Texas appraisal rulemaking enters final stretch after public hearing

Texas regulators are finalizing mandatory right-to-appraisal rules under Senate Bill 458, with the last public hearing and a surge of consumer comments pushing for stronger limits on insurer-controlled umpire selection. Auto Claim Specialists says the outcome will shape whether the new law delivers real protections for policyholders when the rules take effect Sept. 1, 2026.

Why it matters: - Texas is about to finish rules that will govern how mandatory right to appraisal works in insurance disputes. - The final version will determine whether the new consumer protection is enforceable in practice or remains mostly on paper. - The rules take effect ahead of the Sept. 1, 2026 statutory implementation date.

What happened: - The Texas Department of Insurance held a public hearing on Docket No. 2862, the last chance for public testimony before final administrative rules are issued. - The rulemaking implements Senate Bill 458, a 2025 law that requires insurance policies written in Texas to include an appraisal clause under Texas Administrative Code Title 28, Part 1, Chapter 5, Subchapter Q, Division 4 (§§5.9800 - 5.9806). - Auto Claim Specialists used the hearing to push for consumer-focused amendments to the proposed rules. - Robert McDorman, president and founder of Auto Claim Specialists, testified at the hearing. - No public speaker voiced opposition to the core consumer amendments supported by Auto Claim Specialists and allied watchdog groups.

The details: - The main dispute centered on proposed §5.9806(b)(3) in TDI’s April draft. - That provision would allow insurers to build vendor-based umpire selection mechanisms into policies before any claim dispute arises. - Testimony from public adjusters, attorneys and consumer advocates warned that carrier-controlled vendor systems could create structural disadvantages, hidden fees and reduced neutrality in binding loss disputes. - McDorman argued that a vendor-based umpire mechanism without a clear option for judicial appointment would let insurance carriers control appraisal outcomes and undermine the process’s independence. - McDorman urged TDI to make clear that either party can request judicial appointment of an umpire and that request should override any vendor-based selection process in the policy. - McDorman said appraisal awards are binding on both parties under §5.9802, so the method used to choose the neutral decision-maker matters as much as the award itself. - McDorman also said policyholders should be able to choose between vendor-based selection and judicial appointment at the time of claim, not be locked in by policy language written before a dispute exists. - He recommended disclosure of any financial ties between listed appraisal vendors and the insurer or its affiliates. - He also said that if an insurer uses a vendor-based process, the insurer should pay the vendor’s fees and the umpire’s compensation. - McDorman called for licensing requirements, continuing education and enforceable ethical standards for appraisers and umpires. - He pointed to Insurance Code Chapter 84, which allows TDI to impose administrative penalties of up to $25,000 per violation, per day. - Auto Claim Specialists said its advocacy campaign on TDIadvocates.com gathered 1,072 petition signatures from Texas policyholders opposing carrier-controlled vendor umpire mechanisms. - McDorman described the signers as policyholders who had been through the auto appraisal process and wanted regulators to hear directly from consumers. - Auto Claim Specialists says the campaign followed nearly a decade of work that began when State Farm removed the appraisal clause from certain Texas auto policies for repair procedure disputes. - McDorman said he has testified before legislative committees, met with regulators, conducted claims research and written monthly “Ask the Expert” columns in Texas Automotive magazine. - Auto Claim Specialists said it worked with the Auto Body Association of Texas, Texas Watch, lobbyist Andrew “Drew” Graham of Graham Public Affairs, Longleaf Consulting lobbyists Jacob Smith and Jesus Moreno, lawmakers from both parties and industry professionals to help build support for SB 458. - A link to the submitted comments is available in the company’s announcement: the submitted comments.

Between the lines: - The hearing suggests the policy fight has shifted from whether appraisal reform is needed to how much control insurers can retain over the process. - The broad participation from consumers is likely to matter because regulators are weighing not just legal arguments but evidence of how the rules may affect real claim disputes. - McDorman’s push for court oversight, disclosure and insurer-paid vendor costs signals a broader effort to prevent the new framework from favoring carriers.

What's next: - TDI now moves into its final rulemaking phase before the Sept. 1 compliance date. - Final rules will determine whether judicial appointment, vendor disclosure and cost-allocation protections are adopted. - McDorman said Texas could become a model for other states considering similar consumer protections. - If the rules are adopted as recommended by Auto Claim Specialists, Texas policyholders would gain stronger dispute-resolution protections in appraisal cases.

The bottom line: - Texas is close to locking in a major insurance consumer protection, but the real test is whether the final rules preserve independence, transparency and meaningful choice for policyholders.