Texas Proposes New System for Resolving Home & Auto Insurance Disputes

The Texas Department of Insurance released details of a new system that would make it easier to resolve claim disputes.

According to the TDI’s working draft, new personal home and auto insurance policies would need to include appraisal provisions to resolve claim disputes.

Appraisal clauses are a crucial part of the insurance system. They allow policyholders and insurers to challenge a ruling, theoretically creating fairness for all parties involved.

The Texas Department of Insurance, however, noticed some insurers were removing appraisal clauses from policies, giving policyholders little recourse during a dispute.

In response, Texas recently passed Senate Bill 455, requiring surplus lines insurers in the state to include appraisal clauses. Under the new TDI draft, home and auto insurance companies would need to include a similar clause.

Here’s how the system would work:

1. All new personal home and auto insurance policies would include appraisal provisions to help resolve claim disputes
2. Under the appraisal provision, either the policyholder or insurer would be able to demand an appraisal
3. If the policyholder disagrees with the amount of the loss or the damage, for example, then the policyholder would be able to demand an appraisal; the insurer would have the same powers
4. Under this system, the resulting appraisal award would be binding (except where there’s a conflict with state law or a material mistake)
5. Each party – the insurer and the policyholder – would hire its own appraiser; appraisers would have 75 days (for auto insurance) or 180 days (for homeowners insurance) from the date of the appraisal demand to reach an agreement
6. If the appraisers cannot agree within the 75 to 180 day window, then an umpire would be selected; the umpire could be an adjuster, public adjuster, general contractor, engineer, or architect, and that umpire would have 75 to 180 days to make a final decision

Texas Insurers Accused of Removing Appraisals from Policies

Texas’s proposed appraisal system isn’t anything crazy: it’s similar to the appraisal systems found in other states and in a standard insurance policy.

So why is the Texas Department of Insurance proposing such a system?

According to the TDI, some auto insurance companies had removed the appraisal process for claims involving partial losses. Despite having a longstanding place in the industry, appraisal clauses were being quietly removed, making it difficult for policyholders to resolve disagreements.

Under the new system, policyholders would have a formal mechanism for resolving insurance disputes – whether it’s a partial loss or total loss.

Without an appraisal clause, policyholders have limited ways to challenge an insurer’s ruling. If you believe your car has $5,000 of damage and your insurer believes it has $1,500 of damage, for example, then it would be difficult to challenge this ruling.

Based on the new TDI draft, things could change.

The draft was released in late September. It comes as Texas lawmakers also recently passed Senate Bill 455, requiring surplus lines insurance contracts in Texas to include an arbitration agreement.

The appraisal clause is a crucial part of the insurance system, and the Texas Department of Insurance’s new draft helps formalize its place in the system, giving policyholders a formal way to challenge an insurer’s ruling.

For help invoking the appraisal clause, or to determine the best time to invoke the appraisal clause, schedule a no-cost consultation with ClaimsMate today.