Steve Badger forwarded me the Texas Department of Insurance (TDI) request asking for comments on draft regulations that would, for the first time, mandate appraisal procedures in every personal auto and residential property insurance policy in Texas. Texas is about to put some formal rules around a process that has long operated like the Wild West or “kangaroo courts” of insurance dispute resolutions, as I noted in “Can Appraisal Turn Into A Kangaroo Court.”
For those who don’t spend their mornings reading appraisal awards over coffee, here’s the short version. Appraisal is the process where each side hires an appraiser, those two pick an umpire, and the panel decides how much the policyholder’s loss is worth. It was obviously designed to be a method to resolve disputes without litigation. It was first in place before civil litigation was as pervasive as it is today. It can be a solution without the courtroom drama. But in practice? Sometimes it looks more like a kangaroo court than a courtroom because there are no written rules, as I have long written about in this blog.
If you are interested in the history of the appraisal clause, I suggest reading Appraisal Clause in 1761 Maritime Policy and Reflections on Fast Resolution of Controversies.
The Causation Elephant in the Room
Here’s where it gets tricky. Texas law currently says appraisers can determine causation to set the amount of loss, but insurers keep the right to later challenge coverage, including that same causation. Courts have drawn the line this way, even though it means we often end up with delay, uncertainty, and sometimes litigation after the appraisal is over. For those wishing to study that topic in greater detail, I suggest reading Texas Appraisal Law Update, Texas Appraisal Allows Determination of Causation and Upholds Zero Award, and The Scope of Appraisal Panel’s Authority in Texas.
The Department of Insurance could take a different tack. If the regulation is written so that the panel is allowed to decide causation once and for all, the final resolution of the dispute would become faster, cleaner, and more final. My view? Let the appraisal panel do its job. The people in the best position to determine what damage came from hail versus wear-and-tear are the ones actually looking at the roof, and you do not need a judge and jury three years later making that same determination.
Ashley Harris wrote a law review on this topic, which has been cited by courts and parties where the causation issue has arisen, as noted in Ashley Harris Cited by Iowa Supreme Court Regarding Causation Issues in Appraisal Proceedings. It should be noted that the trend is to allow parties to determine causation in appraisal. I believe the Department of Insurance has regulatory authority based on its statutory authority to determine this, contrary to the Texas Supreme Court ruling.
I am not holding my breath that this will happen. Good ole Steve Badger and the rest of the insurance industry lobby will probably be against this type of resolution of the causation issue through appraisal, which is common in many other states.
Who Gets to Be an Appraiser?
The draft rules propose restricting appraisers and umpires to specific categories, such as contractors, engineers, or adjusters. That sounds neat in theory, but in real life, losses come in all shapes and sizes. Some appraisals involve wine collections, jewelry, or business income loss—things for which neither a roofer nor an adjuster is necessarily equipped to value.
The better rule? Keep it simple. Anyone can be an appraiser, so long as they aren’t conflicted, aren’t working on a contingency fee, and haven’t already touched the claim. That’s the standard that insurance policies have always contemplated. Let the parties pick the person they trust most to value their loss without more limitation.
How Fast Should It Go?
Appraisal is supposed to be quick. But “quick” in a $30 million industrial loss doesn’t mean the same thing as “quick” in a $15,000 water damage claim. The draft rules set rigid timelines, but there’s a danger they’ll be too one-size-fits-all.
My suggestion: follow the lead of groups like the Insurance Appraisal and Umpire Association (IAUA) and the Property Loss Appraisal Network (PLAN). Require prompt resolution, but let the umpire set the calendar. Give the panel flexibility to move quickly on small matters while recognizing that complex losses take more time.
Why You Should Speak Up
TDI has invited public comment until October 6, 2025. This is one of those rare moments when industry professionals, policyholders, lawyers, and adjusters can shape the future of appraisal in Texas.
Do we want appraisal to remain the “kangaroo court” it has been? Or should it evolve into something closer to arbitration, with finality, fairness, and procedures everyone can rely on?
Whatever your answer, now is the time to share it. Speak now or forever hold your peace because once these rules are set, they will govern every appraisal clause in every home and auto policy in Texas.
If you have thoughts, please read the request and the draft regulation. Send your comments to the Texas Department of Insurance before the October 6 deadline. You can email David Muckerheide at David.Muckerheide@tdi.texas.gov.
Thought For The Day
“Democracy is not a spectator sport.”
– Marian Wright Edelman