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E & O info for AMC's

Discussion in 'General Appraisal Discussion' started by ohiodoug, Oct 13, 2010.

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  1. ohiodoug

    ohiodoug Sophomore Member

    Jan 23, 2002
    Professional Status:
    Retired Appraiser
    I just completed a CE class where the instructor informed us that if we provide AMC's with our E & O information it nullifies most policies. Has anyone else heard this and, if so, how do you handle it?
  2. Jim Bartley

    Jim Bartley Senior Member

    Jan 20, 2002
    Professional Status:
    Certified Residential Appraiser
  3. Pittsburgh Pete

    Pittsburgh Pete Elite Member

    May 6, 2008
    Professional Status:
    Certified General Appraiser
    We provide numerous clients (none of them AMCs) with our E&O information. I believe your instructor was incorrect or you misinterpreted what he said.
  4. David Beasley

    David Beasley Senior Member

    Dec 12, 2003
    Professional Status:
    Certified Residential Appraiser
    North Carolina
    Like LIA's FAQ (link in post #2), I don't think submitting them with every report is a safe practice, but submitting them to clients is sometimes a requirement if they are to stay a client.

    Check with your own E&O provider, make them explain any policy they have regarding the issue. I doubt very much that providing the info to a client will void or nullify your coverage - LIA plainly states in the link above that it does not affect the insured's coverage. They simply recommend that you send the data directly to the client and not to make it a part of any appraisal report. I've never included an E&O declarations page within an appraisal, just like I would never submit a copy of my license in an appraisal. Send them separately and directly to the client? Sure, no problem. But our appraisals never stop at the lender - they're passed around like candy after closing, by homeowners (and I've seen builders with appraisal collections, and even some Realtors). Bottom line is: End-use consumers (outside of those that directly engage us) have no need for our credentials, so only send them to the actual lender/lawyer/whomever clients, and send them outside of an appraisal report(s), as a separate fax or email attachment.

    Also note: A more concerning issue is the verbiage in the AMC "contracts" that most of them have you sign is the ubigitous "indemnification and hold harmless" clauses. When you sign one of those, you're taking on the bulk of the actual AMC's liability. Then read your E&O policy, closely, and you'll find out that they only cover YOU, not an AMC. If that AMC later has a problem with one of your appraisals, they'll sue you for their legal fees and damages, and your E&O provider will then kindly remind you that you are NOT covered for those possible judgements.

    The AMC Regulation Bill that recently passed here in NC specifically outlaws (as a prohibited act) AMCs forcing appraisers to sign such indemnity and hold harmless clauses. I know they're out there. The last 5 AMCs (aside from Kirchmeyer) that tried to recruit me all had such clauses in their "contracts" and is one of the numerous reasons I politely told them to take a hike. What good is having E&O insurance if it isn't going to cover a single AMC appraisal? For more info on this, I think LIA (link above, again) has a good outline of it in one of their FAQs. They obviously recommend against signing any "contracts" with such clauses in them, in no uncertain terms, as they also add in the perfunctory CYA - "it's a business decision" for each appraiser.
    Last edited: Oct 13, 2010
  5. Mile High Trout

    Mile High Trout Elite Member

    Feb 13, 2008
    Professional Status:
    Certified Residential Appraiser
    The first thing any trainee appraiser should be taught is that the appraiser is the one left holding the proverbial bag.

    Take the time to follow all the applicable rules and regulations, and these types of issues will be far less likely to rear their ugly heads. Try and get fast and cheap with appraisal services, and you'll need to look at these issues in great detail.
  6. Privateer

    Privateer Junior Member

    Apr 8, 2008
    Professional Status:
    Banking/Mortgage Industry
    Below is what I've written previously for our insured appraisers on readimember about attaching E&O to reports. Attaching E&O information to reports, however, has zero relevance to any appraiser's insurance coverage for a claim. It's just a bad practice that increases your chance of a claim, and the only reason some AMCs or lenders require it is out of lazy administrative practices.

    "We are asked this question a lot and the answer is always the same. There is no good reason to attach a copy of your E&O insurance declarations page or any other evidence of insurance to appraisal reports.

    The main reason why we advise against it is that a majority of claims these days are filed by property owners and borrowers. These parties are neither clients nor intended users of most reports. Attaching your E&O declarations page to an appraisal report simply invites these parties to threaten or bring claims against you. Most claims will be filed regardless of whether an appraiser has E&O insurance, but for a few people, the fact that there is an insurance policy somewhere gives them the idea of easy money. We've seen claims from homeowners who've alleged claims about things as petty as square footage being off by 2% and then expecting a payment as if your E&O were a manufacturer's warranty. (Claims like this, of course, are defended and rarely result in any recovery to the claimant.)

    We realize that some AMCs and lenders require appraisers to attach their E&O to reports. There's no law or regulation against that, but we suggest that you try to reason with them and explain:

    1. You are happy to supply the AMC or lender with a copy of your E&O declarations page that they can keep on file.

    2. Attaching your E&O to your report not only exposes you to unnecessary risk of claims by third parties but it also makes it more likely that the AMC or lender will be dragged into a case filed by a homeowner or borrower.

    Aside from the above points, the idea of attaching E&O information to appraisals is misguided at its core. All appraiser E&O insurance is written on a claims made basis. This means that the policy that will cover you is not the policy that you have in place on the date of the appraisal but rather the policy that you have -- or should have -- in place years later when the lawsuit is filed or the claim asserted. AMCs and lenders also should realize that an E&O declarations page has little value in determining whether potential coverage exists for their prospective claim -- the fact is that a few years ago, one E&O provider was selling a policy that excluded claims filed by lenders, which is something that could only be determined by reading the policy itself. Other policies exclude things like supervised work and construction progress reports -- so, a declarations page doesn't tell the AMC or lender much about what is actually covered."

    Thank you,
    Peter Christensen
    Last edited: Oct 15, 2010
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