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Uberrimae Fidei (what?)
By David Brauner, Senior Broker OREP
Why is this obscure term- Uberrimae Fidei – important to you? Allow me.
An uberrimae fidei contract is a legal agreement requiring the highest standard of good faith. Uberrimae fidei is Latin for utmost good faith. Insurance contracts are the most common type of a uberrimae fidei contract.
The concept of uberrimea fidei is a double-edged sword for you, the policyholder. The friendly side of the blade guarantees you a high standard of protection. You might have heard the term “duty to defend.” An insurer has a duty to defend if the face of the complaint alleges something covered and does not allege exclusion to coverage.
Now here’s the sharp end of the blade: because the insurance company agrees to share the risk of loss with the policyholder, it is imperative that the policyholder (you) act in good faith by fully disclosing all information that affects the insurance company’s level of risk.
I have written many times over the years why it is so important to report claims and complaints when they happen. It is especially important to report claims and complaints on an insurance application- new or renewal. That is a legal document you are signing that saddles the insurer with a duty to defend, and you with duty to disclose. As noted in previous stories, failing to provide full disclosure can be cause for cancellation of your policy and worse: if an unreported claim surfaces later, there may be no coverage.
For your own protection, please don’t withhold information and carefully consider the following: while reporting a claim mailed to you on a law firm’s letterhead is pretty clear cut, what about a frivolous complaint to your state board? I have seen numerous complaints which appear frivolous- a homeowner unhappy with a value for instance. Many times complaints like this do “go away.” State boards are doing a much fairer job reviewing complaints and expunging those that are baseless without any permanent record. But that is not always the case.
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If there has been what you consider to be a “frivolous” complaint filed against you, you may be tempted to not disclose it on your application because you’re sure it will go away. If the complaint is dismissed, there should be no issue. If some merit is found in the complaint, however, and you need defending, the insurance company is going to ask you why you did not report it. Saying you did not believe it would turn into anything is an understandable but potentially impotent defense.
Furthermore, there are times your appraisal will be reviewed by state board examiners where they find an unrelated issue- this is common. Sometimes the complainant has a point you didn’t see at first.
Here’s the irony, in most cases, your premium will not be surcharged for a pending complaint until there is a finding. If there is a finding and it’s minor, any surcharge probably will be small. Now this is case by case but a 15% surcharge on a $750-$1,000 policy will not break the bank or put you out of business. As unfair as a frivolous complaint is, it’s probably best to accept up front that it will cost you time and maybe some money to defend.
Most policies, including those sold by OREP, will reimburse expenses for your defense against up to a sublimit for an action brought by your state board. No policy will reimburse you for any part of any fine or the cost to take education. OREP insureds enjoy further risk management protection with free state board consulting by Bob Keith and (his webinar). Keith’s services are open to all appraisers nationwide. OREP insureds who are facing a state board complaint, please email email@example.com for your free consultation.
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About the Author
David Brauner is Senior Broker of OREP and Publisher of Working RE Magazine. David has been helping appraisers with insurance for over 20 years. David Brauner Insurance Services, Calif. Insurance Lic: 0C89873. OREP- Organization of Real Estate Professionals Insurance Services, LLC. Calif. Lic. #0K99465; firstname.lastname@example.org (888) 347-5273 toll free. Visit OREP today for a same day quote on appraiser insurance.
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