Should I Attach My E&O Insurance Declarations Page to My Appraisal Report?

No. We are asked this question a lot and the answer is always the same. There is no good reason to attach a copy of your E&O insurance declarations page or any other evidence of insurance to appraisal reports.

The main reason why we advise against it is that a majority of claims these days are filed by property owners and borrowers. These parties are neither clients nor intended users. Attaching your E&O declarations page to an appraisal report simply invites these parties to threaten or bring claims against you. The existence of insurance does not have anything to do with most claims -- institutions like the FDIC will sue you regardless. But for a few people, the fact that there is an insurance policy somewhere gives them the idea of easy money. We've seen claims from homeowners who've alleged claims about things as petty as square footage being off by 2% and then expecting a payment as if your E&O were a manufacturer's warranty. (Claims like this, of course, are defended and rarely result in any recovery to the claimant.)

We realize that some AMCs and lenders require appraisers to attach their E&O to reports. There's no law or regulation against that, but we suggest that you try to reason with them and explain:

1. You are happy to supply the AMC or lender with a copy of your E&O declarations page that they can keep on file.
2. Attaching your E&O to your report not only exposes you to unnecessary risk of claims by third parties but it also makes it more likely that the AMC or lender will be dragged into a case filed by a homeowner or borrower.

Aside from the above points, the idea of attaching E&O information to appraisals is misguided at its core. All appraiser E&O insurance is written on a claims made basis. This means that the policy that will cover you is not the policy that you have in place on the date of the appraisal but rather the policy that you have -- or should have -- in place years later when the lawsuit is filed or the claim asserted. AMCs and lenders also should realize that an E&O declarations page has little value in determining whether potential coverage exists for their prospective claim -- the fact is that a few years ago, one E&O provider was selling a policy that excluded claims filed by lenders, which is something that could only be determined by reading the policy itself and another E&O provider is currently selling a policy that excludes claims by the FDIC and other regulatory agencies.