Vendor agreements with "hold harmless"

[DWiley]

Some very good comments made by General Counsel, Peter Christensen for LIA

I don't see anything new or earth shattering in those comments.

...the policy issued to you by Liberty would not provide coverage to AppraisalPort (FNC, Inc.), or any of your clients pursuant to an indemnity or hold harmless agreement that you may have signed. Further, the policy would not provide any additional coverage to you for any added expense or obligation which you incur as a result of such an agreement.
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My E&O insurance will not cover FNC or any of my clients. No suprise there. It is my E&O policy; it covers me, not my clients.

My E&O insurance will not provide additional coverage for things related to the agreement. Again, no surprise there. My E&O covers errors on my part, not business agreements.

 

[Workbox]

No, but this is.

As general counsel for Liability Insurance Administrators (LIA), I would like to make some clarifications regarding the commentary about AppraisalPort's agreement and E&O insurance coverage.

First, an appraiser's decision to sign the agreement -- like the signing of any contract containing an indemnity clause -- does not void an appraiser's E&O coverage with LIA. To the contrary, the appraiser's E&O coverage remains unaffected and in place. The appraiser still has the same degree of protection that he or she had before signing the contract. (This point is mentioned in the linked-to letter.) Thus, an appraiser sued for professional negligence in connection with an appraisal delivered through AppraisalPort would still be defended in the same manner under the policy (assuming all other regular terms and conditions of the policy are met and the appraiser maintains current coverage, etc.).

What an appraiser's E&O insurance does not cover is the additional, potential liability that the appraiser promises to assume in the indemnity language of the agreement -- the part, for example, that obligates an appraiser to pay for AppraisalPort's fees, costs, damages, etc. if AppraisalPort is sued (even if due to AppraisalPort's own negligence). Such potential liability for the appraiser would not exist in most cases except for the contractual promise made in the agreement and is potentially subject to exclusion. Like all professional liability policies of which I am aware, an appraiser's policy does not cover liabilities assumed by contract. Under this customary exclusion in professional liability policies, the additional contractual obligation assumed by the appraiser is not covered to the extent it exceeds the liability that would exist without the contractual obligation. But, again, as mentioned above, the appraiser's insurance is not voided and remains in place.

Having made the above clarification, I also want to state strongly that I consider AppraisalPort's terms and conditions to be grossly unfair to appraisers. The agreement contains the most one-sided indemnity provision that I have read in appraisal-related agreements -- going so far as to require appraisers to indemnify AppraisalPort for its own sole negligence. I would urge appraisers to show their dissatisfaction to AppraisalPort and Fannie Mae.

Peter Christensen

 

[Pamela Crowley (Florida)]

I wonder... Does FNC have a separate contract for appraisers that 'support' them that does not include the appraiser having to pay FNCs legal fees?

 

[Elliott]

These indemnity clauses are just another form of unreasonable pressure
on appraisers. Any appraiser that signs them must take a big gulp
before they sign the agreement. Anybody can understand what it really
says, "Master I will do what you axt cause you are much bigger and
more powerful. You can just threaten that lawsuit and I will drop to
my knees, yes master."

 

[Mr Rex]

These indemnity clauses are just another form of unreasonable pressure
on appraisers. Any appraiser that signs them must take a big gulp
before they sign the agreement. Anybody can understand what it really
says, "Master I will do what you axt cause you are much bigger and
more powerful. You can just threaten that lawsuit and I will drop to
my knees, yes master."

It does seem that we are going from the sublime to the ridiculous. I wonder how many AMCs will take notice and force feed "Hold Harmless Agreements" to the hungry masses of appraisers between now and 1/1/2008?

 

[DWiley]

Workbox,

Thanks. I appreciate the confirmation of what I have been saying about the terms of use having no effect on E&O coverage.

First, an appraiser's decision to sign the agreement -- like the signing of any contract containing an indemnity clause -- does not void an appraiser's E&O coverage with LIA. To the contrary, the appraiser's E&O coverage remains unaffected and in place. The appraiser still has the same degree of protection that he or she had before signing the contract.
​

Most hold harmless agreements are one sided and inherently unfair. The only one I would ever "endorse" is one that held me harmless

Still, hold harmless agreements are, unfortunately, part of life. If we followed Pam's advice and never agreed to one, then none of us would use forms software, no one would have an Xsite, no one would use PDF files, etc. All of those things require one to agree to hold harmless language. Most just check I AGREE and move on without even reading it.

I am no fan of FNC's hold harmless language, but I do realize that in order to run an appraisal company one MUST agree to some of these. Otherwise one cannot have the tools needed to do the job.

Everyone must make the decision that is best for them. I am not trying to talk anyone into or out of using AP. How you run your companies is up to you. However, I do want people to make choices based on correct information and not to rely on bogus claims - like the claim that signing the AP terms of use invalidates you E&O coverage.

 

[Pamela Crowley (Florida)]

H E L L O

Many of the AMCs already have been using these hold harmless clauses.
I've been warning appraisers about this for years.

 

[Mr Rex]

H E L L O

Many of the AMCs already have been using these hold harmless clauses.
I've been warning appraisers about this for years.

Yeah, but now they all can if they want to, and you either play the hand you are dealt or fold and go home. I hope Mr Cuomo is happy.

 

[DWiley]

Many of the AMCs already have been using these hold harmless clauses.

This is a very accurate statement. I would bet that anyone who has ever delivered an electronic report using anything other than direct email has agreed (perhaps unwittingly) to a hold harmless statement of some sort.

We use several web portals, and they all have some sort of hold harmless as part of the terms of use.

Anyone use RIMS? Their terms of use say:

11. User Representations; Indemnification
b. You will indemnify and hold ExactBid harmless against any and all judgments, settlements, penalties, costs and expenses (including attorneys' fees) paid or incurred in connection with claims due to, resulting from or arising in connection with activities and information which are performed, made, distributed, displayed, transmitted or published by you, including but not limited to those attributable to (a) infringement, misappropriation or violation of any copyrights or other proprietary rights of any third party, and (b) errors in or omissions from such activities and information.

​

 

[Jonsey]

This is a very accurate statement. I would bet that anyone who has ever delivered an electronic report using anything other than direct email has agreed (perhaps unwittingly) to a hold harmless statement of some sort.

right. perhaps, unwittingly, the true extent, unknowingly. But, now that we know, there will be no more defensible excuses.