Texas total-loss appraisal: how the appraisal clause works

Texas regulates auto total-loss claims through three layered authorities: the binding appraisal mandate at Texas Insurance Code Chapter 1813 (enacted by SB 458, effective for policies issued or renewed on or after January 1, 2026), the prompt-payment regime at Chapter 542, and the general unfair-claims prohibitions at Tex. Ins. Code § 541.060. Chapter 1813 — Appraisal of Disputed Losses (SB 458). Every personal automobile insurance policy delivered, issued for delivery, or renewed in Texas on or after January 1, 2026, must contain an appraisal provision, a dispute resolution process to determine the amount of loss when that amount is in dispute between the policyholder and the insurer. Sec. 1813.002(a) directs the commissioner to adopt rules, including rules establishing the period in which an appraisal must be completed. TDI's PROPOSED rules (28 TAC §§ 5.9800–5.9806, published May 8, 2026; not adopted when this entry was checked) would require the provision to state that either party may unilaterally demand appraisal and, for personal auto policies, would require a written demand within 120 days after the insurer's acceptance-or-rejection notice under § 542.056, give the appraisers 40 days after the demand to try to agree, and require an award within 180 days after the demand when an umpire is involved. The appraisal award is binding, except in cases of fraud, accident, material mistake, or an appraisal award made without authority (Sec. 1813.004(b)). Chapter 542, Subchapter B — Prompt Payment of Claims. Section 542.055 requires the insurer, within 15 days of receiving notice of a claim, to acknowledge receipt of the claim, request any information reasonably needed for the investigation, and begin investigating. Section 542.056 requires the insurer to notify the claimant in writing within 15 business days after receiving all requested investigation items whether the claim is accepted or rejected (30 days in arson cases). Section 542.057 requires the insurer to pay an accepted claim no later than the fifth business day after the date the acceptance notice is issued. Section 542.060 makes prompt-payment violations civilly actionable: a violating insurer is liable for the amount of the claim, plus interest at 18% per year on the unpaid amount, plus reasonable and necessary attorney's fees. § 541.060 — Unfair Claim Settlement Practices. Section 541.060(a) prohibits, among other things: misrepresenting a material fact or policy provision; failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement when liability has become reasonably clear; failing to provide a reasonable explanation of the basis for a denial or compromise offer; and refusing to pay a claim without conducting a reasonable investigation. Tex. Ins. Code Ch. 541, Subchapter D allows a claimant to recover actual damages, plus court costs and reasonable attorney's fees, plus up to three times actual damages for knowing violations.

Texas added Chapter 1813 in 2025 (SB 458, 89th Leg., effective September 1, 2025); it applies to personal auto policies delivered, issued for delivery, or renewed on or after January 1, 2026. The broader first-party bad-faith framework is anchored in Arnold v. National County Mutual Fire Insurance Co., 725 S.W.2d 165 (Tex. 1987), which recognized the insurer's common-law duty of good faith and fair dealing in the handling of a first-party claim. The combined result for a Texas policyholder facing an undervalued total-loss settlement on a policy delivered, issued, or renewed on or after January 1, 2026, is: (1) a contractual right to binding appraisal under Chapter 1813, (2) a prompt-payment cause of action under Chapter 542 with interest at 18% a year plus attorney's fees, and (3) an unfair-claims cause of action under § 541.060 with up to treble damages for knowing violations.