Illinois Proposes New Auto Insurance Appraisal Bill to Protect Policyholders

Illinois is considering a new legislative measure to enhance auto insurance policyholder protections by mandating an appraisal clause for both first- and third-party claims. House Bill 4160, advancing through the House Insurance Committee, aims to enable policyholders or insurers to request an appraisal when disputes arise over a vehicle's actual cash value or loss amounts, including repairable or total loss claims and third-party settlement offers.

Under the proposed bill, once an appraisal is requested, both the insured and the insurer must appoint neutral and qualified appraisers within seven calendar days, notifying each other of their choices. If the appraisers fail to agree on the loss amount or settlement offer within five days, they must agree on an impartial umpire. Failing to agree on an umpire within 15 days allows either party to seek assistance from the court or the Department of Insurance for an umpire appointment.

Both parties are responsible for their appraiser's costs. However, if an umpire becomes necessary, the expenses are shared unless the final appraisal overwhelmingly favors the policyholder or claimant by 10% or more, in which case the insurer covers the full appraisal and umpire fees. This provision ensures fair resource allocation and incentivizes accurate initial valuations.

If enacted, the bill would impose civil penalties of up to $5,000 per violation on non-compliant insurers, alongside potential administrative sanctions from the Department of Insurance. Insurers exhibiting delays or bad faith could be liable for the claimant's associated legal and appraisal costs, strengthening consumer protection mechanisms.

An Automotive Appraisal Standards Advisory Board would be established by the bill to assist in rule development and enforcement strategies, operational within 120 days post-enactment. The House Insurance Committee passed the bill with a 10-4 vote, receiving backing from the Alliance of Automotive Service Providers of Illinois and several collision repair shops, despite opposition from the American Property Casualty Insurance Association.

Beth Seberger, president of the AASPI Board of Directors, emphasized the decline in insurance claims handling practices over recent years. Highlighting third-party claims issues and ongoing language negotiations, Seberger stated, "A person shouldn’t have to wait forever to get their car fixed. If the right to appraisal gets them back on the road faster and for less money, isn’t that the whole benefit of it?"

A parallel Senate bill, SB 2708, is under review in the Assignments Committee, following legislative precedents set in Texas and Washington the previous year. This initiative reflects growing efforts to standardize insurance claims processes and improve consumer satisfaction nationwide.