The regulation of insurance is governed by the Insurance Code (Code) in Title 48 RCW. The Office of the Insurance Commissioner (OIC) regulates insurance transactions in Washington, including the form and content of insurance contracts.
Insurance Contracts.
The Code specifies the categories of information that must be contained in an insurance contract, including the type of risk that is being insured against, the amount of the premium, the starting date of the insurance coverage, and the period during which the insurance is to continue. Every person in Washington who operates a motor vehicle must be insured under a motor vehicle liability policy, a liability bond, a certificate of deposit, or be self-insured. Where a person is insured under a motor vehicle liability policy, the policy must include the name and address of the insured, the coverage provided by the policy, the premium charged, the policy period, and the limits of liability.
Motor Vehicle Insurance Contracts.
Unless an insurer certifies that it is not less favorable to the insured, every basic contract of automobile insurance must include a provision for the right to an appraisal to resolve disputes, between the insured and the insurer, regarding the actual cash value and amount of loss on a damaged vehicle. "Basic contract of motor vehicle insurance" means any motor vehicle insurance policy that includes first-party coverage for physical damage.
The appraisal clause must be included in the insurance contract and include the following:
This requirement applies to policies issued or renewed effective on or after January 1, 2023.
The substitute bill provides that an insurer must reimburse an insured for the costs of an appraisal process only if there is a difference of $500 or more between the amount of loss the insurer adjusted before the appraisal process, and the amount of loss determined through the appraisal process.
(In support) House Bill 1979 will hold insurers responsible for a fair settlement of a claim, and if an appraisal is needed and proves the insurance company didn't pay the full loss, the insurer will pay the loss, which is a fair solution. While many personal auto policies do provide an appraisal clause, there is no regulation requiring insurance companies to have an appraisal clause. Appraisals should be a fast and inexpensive alternative to litigation over whether the insurer is paying the reasonable cost of necessary repairs, and right now when policyholders prevail in an appraisal, they have to bring an independent action for bad faith claims to recover their appraisal charges, which is costly, risky, and time-intensive.
The bill's requirement will give consumers greater protections and avoid putting consumers in a "take it or leave it" position with an insurer. Direct repair facilities that work with insurance companies can be motivated to keep repair costs down, which oftentimes results in a dispute over the cost to properly and safely effectuate a repair. Data from 150 instances this year show that the appraisal value of cars prior to engaging in an appraisal process has been well below $4,000 less than the appraisal value of the car. The cost-shifting provision is consistent with regulations already in place, and the proposed amendment triggering an insurer's obligation to reimburse when the difference is $500 or more is okay because people shouldn't be encouraged to ding title insurance companies for a $1 or $10 difference.
(Opposed) House Bill 1979 creates an unfair process for evaluating disputed claims. As drafted, this bill is one-sided and unfairly incentivizes repair shops to fight on every claim where they don't get exactly what they ask for. This bill appears to be more directed to repair of vehicles rather than total loss claims, which are treated differently and may be getting conflated in these conversations. If the appraisal mechanism goes into effect during the cost of repair process it would produce a nightmare result. Insurers take their duties very seriously to return a damaged vehicle to precrash status. They approach the task with attention to safety, quality, and cost-effectiveness. The independent appraisal process sets up a no-risk incentive for auto repair facilities to potentially inflate repair estimates; there is no language in the bill providing a consequence for a repair shop that takes an unreasonable position on its costs. It also creates concern relative to delays that the appraisal process can cause and additional costs, including storage costs, for vehicles in a long-term dispute. The consequence will be dramatically higher repair costs for a significant percentage of auto repair claims.