Washington State Bill Seeks to Require Appraisal Clause in Auto Insurance Policies

Washington State Bill Seeks to Require Appraisal Clause in Auto Insurance Policies

A new bill in Washington aims to mandate that vehicle insurance policies include an appraisal clause, giving policyholders the right to dispute the actual cash value and loss amount on damaged vehicles through an appraisal process.

Legislative Background
House Bill 1645 (HB1645) was introduced on January 28 and referred to the Consumer Protection and Business Committee. A similar Senate bill, SB6252, was introduced last year but failed to progress beyond the Senate’s Committee on Business, Financial Services, Gaming, and Trade.

Jeff Butler, a public and independent adjuster and owner of Collision Consulting of Washington, has been a key advocate for right-to-appraisal legislation in the state. Last year, Butler petitioned legislators for auto insurance reform, citing insurers’ use of photo estimating, artificial intelligence (AI), and virtual claims processes as unfair and deceptive practices.

Bill Details
The proposed law, supported by the Washington Office of the Insurance Commissioner (OIC), establishes a structured process for resolving appraisal disputes. Once an appraisal is invoked, each party must select a disinterested appraiser within 10 days. These appraisers will then appoint an independent umpire. If they fail to do so, the OIC will designate one. The umpire must have no direct financial interest in the outcome.

If the appraisers cannot agree on the loss amount, the matter is submitted to the umpire for resolution. Each party covers their appraisal expenses, sharing the umpire’s cost equally. However, if the appraisal process determines the loss is at least $500 higher than the insurer’s original estimate, the insurer must reimburse the policyholder for reasonable appraisal-related costs, including professional fees and attorney expenses.

The Case for Reform
In support of HB1645, Butler submitted another letter to legislators emphasizing the challenges consumers face when disputing claim settlements.

“Washington’s legal framework does not provide effective remedies for policyholders when insurers undervalue settlements, particularly for claims between $3,000 and $10,000,” Butler wrote.

Data from Butler’s firm indicates that insurance companies’ initial estimates average $11,533 lower than appraisal awards. For total loss claims, the difference averages $5,775. The cost to invoke an appraisal ranges from $550 to $4,000, creating an additional financial burden on consumers already struggling to recover fair claim values.

Industry Pushback and Concerns
Insurance lobbyists often argue that appraisal clause mandates lead to higher premiums. However, Butler points to Oregon, which has a similar law but has not experienced significant premium increases.

The Washington Independent Collision Repairers Association (WICRA) also presented survey findings to the OIC in July 2023. Among 30 independent shops surveyed:

• They collectively handled over 1,000 photo-based insurance estimates monthly.

• 93% of auto claims were settled solely through insurers’ photo reviews.

• 80% of the estimates reviewed were inaccurate.

• 70% of shops had to submit multiple requests before receiving a response or payment.

Former Insurance Commissioner Mike Kreidler expressed concerns over growing complaints, noting a 63% spike in claim-related grievances. He criticized insurers’ reliance on photo-based estimates, citing the lack of in-person assessments and inadequate explanations for claim denials.

The Battle Ahead
Despite growing support, Butler anticipates resistance from insurance industry lobbyists as the bill moves forward. The House Consumer Protection and Business Committee, where HB1645 currently sits, has historically sided with the insurance industry on similar issues.

Insurance lobbying remains a powerful force. According to an S&P Global report, property and casualty (P&C) insurers outspent health and life insurers in lobbying over the past decade, spending approximately $57.2 million in 2023 alone.

HB1645 represents a potential step forward for consumer protection in Washington, but its passage will likely face significant challenges from industry opposition.