After several years of advocacy for the mandatory right to appraisal in Texas, legislation is making promising progress with no opponent testimony on one such bill Thursday.

During a Senate Committee on Business and Commerce hearing, five organizations and two business owners spoke in support of SB 458. The bill is one of two similar appraisal bills that have been proposed. The other is SB 369, which hasn’t been scheduled for a hearing yet.

Many car insurance policies include an appraisal clause that policyholders can invoke to have a third-party appraisal done when they don’t agree with their carrier’s valuation of their vehicle or damages. Both the carrier and the policyholder hire an independent appraiser and if the appraisers can’t agree, an umpire is selected to make the final decision.

However, some insurance companies don’t include the appraisal clause in their policies.

Generally, the mandatory appraisal bills seek to:

• • Require an appraisal procedure in all personal auto insurance policies
  • Allow appraisal requests by an insurance company or insured person within a certain amount of time
  • Require the vehicle owner and insurance company to appoint competent appraisers
  • Require appraisers to select a mutually agreed upon umpire to determine the true cost of repairs within a certain amount of time

SB 458 states the appraisal provision “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.”

“Insurers like the appraisal process,” said Beaman Floyd, director of the Texas Coalition for Affordable Insurance Solutions, during the March 27 hearing. “That’s why it’s voluntarily in most of the policies in Texas. We think it is a good dispute resolution system and a good way to head off everybody having to spend a bunch of money in the courthouse and get a fair settlement.

“We do from time to time see the abuse of the appraisal process and we’ve seen credible evidence of abuse both by insurance companies and by other folks in the world on appraisal processes. Part of what we asked for… is to make sure that we have good guardrails so that if we mandate appraisal processes they don’t get abused by either party and we think your bill, Senator [Schwertner], strikes a pretty good balance in that direction. We appreciate the process.”

Robert McDorman, Auto Claim Specialists general manager and public insurance adjuster, noted that in 2023, the Texas Office of Public Insurance Council (OPIC) recommended the right to appraisal on insurance claims be a mandatory part of policies. He is a longtime advocate for the right to appraisal.

OPIC noted in its report to the legislature that it is “increasingly concerned with restrictions on appraisal in policy forms filed by top insurers.”

McDorman also pointed out a 2023 study from Texas Watch, a nonprofit consumer advocacy organization, that found across all 1,246 auto insurance claims it analyzed, the appraisal award was an average 40% higher than the insurance offer.

According to his records, McDorman said, on average, payouts in disputes over repair procedures increase by $6,568 after invoking the appraisal clause, and for total loss disputes, increase by $3,964 above the carrier’s offer.

“The limiting or the removal of the right of appraisal in motor vehicle claims will be the nail in the coffin for safe roadways in Texas. Please help us [with] mandatory appraisal rights for Texas,” McDorman said.

Jon Schnautz, legal and legislative advocacy counsel for the Insurance Council of Texas, said his organization’s goal with appraisal legislation is to make sure a mandate wouldn’t disrupt appraisal provisions already in insurance policies.

“If the process were overly prescriptive or included certain things, we feel like it could have led to abuse,” he said. “We think your committee substitute doesn’t go near those lines. We appreciate it and really appreciate the process there and balancing of different interests.”

Schnautz added that, according to the aforementioned TDI report, about 1 in 5,000 paid and/or payable auto insurance claims goes to appraisal, and of those, seven-eighths are total losses.

“One-eighth of 1 in 5,000 is how many claims are going to appraisal on partial losses right now,” he said. “That to us indicates the process probably isn’t being abused right now. We want to make sure it stays that way.”

Manuel Rubio, owner of Miracle Body and Paint in San Antonio, sought to clarify incorrect notions he said he’s noticed auto insurance companies often have.

“There’s some misconceptions that insurance companies have, assuming all collision centers are equal in repair procedures and knowledge,” he said. “According to our records, we had nine claim repairs that were resolved by using the appraisal clause. In 2024, of these nine claims, we collected $41,000. That’s an average of over $4,600 per claim.

“The appraisal clause is a mechanism that promotes fairness and efficiency in settling insurance claims. When automotive repairs or procedures come into question, the appraisal clause objectively clarifies these differences and settles these property losses amicably. The appraisal clause protects both policyholders and insurance companies with transparency. I urge this committee to please pass this appraisal clause bill… Collision centers and policyholders are tired of all the back and forth that goes on with settling insurance property claims. Policyholders simply are trying to get their cars repaired correctly and safely. Collision centers have to hire attorneys and collection agents just to try to collect the balances that are owed by insurance companies for proper repairs.”

Scot Kibbe, American Property Casualty Insurance Association (APCIA) state government relations vice president, said APCIA thinks the bill “balances the interests and sets sensible parameters.”

“I know it’s been a kind of sticky issue the last couple of sessions but we just appreciate the good work and we’re very happy to support it,” he said.

Ches Bostick, CEO and owner of Abba Claims Consultants and Texas Association of Public Insurance Adjusters president, said some insurance carriers are writing into their policies that even if an award is agreed to through invocation of the appraisal clause they still have the right to deny the claim.

“We think that’s something that should be looked at,” he said. “An appraisal is intended to be an expeditious and inexpensive process for resolving the claim without litigation but today it’s anything but. It’s become the wild wild West of the insurance industry. There are some carriers that are beginning to exclude the process from the policies altogether. In those cases, policyholders are left with no other option but to hire a lawyer. Most won’t and often end up settling their claim for far less than they’re entitled to.”

Ware Wendell, Texas Watch executive director, said he’s heartened to hear support from across the table on the bill.

“Appraisal is important for resolving these disputes quickly and getting to the correct number,” he said. “We’re talking about the cost of the loss; nobody’s overpaid or underpaid. It’s getting to the right number, getting this before an independent expert or panel of experts.”

Referring to Texas Watch’s research and the TDI study, Wendell added, “That’s real money for your constituents and it makes sure that we get to the right amount of money to where the repair professionals can do the job the right way, the safe way, according to the manufacturer specifications. We know safe repairs save lives.”

Reagan Elmer, director of government affairs for the Independent Insurance Agents of Texas, also expressed support for mandatory right to appraisal because it’s “good for customers.”

Companion bills for SB 458 and SB 369 have also been introduced.

In addition, HB 722 would amend current law to add an appraisal process requirement for insurers.

According to the bill, when a person whose vehicle is being appraised by an insurer for the amount of loss requests an appraisal, the insurer would have to provide a written explanation of any procedures, formulas, calculations, or other methods used by its appraisers to determine the amount of loss, including the cost of observed or predicted repairs and the salvage value of the automobile.

The bill was referred to the House Committee on Insurance on March 4.

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