Texas finalizes appraisal rules as consumer pressure builds

Texas regulators are close to setting the final rules for Mandatory Right to Appraisal under SB 458, with a September 1, 2026 implementation date approaching. Auto Claim Specialists says the rules will decide whether the new consumer protection works in practice, and a public hearing drew broad support for tighter limits on insurer-controlled umpire selection.

Why it matters: - Texas is about to lock in the rules that will govern Mandatory Right to Appraisal for insurance claims. - The final framework will determine whether policyholders get a usable dispute process or a protection that exists only on paper. - The outcome could shape consumer protections in Texas and serve as a model for other states watching the rulemaking.

What happened: - The Texas Department of Insurance held a public hearing on Docket No. 2862 before issuing final rules for SB 458. - The hearing was the last chance for public testimony before TDI finalizes administrative rules. - The statutory implementation date for the new appraisal requirements is September 1, 2026. - Auto Claim Specialists used the hearing to press for consumer protections around how appraisers and umpires are selected. - Robert McDorman, president and founder of Auto Claim Specialists, testified at the hearing.

The details: - SB 458 requires insurance policies written in Texas to include the Appraisal Clause under Texas Administrative Code Title 28, Part 1, Chapter 5, Subchapter Q, Division 4 (§§5.9800 - 5.9806). - TDI’s April draft included proposed §5.9806(b)(3), which could allow insurers to build vendor-based umpire selection systems into policies before any dispute arises. - Public adjusters, attorneys and consumer advocates warned that carrier-controlled vendor mechanisms could create hidden fees, structural disadvantages and weaker neutrality in binding loss disputes. - McDorman argued that a vendor-based umpire system without a clear right to judicial appointment would let carriers control appraisal outcomes. - McDorman urged TDI to make a timely request for judicial appointment override any vendor-based selection process in a policy. - McDorman said the appraisal award is binding on both parties under §5.9802, so the neutral-selection process matters as much as the result. - McDorman also recommended that insurers clearly tell policyholders they can choose between vendor-based selection and judicial appointment at claim time. - McDorman called for disclosures about financial relationships between listed appraisal vendors and insurers or their affiliates. - McDorman said insurers should pay the full cost of vendor services and umpire compensation if they choose a vendor-based process. - McDorman asked TDI to add licensing requirements, continuing education and enforceable ethics standards for appraisers and umpires. - McDorman pointed to Insurance Code Chapter 84, which authorizes TDI to impose administrative penalties of up to $25,000 per violation, per day. - Auto Claim Specialists says its advocacy campaign on TDIadvocates.com collected 1,072 petition signatures from Texas policyholders opposing carrier-controlled vendor umpire mechanisms. - Auto Claim Specialists says the effort began nearly 10 years ago after State Farm removed the Appraisal Clause from certain Texas auto policies for repair procedure disputes. - Over the past decade, McDorman says he testified before legislative committees, met with regulators, conducted claims research and wrote monthly “Ask the Expert” editorials in Texas Automotive magazine. - Auto Claim Specialists says it worked with the Auto Body Association of Texas, Texas Watch, lobbyist Andrew "Drew" Graham of Graham Public Affairs and Longleaf Consulting lobbyists Jacob Smith and Jesus Moreno, along with lawmakers from both parties and industry professionals, to help build support for SB 458. - McDorman said TDI has shown a willingness to review data, ask questions and consider input from different perspectives.

Between the lines: - The central fight is not over whether Texas policyholders have a right to appraisal, but over who controls the neutral decision-maker when a claim turns into a dispute. - Consumer advocates are trying to prevent insurers from writing default selection systems that could lock in advantages before a claim exists. - The petition total suggests the issue has moved beyond a trade dispute and into a broader consumer concern. - The unanimous 2025 legislative approval gives the rulemaking process political backing, but the practical details still remain unsettled.

What's next: - TDI will finish the rulemaking process before the September 1 compliance date. - The department will decide whether to adopt the consumer protections and oversight measures urged by Auto Claim Specialists and allied groups. - Stakeholders in Texas and other states are watching the final language closely. - Auto Claim Specialists said more information is available online, including its submitted comments.

The bottom line: - Texas is close to turning a major appraisal-rights law into enforceable rules, but the final details will decide how much power policyholders actually have when insurers and consumers disagree.