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Montana committee hears competing cases for mandatory right-to-appraisal in auto insurance
Summary
Proponents including collision repair shops and consumer advocates told the Economic Affairs Interim Committee that a mandatory right-to-appraisal would protect vehicle safety and fair valuation. Insurers and trade groups warned it could raise premiums, encourage strategic use of appraisal, and add administrative costs. Lawmakers asked for more data on claim volumes and premium impacts.
The Montana Economic Affairs Interim Committee heard more than two hours of testimony March 10 as repair shops, consumer advocates and insurers debated a proposal to require a right-to-appraisal clause in all auto insurance policies.
Supporters said appraisal is a neutral, speedy alternative to litigation that preserves safe, proper repairs. Melissa Lewis of the Montana Collision Repair Association told the committee appraisal is “a well established, neutral, and efficient way to resolve these disputes,” and argued it protects both consumers and repair shops when insurers underpay or refuse to pay for manufacturer-recommended safety procedures (Melissa Lewis).
Erica Eversman of the Automotive Education and Policy Institute emphasized safety and the limits of automated valuations. She said appraisal focuses on loss valuation and repair procedures and warned that automated systems and underestimation of repair needs are increasing risks to motorists. “This is about safety,” Eversman said, calling out examples where inadequate procedures produced serious injuries in other states.
Robert McDormand, a public insurance adjuster, described Texas’ multi‑year experience in building a mandatory appraisal framework and reported typical appraisal award improvements his office sees for insureds. He told the committee his work shows average increases in his caseload of several thousand dollars on under‑indemnified claims (Robert McDormand).
Insurers and trade associations urged caution. Bob Passmore of the American Property Casualty Insurance Association said appraisal clauses are common but ‘‘few states require them by law,’’ and warned that mandatory, prescriptive rules could be misused by third parties and lead to higher costs. Brandon Vick of NAMIC warned that requiring in‑person inspections and strict timelines could create repair delays and increase storage and rental costs that ultimately affect premiums.
Industry witnesses noted several specific concerns in the draft framework: expanding appraisal to third‑party claimants who are not party to an insurance contract, appraisers or umpires lacking independent qualifications, and a fee‑shifting ‘‘loser pays’’ trigger tied to an award exceeding an insurer’s last offer by a percentage (disputed thresholds of 7.5% vs. 25% were discussed).
Business groups and a chamber representative urged the panel to slow the proposal and study likely premium impacts. Bruce Spencer, speaking for insurers’ counsel, presented a cost estimate drawn from another state’s experience that he said could translate into a multi‑million dollar increase in premiums statewide; industry witnesses said concentrated use by a few shops can magnify market effects.
Public commenters included consumers who said appraisal is the only practical way for many policyholders to challenge undervaluation without expensive litigation. The committee’s lawmakers repeatedly asked regulators for more hard data, including numbers of auto policies, complaint volumes, and any Department of Insurance data on appraisal usage and outcomes.
What happens next: Committee members asked staff to collect additional data and requested the Department of Insurance and regulators provide policy counts and any available carrier responses for review at the next interim meeting. The panel did not take a formal vote; sponsors signaled interest in drafting and refining statutory language and in evaluating thresholds and enforcement mechanics before deciding whether to advance a bill.
