Greater Awareness Needed for Policyholder Rights via Right to Appraisal
by Robert L. McDorman
Dear Mr. McDorman,
I own and operate a collision facility in East Texas. I agree with last month’s reader that the release of the Texas Department of Insurance’s Appraisal Experience Data Call Report outlines and supports the need for mandatory appraisal rights in Texas. I also was surprised that less than 0.02 percent of payable personal auto claims used the Appraisal Clause. However, what I found equally surprising was that reportedly only 13 appraisals were followed by a lawsuit. Over the years, we have referred many of our clients to Auto Claim Specialists for help when there is a dispute between them and their insurer. Based on comments and feedback from our clients about their experience going through the appraisal process, the reported 13 lawsuits filed after appraisal seems oddly low. It seems I’ve seen at least that many or more just from clients out of my shop. Do you agree? What has been your experience?
Thank you for your comments and questions. As I wrote last month, I commend the Texas Department of Insurance (TDI) for stepping forward, requesting this data on appraisal and releasing it for public view. The 0.02 percent of reported claims that went through appraisal is concerning and shows that there should be greater awareness of the policyholder rights when the proposed settlement offer is low. I feel confident the TDI understands that, without the Right to Appraisal, the number of claims ending in litigation would be much more significant. This data call report sounds the alarm on the systematic under-indemnification scheme I have spoken about for years, underlining the need for mandatory appraisal rights. The TDI website states, “Your policy may include an appraisal process to resolve complaints (emphasis added).” With mandatory appraisal rights in Texas, it would state, “Your policy includes an appraisal process to resolve complaints.”
As for the 13 reported claims during the entire July 2020 to June 2023 time period where a lawsuit followed appraisal, our records show that for the period of July 2020 to June 2021, we referred 42 clients to law firms; from July 2021 to June 2022, we referred 21 clients to law firms; and from July 2022 to June 2023, we referred 89 clients to law firms. When we refer clients to lawyers for help with their claim after their insurance carrier harms them, very few do not follow through with litigation. Thus, our number of likely lawsuits filed during this period after our clients failed to receive fair settlements following the exercise of their appraisal rights is 152 – an order of magnitude greater than the reported number of just 13 from the carriers. Hence, you are absolutely correct in being skeptical of that implausibly small reported number. Additionally, from August 2023 through December 2024, we have referred another 80 clients to law firms. I would gladly supply our data to the TDI to compare against the data provided by the chosen 12 insurer groups if requested.
Clearly, with the TDI’s Appraisal Experience Data Call Report noting an average appraisal increase of between $2,100 and $5,900, the Texas Watch Impact Of Auto Appraisal Report noting an average increase of $4,078.20 and our average increase of $4,973, the necessity for mandatory appraisal rights in Texas is indisputable. Without mandatory appraisal rights, the litigation numbers would increase through the roof, clogging up our already congested court system. We, as insured citizens of Texas, need our lawmakers to pass the mandatory Right-to-Appraisal bill this upcoming session. Without the passing of this bill, unjust auto claim settlements will not only continue, but likely grow even worse.
In addition to widespread and mostly unchecked under-indemnification in total loss claims, the under-indemnification in repair procedure claims in Texas is also rampant. Most of the estimates and supplements we see for repair claims have many overlooked (by design) safety and OEM-required operations needed to restore the vehicle to its pre-loss condition to the best of one’s human ability. Limiting or removing the insured’s right to appraise a repair procedure is a serious safety issue. The limiting or eliminating the Right to Appraisal by the insurance carrier in a repair procedure dispute will be the nail in the coffin for safe roadways in Texas.
As I have written many times, we at Auto Claim Specialists understand your concerns about under-indemnification. Until legislators pass laws to make the Right to Appraisal mandatory in Texas for all motor vehicle policies, we have no choice but to continue to advise our clients who have been harmed and cheated by their insurance carriers to fight like the third monkey in line to get onto Noah’s Ark when it has already begun to rain, and we will help. In my professional opinion, the more times these systematic under-indemnification schemes are exposed and monetary punishment is levied, the quicker change will come to help us all.
Our position at Auto Claim Specialists is that the Right to Appraisal should be a mandatory contractual right in every policy. For the 89th Texas Legislative panel, we have teamed up with lobbyist Andrew “Drew” Graham to educate lawmakers and help secure mandatory contractual appraisal rights for all insured Texans. We, the insureds, are many, and I am confident that if we join forces and all do what we can, we can be successful in securing our rights and our children’s rights to contest insurance settlement offers that would result in underpayment of losses and/or shoddy and dangerous repairs.
The spirit of the Appraisal Clause is to resolve loss disputes fairly and to do so in a timely and cost-effective manner. Invoking the Appraisal Clause removes inexperienced and biased carrier appraisers and claims handlers from the process, undermining their management’s many tricks to undervalue the loss settlement and under-indemnify the insured. Through the Appraisal Clause, loss disputes can be resolved relatively quickly, economically, equitably and amicably by unbiased, experienced, independent third-party appraisers as opposed to more costly and time-consuming methods such as mediation, arbitration and litigation.
In today’s world, regarding motor vehicle insurance policies, frequent changes in claim management and claim handling policies and non-standardized GAP Addendums, we have found it is always in the best interest of the insured or claimant to have their proposed insurance settlement reviewed by an expert before accepting. There is never an upfront fee for Auto Claim Specialists to review a motor vehicle claim or proposed settlement and give their professional opinion as to the fairness of the offer.
Please call me should you have any questions relating to the policy or covered loss. We have most insurance policies in our library. Always remember that a safe repair is a quality repair, and quality equates to value. I thank you for your question and look forward to any follow-up questions that may arise.
Sincerely,
Robert L. McDorman
Want more? Check out the February 2025 issue of Texas Automotive!