Adding an AMC as an Additional Insured or Certificate Holder
I'll disclose first that I'm an attorney for an E&O administrator. The posters who have said that adding the AMC as a "certificate holder" can mean different things are correct. In the context of appraiser E&O insurance, it can either mean that a certificate of insurance is issued to the AMC to evidence the appraiser's coverage (not too big of a deal unless many clients demand it) or mean the equivalent of adding the AMC as an additional insured (a much bigger deal). It depends on what the AMC is really asking for -- as some posters have noted. Unfortunately, many AMC contracts are poorly worded and it's not possible to determine what the AMCs really want. Worse, some AMCs can't explain what they want when I ask them. One of the reasons is that some AMCs copy each others' agreements without much thought and then try tweaking them here and there without relevant knowledge.
I think all reputable E&O companies selling to appraisers would refuse to add an AMC as a true "additional insured" to an individual appraiser's E&O policy. There are several reasons. I'll focus on just a couple points here. First, the professional work that the appraiser's E&O policy insures is the professional work of the appraiser and only that appraiser's work -- it doesn't insure services by the AMC or even the type of service that the AMC provides ("appraisal management"). The policy also exists for the main purpose of defending the appraiser against claims by parties like AMCs. Also, the premium that the insurance carrier charges is not intended or designed to cover the additional risk and cost of providing coverage for potential claims against the AMC. (The reason for much of the misunderstanding here is due to the fact that adding additional insureds such as a landlord to a general liability policy -- as opposed to a professional liability policy -- is a much different matter and is routinely done because the same concerns do not arise.)
If appraisers are actually signing contractor agreements with AMCs that require AMCs to be added as "additional insureds," it probably means that the AMCs aren't following through to make sure that this actually occurs or that the AMCs are satisfied when they see a "certificate of insurance" either because that's what they really wanted or don't know the difference.
One of the latest wrinkles I've seen in AMC contractor agreements comes from CoreLogic's new agreement. This agreement is a poster-child for poor legal drafting. I'll leave the details for a long article, but as to the insurance issue this agreement says: "Appraiser shall carry and maintain in force at all times and at Appraiser’s expense, during the term of this Agreement (and, to the extent that any insurance is carried on a claims made basis, for such period thereafter that claims may be legally made with respect to occurrences during the term)". If an appraiser intends to comply with this agreement, the appraiser must basically keep in place their E&O insurance forever in many states because in most states "claims may be legally made" forever -- even if a statute of limitations does apply, the statute is an affirmative defense that must be asserted. The statute does not prevent a claim from being "legally made." Moreover, if we assume that CoreLogic really means for as long as any relevant statute of limitations period, in many states the statute of limitations does not begin to run until the plaintiff discovers or should have discovered the alleged error by the appraiser. There are many more flaws in the agreement that show wrong-headed thinking. (I'll also add that, in my experience, unfair and commercially unreasonable AMC appraiser contracts lead AMCs to have -- overall -- lower quality appraiser panels on average than AMCs which have more reasonable terms.)
It is true that local, state and government agencies (like redevelopment agencies and airport authorities) are many times added to appraiser E&O policies as additional insureds. This is done carefully and with thought to the issues involved. These types of agencies are also very different clients than AMCs.
Thanks,
Peter Christensen
