Several years ago my partner and I developed an appraiser liability seminar. During the course of the research, I came across this story.
Stephanie, an appraiser in northern Michigan, was asked to appraise a vacant dwelling for an FHA loan. As most of us are aware, one of the requirements for this type of appraisal is that the appraiser activates the furnace and confirms that it produces and circulates hot air. When Stephanie turned on the furnace, a minor explosion occurred and a fire erupted. Stephanie had the presence of mind to call 911 and turn off the valve on the propane tank, but by the time the local volunteer fire department arrived, the house was a total loss.
So what happened? Did Stephanie receive a citation or an award for quick thinking? Hardly. The homeowner’s insurance carrier sued Stephanie as “proximate cause” of the fire.
Her E&O carrier said it was not a "professional act" and left her to twist in the wind. Fortunately, her general liability carrier stepped up to the plate and the homeowner's insurance company backed off.
It's debatable whether the E&O carrier should have acknowledged it as a professional act. Another E&O company later told me they would have. But the point is that there are things over which appraisers are sued that are not covered by E&O. You may not be clumsy, but someone else may break the Ming vase and blame you. Suppose you let yourself in via the MLS keybox and after you leave, the latchkey kid and his buddies break the vase before ma and pa get home from work.
Or your trainee is involved in an accident on the way to or from an inspection. Guess what?
Or you are accused of stealing something during an inspection. Or the latch on the screen door to the lanai doesn't catch behind you and a neighborhood kid comes over and drowns in the pool. Or whatever.
One important thing I learned from Stephanie's experience is that some general liability policies are limited on on-premises acts and some cover off-premises acts as well. If you have a general liability policy, it's not of much use unless it covers off-premises.
