must be made in writing no later than 120 days from the date the insurer notifies the policyholder that it has accepted coverage of the property loss or damage.

Each party would be responsible for hiring its own appraiser within 20 days of the written demand.

The appraisers would be required to agree on the amount of loss or damage within 75 days of the written demand. An umpire would be chosen within 105 days after the written demand if the appraisers cannot agree on an amount. If the selection of an umpire can’t be agreed on, a county or district court would step in to choose one at the request of either party.

Appraisal awards determined by an umpire must be issued no later than 180 days after the umpire is selected or appointed. If the umpire doesn’t meet the deadline, the appraisers may choose a new umpire. Deadlines can be extended at the request of either party by written agreement.

The draft rules also outline requirements for notice to consumers of their right to appraisal within insurance policies, including that it be written in plain language to explain how they can demand an appraisal and their responsibilities during the process.

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