BILL ANALYSIS

Senate Research Center	H.B. 4194
88R24285 CJD-F	By: Perez et al. (Schwertner)
	Business & Commerce
	5/9/2023
	Engrossed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

H.B. 4194 preserves the right to an appraisal provision in certain insurance policies. Access to appraisal in residential and personal auto policies has long been the status quo but without clear requirements in statute, state regulators lack the clear authority to require access to appraisal in certain personal insurance policies filed with the Texas Department of Insurance (TDI).

The Office of Public Insurance Council and TDI have recommended the legislature take action to address a policyholder�s right to appraisal to resolve disputes with the insurer over the amount of loss.

H.B. 4194 simplifies the engrossed bill to require insurers include an appraisal provision for personal home and auto policies. The substitute removes the sections that define the appraisal process in statute and instead simply requires certain insurance policies contain an appraisal process.

H.B. 4194 amends current law relating to an appraisal process for disputed losses under personal automobile or residential property insurance policies.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance in SECTION 1 (Section 1813.002, Insurance Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subtitle A, Title 10, Insurance Code, by adding Chapter 1813, as follows:

CHAPTER 1813. APPRAISAL PROCESS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1813.001. APPLICABILITY OF CHAPTER. (a) Provides that this chapter applies only to an insurer writing a personal automobile or residential property insurance policy, including:

(1) a capital stock insurance company;

(2) a mutual insurance company;

(3) a county mutual insurance company;

(4) a Lloyd's plan;

(5) a reciprocal or interinsurance exchange;

(6) a farm mutual insurance company;

(7) an eligible surplus lines insurer if this state is the insured's home state as defined by Section 981.002 (Definitions); and

(8) the FAIR Plan Association.

(b) Provides that this chapter does not apply to:

(1) the Texas Windstorm Insurance Association; or

(2) a commercial insurance policy.

Sec. 1813.002. RULES. Authorizes the commissioner of insurance (commissioner) to adopt rules necessary to implement this chapter.

Sec. 1813.003. REQUIRED POLICY PROVISION: APPRAISAL PROCESS. (a) Requires that any appraisal provision contained in an insurance policy described by Section 1813.001 comply with this chapter.

(b) Provides that the requirements of this chapter control over terms of an insurance policy and other law only with respect to the specific issues addressed in this chapter. Provides that all other terms and conditions of the appraisal process remain subject to the terms of the insurance policy and applicable law.

(c) Provides that the provisions of this chapter are not the sole provisions that are authorized to be included in an appraisal process provided in an insurance policy. Authorizes a policy, subject to any other provision of law, to include any other provision not in direct conflict with this chapter.

(d) Provides that this chapter does not alter or provide an exception to the prompt payment of claims deadlines under Subchapter B (Prompt Payment of Claims), Chapter 542.

SUBCHAPTER B. APPRAISAL PROCESS

Sec. 1813.051. APPRAISAL DEMAND. (a) Authorizes the policyholder or insurer, if the policyholder and insurer fail to agree to the amount of loss covered by the policy, to provide a written demand for appraisal to the other party.

(b) Prohibits the policyholder from demanding appraisal after the policyholder files a lawsuit asserting the claim that is the basis for the appraisal demand.

(d) Authorizes the insurer to incorporate a demand for appraisal with the insurer's original answer to the lawsuit.

(e) Authorizes a lawsuit, if the policyholder files a lawsuit and the insurer subsequently demands appraisal, to be abated until the appraisal process is complete, provided that the insurer has not:

(1) denied the claim; or

(2) reserved the right to dispute coverage following the appraisal process.

Sec. 1813.052. SELECTION OF APPRAISERS. Requires the policyholder and insurer, not later than the 20th day after the date an appraisal demand is provided under Section 1813.051, to each:

(1) select a competent and impartial appraiser; and

(2) provide written notice to the other party of the appraiser's identity.

Sec. 1813.053. APPRAISAL OF LOSS BY APPRAISERS; SELECTION OF UMPIRE. (a) Requires the appraisers to appraise the loss that is the subject of the appraisal not later than the 30th day after the date both the policyholder and insurer have complied with Section 1813.052.

(b) Authorizes the appraisers to extend the deadline described by Subsection (a) for a period not to exceed 30 days on written agreement by the appraisers, policyholder, and insurer.

(1) the appraisers are required to issue their award and provide written notice of the award to the policyholder and insurer; and

(2) the agreed amount as stated in the appraisal award is the amount of loss.

(d) Requires the appraisers, if the appraisers fail to agree on the amount of loss, to select a competent and impartial umpire. Requires the umpire, if the appraisers do not agree on an umpire after the 20th day after the deadline for the appraisers to determine the amount of loss under this section, to be selected:

(1) by a policy provision, if applicable, that provides for the method of selecting an umpire; or

(2) on written request by either party to a court described by Subsection (e).

(e) Authorizes a policy provision to provide that a competent and impartial umpire is authorized to be selected by a judge of a district court, county court at law, or constitutional county court in the county in which the policyholder resides or where the property is located.

(f) Requires a party requesting court appointment of an umpire to provide the other party with 10 days' written notice of the intent to submit the request. Prohibits the appointment from being made on an ex parte basis without both parties having an opportunity to appear before the court.

(g) Requires each appraiser, after the umpire is selected under Subsection (d) or (e), to provide written notice to the umpire and the other appraiser that includes:

(1) the appraiser's determination as to the amount of loss;

(2) any supporting documentation; and

(3) an itemized list of the disputed differences between the appraisers regarding the amount of loss.

Sec. 1813.054. AMOUNT OF LOSS DETERMINATION BY UMPIRE. (a) Requires the umpire to determine the amount of loss by selecting:

(1) one of the amounts of loss submitted to the umpire; or

(2) an amount in between the two amounts submitted to the umpire.

(b) Requires the umpire to select an amount under Subsection (a) not later than the 30th day after the date the umpire receives the submissions of both appraisers.

(c) Authorizes the umpire to extend the deadline described by Subsection (b) for a period not to exceed 30 days on written agreement of the appraisers, policyholder, and insurer.

(d) Requires the umpire, on deciding on the amount of loss, to issue a written appraisal award that:

(1) states the amount of loss; and

(2) is signed by the umpire and at least one appraiser.

(e) Prohibits the umpire from altering any valuation or any portion of the amount of loss on which the appraisers agree.

(f) Provides that an appraisal award issued under Subsection (d) does not prevent either party from pursuing all other rights under the policy or law.

Sec. 1813.055. APPRAISAL EXPENSES; TERMINATION OF APPRAISAL PROCESS. (a) Requires the policyholder and insurer to equally divide and pay the umpire's expenses, as applicable, and all other appraisal expenses, except that each party is required to pay their own appraiser.

(b) Authorizes the other party, if a party's appraiser materially fails to comply with the deadlines under this chapter and the other party makes a good faith effort to address the failure and continue the appraisal process, to terminate the appraisal process and seek recovery of the party's reasonable hourly appraiser expenses incurred in the appraisal process.

(c) Authorizes the policyholder, the insurer, or both, if the umpire materially fails to comply with the deadlines under this chapter after making a good faith effort to address the failure and continue the appraisal process, to terminate the appraisal process and seek recovery of their reasonable hourly appraiser expenses from the umpire.

(d) Prohibits the party employing the noncompliant appraiser, if an appraisal process is terminated under Subsection (b), from invoking the appraisal process for the dispute at issue. Authorizes the other party, however, to invoke the appraisal process for the dispute at issue.

(e) Authorizes the policyholder or the insurer, if an appraisal process is terminated under Subsection (c), to invoke the appraisal process for the dispute at issue.

(f) Requires the appraisers for the policyholder and the insurer and the umpire to be paid on an hourly or flat-fee basis, using a reasonable hourly rate and based on the estimated number of hours reasonably necessary to complete the appraisal process. Prohibits the appraisers for the policyholder and insurer from being paid on any basis other than an hourly or flat-fee basis, including a contingent or success basis.

Sec. 1813.056. EFFECT OF APPRAISAL. (a) Provides that the appraisal does not affect any applicable policy terms.

(b) Provides that the amount of loss determined by the appraisal process under this chapter is binding as to the policyholder and the insurer. Provides that the use of the process is not a condition precedent to bringing an action for a violation of this code, for a breach of contract, or for any other common-law or statutory remedy.

Sec. 1813.057. EXTENSION OF DEADLINES. Provides that the appraisal deadlines imposed under Sections 1813.052 and 1813.053(a) and (b), if the disputed loss is the result of a weather-related catastrophe or major natural disaster, as defined by the commissioner, are extended for an additional 30 days.

SECTION 2. (a) Makes application of Chapter 1813, Insurance Code, as added by this Act, prospective to January 1, 2024.

(b) Provides that an insurance policy form providing for an appraisal process that is in use on September 1, 2023, and otherwise compliant with Chapter 1813, Insurance Code, as added by this Act, is not required to be filed with the Texas Department of Insurance as a consequence of this Act.

SECTION 3. Effective date: September 1, 2023.