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Vehicle repair customers encouraged to check policies for appraisal clause

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Business Practices | Insurance
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In the latest Consumer Tip video from the Society of Collision Repair Specialists (SCRS), board members discussed the right to appraisal — a commonly available option for policyholders who may not know it exists.

If written in your auto insurance policy, and there’s a disagreement on the amount of repair coverage or total loss settlement, the appraisal clause can be invoked to garner independent appraisals. Both parties hire an appraiser and they agree on the selection of a third appraiser to serve as the umpire in the event of a disagreement between them. An agreement by any two of the three, whether the appraiser and umpire or the carrier appraiser and policyholder appraiser, is binding.

“Once all of that process is done, typically what we see, is there’s a reasonable settlement that has now occurred and the consumer can move forward with their claims process be it reaching an agreement on the repair amount or maybe it’s a situation where there was a disagreement on the value of their vehicle in a total loss,” said SCRS Board Chairman Michael Bradshaw. “Not every policy contains these provisions so as a consumer you want to be familiar with your policy language and you want to check to make sure that that language is contained within the auto policy you currently have.”

Most insurance companies offer some form of appraisal clause in their policies. However, just because the clause is an option for relief, i.e., a claim outcome you find sufficient and fair, that doesn’t mean it can be used on every claim type situation and in every state.

“Almost all of them have it in their policy if it’s applicable,” said Robert McDorman, director of Auto Claim Specialists and consultant with Vehicle Value Experts.

“Relief” in this context means a resolution that insurance policyholders are satisfied with.

In Texas, the Department of Insurance doesn’t require the appraisal clause in auto policies but every carrier has it except for State Farm when it comes to repair disputes, McDorman said. The company does offer an appraisal clause for total losses, he said. Work has been underway by lawmakers, trade, and consumer advocacy groups to mandate the clause. Before the 2023 legislative session ended, the House passed a bill that would require an appraisal clause in auto insurance policies. It’s companion bill in the Senate was left pending in committee.

Earlier this year, Texas Watch said it had reviewed over 1,200 auto insurance claims files and in auto property repair claims, invoking the appraisal clause helped consumers recover, on average, $5,300 more than what the carriers offered. On total loss value claims, an additional $3,800 was recovered. Across the 1,200 claims, $5 million more was recovered by those consumers.

“The appraisal clause is designed to work out disputes over the loss between you and your insurance company,” McDorman told Repairer Driven News.

For example, most states don’t allow appraisal clause use on third-party claims (the other driver is at fault for the collision) but in North Carolina, it’s allowed for diminished value liability claims on the damaged vehicle. The reasoning behind leaving the clause out for third-party claims, or making it very limited, is that the claimant doesn’t have a contract with the insurance company, McDorman said.

In Alabama, Alaska, Arkansas, and Kansas public adjusters aren’t allowed to conduct vehicle damage appraisals. The states do, however, allow appraisers. While that may only seem like semantics, there is a difference.

“That’s why we have two different companies — one’s the public insurance adjuster and one’s the appraisal company, which is Vehicle Value Experts,” McDorman said. “That’s our appraisal arm in states where public insurance adjusters are not allowed.

“If you’re the appraiser, the insurance company does not have to talk to the appraiser but if you’re a public insurance adjuster, the insurance company has to talk to you because you have a contractual right to follow the shoes of the insurer… Whereas if you’re just an appraiser, all the insurance company’s got to do is say, ‘Well, we’re not going to talk to your appraiser and we’re not going to listen to your appraiser.’ So, then the insured has to do all the heavy lifting to try to force the insurance company to hire an appraiser. If you’re a public insurance adjuster, you can make that demand on behalf of the insurer.”

In instances where the appraisal clause isn’t an option, relief would be sought through mediation, arbitration, or in court — again, depending on how your policy reads.

“Always, always look at the policy before you seek relief,” McDorman said. “The policy is the contract that explains the rules between the insured and the insurer. Like anything, the better you know the game, the better the player you are.”

That goes for repair centers as well, he added.

“They should tell their customers to read their policy to see what avenues of relief they have because you wouldn’t want to give your client bad advice… the contract between the insured and the body shop is to perform the work, return the vehicle to its pre-loss condition to the best of one’s human ability then it’s up to the insured to go to the insurer for indemnification for what they agreed to by contract with the body shop… that fight is between the insured and the insurer. That fight is not between the insured, the body shop, and the insurer.”


Featured image: File photo of a crashed vehicle. (Credit: Kwangmoozaa/iStock)

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Appraisal clause crops up in mainstream news report

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