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E&O Insurance

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Travis McGee

Senior Member
Joined
Sep 18, 2004
I HAVE RECENTLY APPLIED FOR WORK THROUGH AMC's (APPRAISER MANAGEMENT COMPANY), THEY HAVE RESPONDED REQUIRING E&O INSURANCE. SINCE 1997 I HAVE WORKED WITHOUT THIS INSURANCE AND HAVE NOT BEEN REQUIRED TO HAVE E&O. I WAS IN A CLASS AND THE INSTRUCTOR WAS A MAI WORKING FOR LEE & GRANT HERE IN ATLANTA GA, AND HE MADE IT CLEAR THAT E&O GIVES PEOPLE A REASON OR THE IDEA TO SUE. DOES E&O HELP A BUSINESS OR HURT? I HAVE LOST WORK FOR NOT HAVING E&O BUT NOT MUCH WORK HAS BEEN LOST AND IT JUST HAS NOT BEEN A REQUIREMENT UNTIL NOW. I NEED TO KNOW OF SOME E&O COMPANIES THAT HAVE REASONABLE RATES JUST IN CASE. CAN SOMEONE HELP IN THIS MATTER? :blink:
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Anthony, just wait until they require E&O..... then require you sign a "hold harmless" clause that will void your coverage. :rolleyes: Going through that now. ;)

If they want to sue, they will. I can sue you because I don't like the color of your car. Might not make sense, but it WILL cost you something to defend yourself.
The bottom line is that insurance is to protect your assets, so that you would not be tossed totally into the po'house. Starting out, I didn't have that much, but after several years, I now have some wealth and a good savings account. That's what you want to protect. Not today, but 2, 5, or 7 years down the road. A lawsuit can come up even after 7 years. ;) I am for having insurance, it can appear to make it more appealing to the ones looking for a scape goat. But without it, can you afford to bare the full brunt of the cost of a $200,000 settlement..... including attorney fees?
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
I think the notion that having E and O insurance will cause someone to sue is absurd. It is very expensive and time consuming to sue, and in our field, there is simply not enough money to be had to encourage people to bring frivolous lawsuits about appraisals. On the other hand, I believe, unfortuantley, if any of us stays in this business long enough, there is a chance some mororn individual homeownwer will sue-- it's just the odds of doing volume , the case in just about any business.

If that day comes, without insurance you have no protection at all. You are a professional, protect yourself like one.

P.S. The reason some lenders won't accept you without insurance , is that E And O firms screen you before they grant coverage, and often won't underwrite people with complaints against them or prior lawsuits. So it is a way for companies to screen out "bad" appraisers.
 

KYLECODY

Senior Member
Joined
Apr 26, 2003
Professional Status
Certified Residential Appraiser
State
Arizona
Now what if you have a LLC? My understanding is if you are sued they can only sue your LLC and get your $ in those accts....So if you keep a few thousand in your LLC and transfer the rest to your personal accounts it seems that you really wouldnt need E&O...is my logic flawed?
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
I WAS UNDER THE SAME IMPRESSION, THAT IS I DO HAVE A LLC AND IF IN FACT A LAW SUIT TOOK PLACE AGAINST ME UNDER MY LLC. MY LLC WOULD BE LIABLE AND IF THINGS GOT TO BAD MY LLC WOULD HAVE TO FILE BANKRUPTCY. HOWEVER MY PERSONAL ASSETS WOULD NOT ENTER THIS EQUATION, BUT I AM NOT A LAWYER AND MAYBE THAT IS WHERE THE ANSWER TO THIS ? LAYS WITH A LAWYER.
 

Rich Heyn

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Michigan
LLC's don't sign the appraisal report. The individual appraiser does.
 
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Montana
Here is the arithemetic:

I am being sued for not reporting in a FHA appraisal that the insulation in a home was vermiculite that turned out to have asbestos.

The case is headed for trial. Estimated cost to defend is $28,000. My deductable is $1000.00 which I paid immediately when the case was filed. If I lose, I pay because my E&O Insurance Company does not pay claims on environmental hazards.

I can assure you it mattered little whether I had insurance or not. Even with insurance, I am only covered for defence but this a a routine every day case but even the simplest of case will cost you at least $28,000 to defend yourself according to my attorney.

If insurance costs $1,000 per year and you have only one case in all the years you are practicing, E &O insurance will pay for itself.

When you look at the cost of defence, you can easily see why so many cases are settled quickly even though the appraiser may been in the right.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
1. Both the appraiser and the LLC would get sued.

2. If a loan goes bad, especially a series that you've got your name on, you're a target, period. Back in the late 80's, when the Texas banks went down, one appraiser had done several stop-and-robs for a new convenience store company. Company went belly-up leaving all these empty stores. He got sued for bad appraisals. He won, but the cost would have bankrupted him just to defend himself. Another appraiser did a drive-by, got sued because he didn't do a walk in, lost at District court level, took it all the way to the supreme ct, lost there. E&O insurance covered both these guys.

3. E&O coverage does not encourage lawsuits and it costs money. However, if you need it, it's sure good to have it.

Roger
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
Thank you for all the good advice, Everyone seems to be for E&O and not against, I will begin my research for rates.
Thanks Again
 
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