Wednesday, February 29, 2012

A Refreshed Warning about Some Risky E&O Sold to Appraisers

We first warned appraisers about this problem almost a year ago, but many appraisers are still falling prey to the marketing for some "no frills" E&O insurance policies and their lack of coverage.  Advertisements for this product appear in some respectable appraiser publications -- fortunately, others have taken steps to protect their readers and members by providing information, e.g., the Appraisers Coalition of Washington published a warning for its members in April last year on the ACOW website and Ann O'Rourke also published a warning last year in her popular Appraisal Today newsletter.

The central problem is what might be called an "E&O ticket" marketed for the purpose of an appraiser fulfilling lender or AMC demands for a declarations page showing a certain limit of liability, without regard for what the policy actually covers.  The problem with the cheap E&O ticket is that it will not provide any coverage for the appraiser's "prior acts" -- in other words, appraisal work that the appraiser performed in the past -- even when the appraiser would qualify for prior acts coverage with reputable insurance programs because the appraiser has had previous uninterrupted insurance coverage in place.

The most common policy like this sold to appraisers is the Five Star Appraisers policy.  The ads undoubtedly offer coverage at very low rates. When an appraiser goes to the website for that insurance, there is a small warning on the opening page that the insurance will not cover an appraiser's prior appraisal work and that the insurance "may not be suitable for all applicants."  On the next page, however, appraisers are told "lenders do not require prior acts."  That's true but only because lenders and AMCs really have not yet caught on to insurance programs like this and the lack of coverage they provide.  The more important point that goes missing in the marketing is will this policy cover the real professional liability risks that most appraisers face?  The answer to that question for most appraisers is "no."

So, what happens to an appraiser who decides to move from a policy that properly covers their prior work to a policy like the one sold by the Five Star program? 

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Saturday, February 25, 2012

16 Appraiser and AMC Statute of Limitations Cases

To follow up our comprehensive 50-state chart regarding statutes of limitations pertaining to claims against appraisers, we have compiled, summarized and linked to 16 cases from 12 states involving statute of limitations issues in lawsuits filed against appraisers and AMCs.  For appraisers registered with READI, the table of cases can be accessed here.  We'll be adding to it over time.

This is one of the cases summarized in the table:


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Tuesday, February 21, 2012

Update: Gibson v. Credit Suisse, Cushman & Wakefield and a New Case -- Blixseth v. Cushman & Wakefield

We've written here previously about what is the biggest case against appraisers in terms of alleged damages.  That case is Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al.  The case is a reflection for appraisers about what is happening in the courts to their profession -- liabilities being pushed on them as the result of an epidemic of buyer's and lender's remorse, appraisal reviews being used as a tool against appraisers who delivered appraisals in the bubble years, appraisers testifying against each other for profit.  The Gibson case is merely the billion dollar version of hundreds of smaller actions against other appraisers, both residential and commercial.

Cushman & Wakefield has been trying to get the case dismissed for the last 18 months with motions to dismiss based on principles no different than would be asserted by a residential appraiser in a much smaller action. 

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Thursday, February 16, 2012

What is the Statute of Limitations for a Lawsuit Against an Appraiser in my State?

The statute of limitations period for a professional negligence claim against an appraiser ranges from 10 years in one particular New England state down to 1 year in a certain Southern state.  Application of the "discovery rule" also varies widely. 

In 2012, most lawsuits against both residential and commercial appraisers continue to relate to appraisals performed at or near the peak of the real estate price bubble, 2004 to mid-2008. Appraisers dragged into these claims often ask us about the relevant statutes of limitations. The question is usually something like: “I did the appraisal in 2005, more than five years ago. I don’t even have the work file anymore. Will the complaint be dismissed based on the statute of limitations?”


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Tuesday, February 7, 2012

FDIC v. CoreLogic -- Court Rules on eAppraiseIT's Motions to Dismiss and Strike FDIC's 1st Amended Complaint

Judge Carter ruled yesterday on eAppraiseIT's motions attacking the FDIC's First Amended Complaint in the lawsuit filed by the FDIC against CoreLogic/eAppraiseIT and their various affiliates on May 9, 2011. 

eAppraiseIT's Motion to Dismiss Count I -- Breach of Contract Relating to Appraisals Delivered Prior to Signing of Formal Written ContractThe first of these motions was eAppraiseIT's motion to dismiss Count 1 of the FDIC's current First Amended Complaint.  In that count, the FDIC alleged a breach of contract pertaining to appraisals delivered by eAppraiseIT prior to the execution of eAppraiseIT's later, very detailed written contract with WaMu.  The formal written contract was not signed until November 2006.  The FDIC is trying hard to plead a separate breach of contract with regard to those early appraisals because there is no potential limitation of eAppraiseIT's liability for them since they pre-dated the detailed written contract containing those limitations.  The problem for the FDIC is that there apparently never was any kind of a written contract between eAppraiseIT and WaMu pertaining to appraisal work in that early period before the parties signed the November 2006 contract -- quite incredible, but that's the way a lot of appraisal management was handled in that period.  Thus, the FDIC is struggling to hobble together some kind of breach of contract story based on a blend of factual scraps.  It is also trying to make it sound like a written contract existed during that time -- because the FDIC can't say the contract was oral without running up against statute of limitations problems.  The result is that the FDIC pleaded a very vague breach of contract claim in Count 1 without the required specifics.  [Remainder of post deleted.  Questions about FDIC/AMC matters should be directed to peter@liability.com.]
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