Mandatory ‘Loser Pays’ Car Insurance Appraisal Clauses Could Become Texas Law

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Lisa Steuer McArdle
Updated on Apr 27, 2022 · 3 min read
House Insurance Committee recently voted 5-4 in favor of recommending lawmakers pass a bill mandating appraisal clauses in
car insurance
House Bill 2534 would allow insurers or policyholders to exercise a right to appraisal, determining how much a policyholder should be reimbursed by insurance on a repair bill or totaled vehicle.
It would allow another option for insurers and policyholders to resolve claim disputes without court. It might sound a little confusing, so let’s break it down a little further.
Car insurance is already complicated enough | Twenty20

Understanding the car insurance appraisals clause

It’s a fairly standard version of the right to appraisal concept in all personal car insurance policies. The distinction in Texas House Bill 2534 is the "loser pays" concept. Both sides are often responsible for their bill and split the umpire bill in appraisal clauses.
The insurance company must pay the customer’s appraiser fees and expenses if the right-to-appraisal process produces a loss or repair cost valuation of $1 higher than the insurer’s last offer.
The insurer’s last offer would have to be deemed "just" for the customer to pay the insurer’s appraiser fee and expenses, under the bill. According to
Repairer Driven News
, a public adjuster with Auto Claim Specialists said an appraisal at his firm typically costs $800 for some context.
So what if an agreement can’t be made between the insurer and the customer on the amount the carrier owes in a loss? Under the bill, either party would be allowed to invoke their right to appraisal, as long as it’s within the first 90 days of a claim’s filing.
Opposing the bill were representatives from the National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association. But bill sponsor Travis Clardy claimed appraisal clauses were established in state code more than 15 years ago at the insurer’s request.

Hiring an appraiser and umpire

Within the first 15 days of the appraisal clause being exercised, both sides need to hire a "competent appraiser" who determines the amount of loss.
If the two appraisers who are chosen can agree on a dollar value, that amount is binding, but if they can’t agree, then the appraisers work together to choose an "umpire," who would determine the amount of loss (with the umpire’s fees being split evenly between both sides). The amount is binding if either appraiser agrees with the umpire.
Also, if the appraisers cannot agree on an umpire in 15 days, the insurer or policyholder "may request that a court in the county in which the named insured resides select the umpire."
The idea is that the bill could provide an opportunity for an amicable solution to a total loss or repair bill, which would be decided by unbiased parties, as opposed to a lawsuit.
The bill cleared the committee without amendments.

What’s next for this new law?

Once again, it’s not an entirely new concept. Most insurers in Texas already contain appraisal clauses in their policies. The Texas Department of Insurance actually advises consumers to consider appraisal clauses.
The idea is that if a customer must pay for their own appraiser, consumers may be less likely to use the process on certain claims, or at all.
The bill doesn’t have a Senate sponsor yet, but automotive dealership trade groups reportedly support the bill and have a senator in mind.

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