Should you attach your E&O Insurance to your Appraisal report?

Sunday, September 15, 2013

Increasing demands by clients on appraisers is not news.  The quality of work and the quick turn-around is a must.   Appraisers who are diligent and thorough still spend 8 hours or the time necessary to complete an appraisal and feel confident about their work in the report being submitted.  AMCs are held to stricter review guidelines as well, so the appraisal submission should be professional and seamless.

Why then can an appraisal report be Rejected simply on the grounds of not including your license and/or proof of E&O Insurance?

We all know the drill.  You apply for work with an AMC or a new client, and you’re required to provide proof of licensing and proof of Insurance.  At renewal time, when you obtain a current copy of your license and E&O respectively, you send proof that you’re still qualified.  Plus, many AMCs request they be named an additional insured to your policy, request to be indemnified, and the Insurance companies are being asked to notify the AMC if your policy is cancelled.  Isn’t this enough to fulfill the requirement of making sure you are eligible and qualified to do the work?  The simple answer- no, it’s not enough.

The emerging trend is that more companies- clients and AMCs- are requiring you to include a copy of these important documents with your personal information in every appraisal report, and… listen up, Appraisers, because this is big news…  they don’t have to require this.   In fact, the Insurance industry advises against it

Unlike earlier suggestions to discuss with the lender, client, or AMC requiring this, there is now little room for you to negotiate.  If you don’t include your Certificate of Insurance or proof of E&O and a copy of your license, the appraisal report is not accepted.  If your reports are not accepted, you did not complete the work you were contracted to perform, and you risk losing not only this job but future appraisal work.  Period.

Why is this feasible?

One reason may be that it’s easier for the lender or client to prove to the homeowner that you are qualified by supplying the homeowner with your information.   The client, lender, or the AMC handling the quality control is responsible for confirming qualification at the time they contract with you to perform appraisal work.  

What’s your risk?

The scary thought is that your personal information has now been provided to multiple people throughout the year who otherwise would never have access to your Insurance information, and they know more about you than most professional service providers are required to disclose.  They now know the type of coverage you carry, your Policy limits, and Policy dates.  This is yet another reason appraisers are being made a target in the legal system.

And the distribution of this information is extensive.  Consider the fact that you performed 250 appraisals last year, and your E&O was included in 250 appraisal reports.  Now what happens to those 250 copies?  Homeowners and consumers are not regulated and can file, record, or distribute freely those reports however they wish.  In fact, try a “google search” or web search for your name.   Do any of your reports show up online?  It’s happening to appraisers just like you.

It’s similar to a physician being asked to provide proof of medical malpractice  insurance to every patient.

The solution is to play defense

The first step, if you haven’t done this already, is to talk to your AMC or client.  Many of the contracts circulating right now only require the appraiser provide proof of licensing and coverage as we stated above, to help them qualify you at the time you initiate work and when there are changes to your coverage or licensing.   If you were qualified enough to receive the job, then your appraisal report should be accepted without these two personal documents included.

Next step, write a clear and concise disclaimer to add to your appraisal report.  The homeowner or recipient of the appraisal report can confirm you are qualified to perform the work by checking with the client or AMC who handles the quality control.  Confirm that your client accepts your reports with the disclaimer, rather than the declarations page (proof of E&O) and license.

Talk with other appraisers.  How are they handling the increasing appraiser requirements? 

If the pressure continues, contact your E&O provider and your state licensing board.  Notify them of the pressure you’re receiving and request for guidance, and their assistance.   For example, at FREA, we are spreading the news to gain a more collective approach to resolving this.  There is no clear answer to this imposing problem, but positioning yourself in a pro-active position is much better than the reactive alternative.  Play defense so you can limit your potential risk. 

FREA members, we want to hear from you.  Are you being required to submit a copy of your E&O and license in every report? As an educational resource, FREA keeps appraisers informed.  Send your story to

Not with FREA and interested in learning more about protecting yourself and your business?  Contact FREA to discuss our Risk Management and Membership.

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