Appraisal: An Issue of Life and Death
by Chasidy Rae Sisk
At first glance, it may appear like Right to Appraisal is a pecuniary matter, but as Ware Wendell (Texas Watch) stressed during a recent installment of the consumer organization’s podcast, In Conversation: Auto Appraisal with Robert McDorman, auto appraisal is “literally an issue of life and death. It’s about getting to a fair number that allows repair professionals the time they need to do the job the right way, to make that repair as safe as possible so that, heaven forbid, if we’re in another collision, the vehicle will perform correctly and protect its occupants, that it won’t come apart at the seams.”
Wendell welcomed his guest, Robert McDorman (Auto Claim Specialists) as “an expert on automotive safety and insurance practices [who] is familiar with what consumers need to know to receive fair and full payment on their auto claims.”
The pair have visited the Capitol together for years, advocating for consumers, yet despite their best efforts, “It’s just getting worse and worse. We’ve spoken with three different insurance commissioners, and for some reason, our message isn’t being heard. We’ve provided statistics and data on the under-indemnification related to these motor vehicle claims,” lamented McDorman, whose role as a licensed public insurance adjuster makes him a “custodian for these records” who only represents the insured.
“Not every single insurance claim we look at is unfair,” McDorman acknowledged. “But a large amount of the insurance companies’ estimates or repair plans are grossly under-indemnified when it comes to the repair procedures, and that often constitutes an unsafe repair. Although manufacturers issue position statements saying certain operations absolutely should be done, we routinely see the insurance carrier refusing to recognize that because it’s not the ‘prevailing practice’ in the market. That means if nine out of 10 shops are doing it wrong because they’re not certified in that brand or don’t have the right qualifications, they won’t pay the one shop doing it right. It’s a serious problem because the technology and materials on today’s cars equates to more sophisticated repairs – and there’s no one better to tell a shop how to fix the car than the manufacturer!”
Wendell pointed out that many consumers are likely unaware that some body shops engage in “professional relationships” (DRPs) with certain insurers that necessitate following the carrier’s guidelines on the repair process. He also lauded ABAT members as “the independent shops that are putting the customers first time and again, investing in their workforce and the best equipment and who have the willingness to push back against the insurance companies when they try to force these repair professionals to cut corners, cheap out on repairs and do things that the consumer may not even realize is creating problems for them.
“Consumers typically have no idea how structurally sound and safe a vehicle is beneath the surface level,” Wendell added. “But these independent shops care about doing the job the right way and are rebuilding those cars from the ground up, from the frame up, to ensure all the safety systems are working the way they should and not letting the insurance companies pressure them into making a cheaper and more dangerous repair.”
Clarifying that the term under-indemnification simply means the insurer isn’t paying enough money according to the policy to make the consumer whole, Wendell explained that appraisal is used merely to identify the amount it will cost to properly repair the damage, and McDorman pointed out that appraisal allows conflicts between the repair professional and the insurer to be handled in a timely fashion, noting that without appraisal, consumers are forced to pursue the matter in litigation which takes an average of 19 months. In fact, he’s still aware of several pending cases from September 2019!
House Bill 1437 (sponsored by Representative Travis Clardy), along with Senate Bill 554 (sponsored by Senator Bryan Hughes), serve as this session’s proposed Auto Appraisal Clause legislation, which are being supported by ABAT, Texas Watch, Auto Claim Specialists and others as a way to rectify many of these issues by requiring all Texas insurance policies to allow policyholders to invoke the Right to Appraisal. “The appraisal bill has stop gaps in it and mechanisms to restructure the appraisal process to be fair for the insurer and the insured,” McDorman said, and Wendell optimistically shared, “Powerful legislators are pushing these bills in both chambers of the Capitol, and we hope to get it signed into law this session.”
Originally, the Appraisal Clause was added to policies at the insurers’ behest; they wanted appraisal as an option in the event of a dispute. By over the years, “as more and more of these disputes have gone through appraisal, we’re finding that the appraisers are coming down on the side of the consumer,” Wendell indicated, asking McDorman about the average under-indemnification he sees when Right to Appraisal is involved. On total losses, McDorman calculated the average under-indemnification as $3,800, while it’s closer to $5,400 on repairable vehicles.
“This is a neutral process,” Wendell stressed. “If the two appraisers cannot agree on the amount, in some cases, it can go to a third appraiser, called an umpire, who figures out the right amount. So, it’s a neutral process, but as you take these claims through that process, you’re seeing the insurance companies underpaying by thousands and thousands of dollars. And it’s taking appraisal to get the right amount of money on the table for that consumer to get the job done the right way, to have their vehicle repaired safely.”
Although these are large amounts of money for the average working family, it’s often difficult to find a lawyer to take those cases through court since a portion of that payment will be needed for attorney fees, often leaving Texas drivers to contend with these situations on their own…unless they’re able to invoke the Appraisal Clause.
“Appraisal is a mechanism to do that whenever the repair methodology is in dispute,” McDorman insisted. “It’s a safety issue, and appraisal is a mechanism that should be honored.”
Yet, back in 2014, a major insurance carrier removed Right to Appraisal from their policies. When McDorman brought this to the attention of the Texas Department of Insurance (TDI), he was instructed to seek appraisal before filing a complaint, forcing him to prove that the Appraisal Clause had been removed from the policy. “They said it was the insured’s right, and they were shocked when they found out that I was right,” he recalled. “One of the deputy commissioners admitted, ‘That got past us completely.’”
For Wendell, instances like this are exactly why it’s “very important for the Texas legislature to step in and to step up on this issue. Our state lawmakers and regulators are the ones that set policy for our state in terms of what is going to be permissible in an insurance policy…and what isn’t.”
The Appraisal Clause legislation proposed during the last session made good progress in the House but stalled in the Senate, and this year, “we need the legislation to pass both chambers so that the governor can do the right thing for the consumers of this state and make sure that they have options when it comes to working with an insurance company to get the right amount of money to do the repair the safe way,” Wendell emphasized his viewpoint.
“Appraisal is the guardrail for indemnification,” McDorman cautioned. “The bill that we drafted, that was sponsored by lawmakers, was fair for both sides. But if we don’t have appraisal on these repairs, this is going to become an even bigger safety issue than it is. If we get to the point where no one is looking over the proper repair methodology when the repair professional and the insurer are at odds on the proper way to fix the car, that will be the nail in the coffin for the safe roadways of Texas.”
Wendell urged listeners to get involved: “We need everybody to tell their lawmakers, state representatives, state senators and the governor to pass this legislation to protect all of us.”
Texans can easily do exactly that and show their support by going to texaswatch.org/saferepairs.
Check out the interview at bit.ly/InConvoAppraisal.
Want more? Check out the April 2023 issue of Texas Automotive!