In 2025, the Texas Legislature passed Senate Bill 458 (SB 458), 1 a significant reform aimed at protecting policyholders in disputes over insurance claims. This new law mandates that all personal auto and residential property insurance policies in Texas include a binding appraisal clause, a move that restores and strengthens a key consumer protection tool.
What Is the Appraisal Process?
The appraisal process is a form of alternative dispute resolution used when a policyholder and their insurance company disagree on the amount of a covered loss. It does not determine whether a loss is covered, but its purpose is to resolve disagreements about the cost of damages.
Here’s How it Works:
- Each party selects an appraiser, one for the policyholder and one for the insurer.
- The appraisers inspect the damage and try to agree on the value of the loss.
- If they can’t agree, they select a neutral umpire to make the final decision.
- The final amount agreed upon by any two of the three (either both appraisers or one appraiser and the umpire) becomes binding on both parties.
So, What Does SB 458 Require?
SB 458 adds Chapter 1813 to the Texas Insurance Code and requires that:
- All personal auto and residential property insurance policies issued or renewed in Texas after January 1, 2026, must include an appraisal provision.
- The appraisal process must be used solely to determine the amount of loss, not coverage issues.
- The outcome of the appraisal is binding, except in cases of fraud, accident, or material mistake.
The Texas Department of Insurance (TDI) is tasked with adopting rules to support the implementation of SB 458. These rules must include setting clear deadlines for completing the appraisal process, ensuring the independence of both appraisers and the umpire, and requiring the use of appraisal in cases involving a total loss.
Who Is Affected?
This law applies broadly to policies issued by a variety of insurers, including stock and mutual insurance companies, county mutuals, Lloyd’s plans, reciprocal exchanges, farm mutuals, surplus lines insurers (when Texas is the insured’s home state), and the FAIR Plan Association. However, it does not apply to commercial insurance policies or policies issued by the Texas Windstorm Insurance Association (TWIA).
Why This Matters for Policyholders
In recent years, some insurers have removed appraisal clauses from their policies, leaving consumers with few options other than litigation. SB 458 restores the right to appraisal and ensures that policyholders have access to a faster, less costly, and more neutral way to resolve disputes over claim amounts.
This is especially important in Texas, where weather-related property damage is common, and disputes over repair costs can delay recovery.
Bottom Line: SB 458 is a win for Texas homeowners and drivers. By setting clear deadlines for completing appraisals and ensuring that either the insurer or the policyholder can initiate the process, the law creates a more balanced and fair system for resolving insurance disputes—offering a faster, more accessible alternative to litigation.
1 Tex. S.B. 458, 89th Leg., R.S. (2025), available at https://capitol.texas.gov/tlodocs/89R/billtext/html/SB00458S.htm