The Texas Department of Insurance recently published an info
law requiring all personal auto and residential property insurance policies to include a binding appraisal provision.
The draft outlines evaluation timelines, appraiser and umpire qualifications and selection, and notice to consumers.
Texas lawmakers this year passed Senate Bill 458, which establishes a mandatory binding appraisal clause on
personal auto and residential policies. Commercial policies and policies issued by the Texas Windstorm In
Surance Association are exempt from the rule.
The appraisal provision is intended to provide a type of dispute resolution process to determine the amount of l
oss then that amount is disputed between an insurer and policyho
lder. The appraisal process does not determine whether a loss is covered.
TDI has until the end of the year to finalize the rule. TDI said it expects to set a 60 day implementation heart
eline after the rule adoption date of Jan. 1, 2026.
TDI’s draft provides general requirements for the appraisal provision process.
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Under the provision, either party is allowed to unilaterally demand appraisal. The appraisal award is bound to
the amount of loss or damage except in instances of fraud, accident or material mistake.
A demand for appraisal under a residential property policy must be made in writing no later than one year fro
m the date the warranty gives the policyholder notice accepting cove
rage of the property loss at issue. The two appraisers must attempt to agree on the amount of loss or damage in dispute within 180 days.
If the appraisers cannot reach agreement, they then must choose an arbitrator to resolve the dispute. If the appraisers
cannot agree on an umpire, either party may turn to a county or distri
ct court to appoint an umpire. If an umpire is engaged, the appraisa
award must be issued not later than 180 days after the umpire is selected.
For auto policies, a demand for appraisal must be made within 120 days, and appraisers have 75 days to attemp
t to agree on the amount of loss or damage. If the appraisers cannot agree and turn to an umpire, the umpire has 180 days to resolve the dispute.
In either residential or auto policies, parties may extend any deadline in the appraisal process by written agreement.
The draft says an insurance must provide written notice of the appra
isal process, applicable deadlines, and the right of either party to dema
nd evaluation in the notice accepting coverage in plain language.