Section 3: Why You Don’t Have to Use Xactimate.

“These provisions require that estimates should be reasonable and not necessarily the product of a particular style, system or vendor exclusive of other reasonable alternatives. For example, insurers should not routinely eliminate from consideration certain estimate practices, concepts, and tools that may be used in estimating damages for a covered loss.” Texas Dep’t of Insurance, Commissioner’s Bulletin No. B-0068–08 (September 29, 2008).

While the insurance industry appears to rely upon Xactimate to produce its damage estimates, there is no contractual requirement that a policyholder utilizes Xactimate when providing an estimate. The issue becomes does the rule also apply to appraisal? Again, “an appraisal clause binds the parties to have the extent or amount of loss determined in a particular way.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009). Recently, the Texas Department of Insurance approved an endorsement that required the insured to submit an estimate of disputed items prior to invoking appraisal. Another recent endorsement approved by the Texas Department of Insurance requires all disagreements submitted to the umpire be set out in a line item format.  Again, check the policy’s appraisal clause for the claim at issue in the appraisal.

PRACTICE POINTER

Are there any ‘accepted estimate practices, concepts, and tools’ in the industry that do not utilize line item estimation?

Do estimates produced by differing styles, systems, or vendors yield vastly different results?

How should an umpire resolve disagreements that result from differing styles, systems, or vendors?

Which should prevail: an insurer’s right to contractually dictate the terms of appraisal or the Texas Department of Insurance’s prohibition against routinely eliminating certain estimate practices, concepts, and tools?

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