E&O: Errors & Omissions

Real Estate Appraisers

Appraisers estimate the value of real or personal property based upon their expertise and judgment in accordance with recognized valuation principles. The most common type of appraiser is a residential real estate appraiser. There are many other types of appraisers valuing all different types of assets. For example, we have provided professional liability coverage to a "cow appraiser", an appraiser specializing in equine risks.

There are many valuation methodologies that appraisers use. These methodologies vary depending upon the use for which the appraisal is required. Valuation methodologies include replacement cost, insurable value, comparable value and investors value. Appraisals are needed for a variety of purposes such as buying or selling property, insurance, estate valuation and forecasting the monetary earning power of property.

Mercator Risk Services Inc. ("Mercator" or "Mercator Risk Services") is one of the largest underwriters of appraisers in the US. The appraisers segment is a unique and significant opportunity for new sales because there are many appraisers and very few specialty programs. Some appraisers may not be properly insured. Because of our unique specialization in this area, Mercator can assist you in providing the best coverage at highly competitive rates for your appraiser account.

Exposure

Appraisers have professional liability claims, although the frequency is low. Appraiser claims are often triggered when an appraisal is used for financing and the future value of the property ends up being less than the appraisal. This can occur if the appraiser does not do a thorough job appraising a property, particularly if the property is unique. However, a realized value on a property lower than the original appraisal can also occur if there is a general market decline in property values. In this situation, the appraiser may be a visible deep pocket even though he or she is not at fault. Typically the amounts at stake are significant and the resulting litigation is long and expensive.

Often, an appraiser's claim or lawsuit may not involve a clear error or omission. The example noted above, where a general market decline pushes all property values down, is the classic example. But other types of claims with no clear error can also lead to litigation. For example, a client may not get the value he or she wanted from an appraisal and may lose a financing commitment. This client is not happy with the result and could bring a claim to obtain a different result or avoid paying a fee. These types of claims are often just as difficult and expensive to defend as a clear-cut error. Insurance typically pays for the cost of defending this type of claim as if it were a clear-cut error on the part of the insured consultant.

Professional Liability Insurance

Appraisers' professional liability insurance, sometimes called errors and omissions or E&O insurance, is available from Mercator's exclusive insurance program. Coverage and pricing vary depending upon the type of professional operation, the specific appraisal services provided and the account's size and location. The percentage of commercial property appraising has a significant impact on pricing.
Specific coverage provisions are important for this coverage. Some professionals require coverage with special provisions to protect themselves from unique claims arising from their specialized services, such as consulting services.

Coverage is provided on a claims-made basis. Limits and deductibles vary with the size and type of insured. Standard limits for most small to medium sized organizations start at $1.0 million, and minimum premiums can run as low as $500. Policy forms vary significantly, but typically are claims-made forms with defense costs outside the limit and deductible.

Mercator Risk Services writes appraisers professional liability insurance in the US. Please let us know your client's needs and we will provide you with information and assistance with your particular situation or account, and professional liability coverage.

Contact us at info@mercatorpro.com or use our web mail form.
(*Office hours from 8am-5pm EST)

Request Information

Bold items are required.

© 1999-2008 Mercator Risk Services | Legal Stuff

Designed and Maintained by ForeSite