The appraisal clause in a Texas auto insurance policy allows policyholders to have a third-party appraisal done when they disagree with their insurance company's valuation of their vehicle or damages. The clause is intended to help resolve disputes over the amount of a loss, such as the cost to repair a vehicle or the value of a totaled vehicle.

The Texas bill requires auto insurance policies to not only carry appraisal clauses but make the process more cost-effective for consumers seeking to use

RTA (Right-to-Appraisal) to remedy a short-pay.

If the right-to-appraisal process produces a total loss or repair cost valuation $1 higher than the insurer’s last offer, the insurer must pay the customer’s appraiser fees and expenses. If the insurer’s last offer was deemed “just” House Bill 2534 would have the customer pay the insurer’s appraiser fees and expenses.

The umpire’s fees and expenses would still be split equally between both sides.

The appraisal clause process itself under HB 2534 is a fairly standard description of the concept.

If the insurer and customer can’t agree on the amount the carrier owes in a loss — the value of a totaled vehicle or the appropriate amount to fix a repairable vehicle — either party can invoke their right to appraisal within the first 90 days after a claim’s filing.

Both sides need to hire a “competent appraiser” within 15 days of the appraisal clause being exercised, and those appraisers must “determine the amount of loss.”

If the two appraisers can agree on a dollar value, that amount will be binding. If they can’t agree, then the appraisers work together to choose an “umpire.” If they can’t agree on an umpire within 15 days, the insurer or policyholder “may request that a court in the county in which the named insured resides select the umpire.”

The umpire also “shall determine the amount of loss.” If either appraiser agrees with the umpire, then that amount is binding.

Pretty straightforward, and similar to the Texas Department of Insurance’s generic description of the process. However, the reimbursement rules HB 2534 would enact appear to be a little more unique:

(a) Each party is responsible for the party’s appraiser’s fees and expenses.

(b) If at the end of the appraisal process the amount of loss is determined to be more than $1 greater than the amount of the insurer’s proposed undisputed loss statement, the insurer shall refund the named insured’s reasonable out-of-pocket expenses for the insured’s appraiser’s fees and expenses.

(c) If at the end of the appraisal process the insurer’s proposed undisputed loss statement is determined to be just, the named insured shall refund the insurer the insurer’s appraiser’s fees and expenses.

(d) All other appraisal expenses, including umpire expenses, are shared evenly between the parties.