bill setting an appraisal process for disputed home insurance losses

The text as introduced · 1,519 words

89R1891 CJD-F

By: Perez of Harris
H.B. No. 345

A BILL TO BE ENTITLED

AN ACT

relating to an appraisal process for disputed losses under

residential property insurance policies.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle D, Title 10, Insurance Code, is amended

by adding Chapter 2009 to read as follows:

CHAPTER 2009. APPRAISAL PROCESS FOR RESIDENTIAL PROPERTY INSURANCE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2009.001. APPLICABILITY OF CHAPTER. (a) This chapter

applies only to an insurer writing a 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; and

(8) the FAIR Plan Association.

(b) This chapter does not apply to:

(1) the Texas Windstorm Insurance Association; or

(2) a commercial insurance policy.

Sec. 2009.002. RULES. The commissioner may adopt rules

necessary to implement this chapter.

Sec. 2009.003. REQUIRED POLICY PROVISION: APPRAISAL

PROCESS. (a) Any appraisal provision contained in an insurance

policy described by Section 2009.001 must comply with this chapter.

(b) 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. All other terms and conditions of

the appraisal process remain subject to the terms of the insurance

policy and applicable law.

(c) The provisions of this chapter are not the sole

provisions that may be included in an appraisal process provided in

an insurance policy. Subject to any other provision of law, a policy

may include any other provision not in direct conflict with this

chapter.

(d) This chapter does not alter or provide an exception to

the prompt payment of claims deadlines under Subchapter B, Chapter

542.

SUBCHAPTER B. APPRAISAL PROCESS

Sec. 2009.051. APPRAISAL DEMAND. (a) If the policyholder

and insurer fail to agree to the amount of loss covered by the

policy, the policyholder or insurer may provide a written demand

for appraisal to the other party.

(b) The policyholder may not demand appraisal after the

policyholder files a lawsuit asserting the claim that is the basis

for the appraisal demand.

(c) The insurer may not demand appraisal after filing the

insurer's original answer to the lawsuit.

(d) The insurer may incorporate a demand for appraisal with

the insurer's original answer to the lawsuit.

(e) If the policyholder files a lawsuit and the insurer

subsequently demands appraisal, the lawsuit may 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. 2009.052. SELECTION OF APPRAISERS. Not later than the

20th day after the date an appraisal demand is provided under

Section 2009.051, the policyholder and insurer shall each:

(1) select a competent and impartial appraiser; and

(2) provide written notice to the other party of the

appraiser's identity.

Sec. 2009.053. APPRAISAL OF LOSS BY APPRAISERS; SELECTION

OF UMPIRE. (a) The appraisers shall 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

2009.052.

(b) The appraisers may extend the deadline described by

Subsection (a) for a period not to exceed 30 days on written

agreement by the appraisers, policyholder, and insurer.

(c) If the appraisers agree on the amount of loss:

(1) the appraisers shall 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) If the appraisers fail to agree on the amount of loss,

the appraisers shall select a competent and impartial 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, the umpire must 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) A policy provision may provide that a competent and

impartial umpire may 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) A party requesting court appointment of an umpire must

provide the other party with 10 days' written notice of the intent

to submit the request. The appointment may not be made on an ex

parte basis without both parties having an opportunity to appear

before the court.

(g) After the umpire is selected under Subsection (d) or

(e), each appraiser shall 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. 2009.054. AMOUNT OF LOSS DETERMINATION BY UMPIRE. (a)

The umpire shall 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) The umpire must select an amount under Subsection (a)

not later than the 30th day after the date the umpire receives the

submissions of both appraisers.

(c) The umpire may 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) On deciding on the amount of loss, the umpire shall

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) The umpire may not alter any valuation or any portion of

the amount of loss on which the appraisers agree.

(f) An appraisal award issued under Subsection (d) does not

prevent either party from pursuing all other rights under the

policy or law.

Sec. 2009.055. APPRAISAL EXPENSES; TERMINATION OF

APPRAISAL PROCESS. (a) The policyholder and insurer shall equally

divide and pay the umpire's expenses, as applicable, and all other

appraisal expenses, except that each party shall pay their own

appraiser.

(b) 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, the other party may terminate the appraisal process and

seek recovery of the party's reasonable hourly appraiser expenses

incurred in the appraisal process.

(c) 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, the

policyholder, the insurer, or both may terminate the appraisal

process and seek recovery of their reasonable hourly appraiser

expenses from the umpire.

(d) If an appraisal process is terminated under Subsection

(b), the party employing the noncompliant appraiser may not invoke

the appraisal process for the dispute at issue. However, the other

party may invoke the appraisal process for the dispute at issue.

(e) If an appraisal process is terminated under Subsection

(c), the policyholder or the insurer may invoke the appraisal

process for the dispute at issue.

(f) The appraisers for the policyholder and the insurer and

the umpire must 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. The

appraisers for the policyholder and insurer may not be paid on any

basis other than an hourly or flat-fee basis, including a

contingent or success basis.

Sec. 2009.056. EFFECT OF APPRAISAL. (a) The appraisal does

not affect any applicable policy terms.

(b) The amount of loss determined by the appraisal process

under this chapter is binding as to the policyholder and the

insurer. 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. 2009.057. EXTENSION OF DEADLINES. If the disputed

loss is the result of a weather-related catastrophe or major

natural disaster, as defined by the commissioner, the appraisal

deadlines imposed under Sections 2009.052 and 2009.053(a) and (b)

are extended for an additional 30 days.

SECTION 2. (a) Chapter 2009, Insurance Code, as added by

this Act, applies only to an insurance policy delivered, issued for

delivery, or renewed on or after January 1, 2026.

(b) An insurance policy form providing for an appraisal

process that is in use on September 1, 2025, and otherwise compliant

with Chapter 2009, 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. This Act takes effect September 1, 2025.