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By Giulia Carbonaro
Senior Reporter
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Texas insurance regulators are trying to make the claims dispute process fairer for homeowners in the state, allowing them to ask for an independent check when they disagree with their carriers over the value of the damage suffered by their properties.
This involves forcing carriers to issue appraisal provisions, a process which was made mandatory in the Lone Star State as of September 1 under Senate Bill 458, a legislation filed without Governor Greg Abbott’s signature this summer.
An appraisal provision is an alternative way of resolving a claim dispute between insurer and policyholder which allows either of the two parties involved to request an independent assessment of the value of the damaged or destroyed item.
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This is often included in many insurance policies as a voluntary option rather than a mandatory one, but earlier this year, it was revealed that many carriers in Texas had removed it from their policies.
The new Texas law ensures that all insurance policies in the state contain “an appraisal provision” which “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.”
But some of the details around how this new law will work and affect carriers and policyholders are still being decided.
The Texas Department of Insurance (TDI) has recently published new draft mandatory appraisal rules for both personal auto and homeowner insurance in the state, which are open to the public until Monday, October 6.
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What Do The Draft Mandatory Appraisal Rules Entail?
Under the draft rules proposed by Texas regulators, every insurance policy subject to the appraisal provision mandated by SB 458 must:
- Allow either insurer or policyholder 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;
- Require the appraisal award not to be in conflict with appraisal requirements or other state law.
Some exceptions are expected to be included in the rule concerning avoiding conflict with appraisal requirements or other state laws,, including if the award was made without authority, is not compliant with the appraisal provision, or if fraud, accident, or a material mistake was involved.
These rules would apply to both homeowners and drivers policies.
When it comes to the appraisal process involving homes, the new draft rules say that, in short, policyholders and the insurer would each choose their own appraiser, and if those two cannot agree, a neutral “umpire” would issue the final decision. This would be a binding decision for both parties involved.
In details:
- A demand for appraisal must be made in writing not later than one year from the date the insurer gives the policyholder notice accepting coverage of the property loss or damage that is the subject of the appraisal;
- Each party must hire its own appraiser and notify the other party in writing of the appraiser's identity not later than 30 days after a written demand for appraisal is made;
- The two appraisers must attempt to agree on the amount of loss or damage in dispute within 180 days after a written demand for appraisal is made;
- If the appraisers cannot agree on the amount of loss or damage, they must select an umpire not later than 210 days after a written demand for appraisal is made;
- If the appraisers cannot agree on an umpire, either party may petition a county or district court to appoint an umpire. The court must be in a county or district where the policyholder resides or where the residential property is located;
- If an umpire is engaged, the appraisal award must be issued not later than 180 days after the umpire is selected or appointed. If an appraisal award is not issued by the deadline, the appraisers may select a new umpire;
- The parties may extend any deadline in the appraisal process by written agreement.
What Does This Mean For Homeowners In The State?
The draft rules released by regulators are currently being reviewed by the Insurance Council of Texas.
If implemented and successful in resolving claim disputes faster and in a fairer way for everyone involved, the Lone Star State could become a model for other states where homeowners have expressed frustration against carriers underpaying or denying damage claim repayments, like Florida.
But it would also be greatly important for Texas homeowners, who currently pay some of the highest insurance premiums in the country. According to Bankrate, home insurance in the state costs $4,049 per year for a $300,000 policy, around $1,700 more than the national average. Part of the reason why home insurance premiums are so high in the state is that Texas is particularly vulnerable to a range of natural disasters which are becoming more frequent and more severe due to climate change. But part of the reason is also that the Lone Star State’s population has boomed in recent years, causing a surge in damage claims that insurers “didn’t know to prepare for,” as Jessica McNally, a Dallas-based agent with Goosehead Insurance, told Bankrate.
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