TDI Drafts New Rule Requiring Appraisal Provision

By Ezra Amacher

The Texas Department of Insurance recently published an informal draft of rules that would implement a new law requiring all personal auto and residential property insurance policies to include a binding appraisal provision.

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 Insurance Association are exempt from the rule.

The appraisal provision is intended to provide a type of dispute resolution process to determine the amount of loss when that that amount is disputed between an insurer and policyholder. 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 timeline after the rule adoption date of Jan. 1, 2026.

Under the provision, either party is allowed to unilaterally demand appraisal. The appraisal award is binding 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 from the date the insurer gives the policyholder notice accepting coverage of the property loss at issue. The two appraisers must attempt to agree on the amount of loss or damage in dispute in 180 days.

If the appraisers can’t reach agreement, they then must select an umpire to resolve the dispute. If the appraisers cannot agree on an umpire, either party may turn to a county or district court to appoint an umpire. If an umpire is engaged, the appraisal award must be issued not later than 180 days after the umpire is selected.