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Editor’s
Note: David Brauner is
Senior Broker at David Brauner Insurance Services/OREP.org and
Editor of Working RE Magazine. He has been providing E&O insurance
to appraisers and home inspectors for 20 years. In this interview,
he provides insight and advice from the inside on rates, claims,
disciplinary actions, coverage and more.
Insight and
Advice from Inside
Interview with David Brauner, Senior Insurance Broker OREP.org
By Cary Ryan,
Assistant Editor
Ryan: I frequently hear insurance professionals assert that
not all errors and omissions policies are created equally- that
which insurance company/policy an appraiser chooses is
important. Brauner: I agree. There are a handful of agencies, including
our own, that have served this profession for many years and that
handle programs written specifically for appraisers. These agency
names should be familiar to most. These programs have underwriters
and counsel who are familiar with appraiser-related issues and have
experience defending them. Some programs such as ours have “extras”
too, like coverage for responding to state board complaints and
“pre” claims advice/assistance. Most offer prior acts as well. This
is important, so make sure you know what you are getting.
Ryan:
Why is prior acts coverage important? Brauner: Most appraisers know by now that their policies are
Claims Made, which means that the claim must be reported
during the policy period. This means that coverage for appraisals in
years past can be lost if the policy lapses or is canceled. Most
appraisers also realize that claims typically take a few years to
surface, which is why back coverage is so important. Switching
companies is typically not a problem, as long as the transition is
completed within the policy period, meaning before the policy
expires.
(story continues below)
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Ryan:
So it’s important that appraisers ask their agent whether they will
be getting prior acts? Brauner: Yes, it is important to ask this question.
Appraisers are being sued in record numbers today- even the careful
ones, so you’ll want to keep coverage for past appraisals. You could
be making a big mistake by letting the back coverage go.
Ryan: This is for claims from banks and individuals as well
as complaints from state boards? Brauner: Yes. Unfortunately, we are seeing legal suits and
Board complaints that are ill-conceived, emotional responses to the
dramatic loss in equity many homeowners are suffering. No matter the
merit, appraisers have to spend time and resources defending
themselves- even if they did nothing wrong. It’s not fair but that’s
the way it is. This is why cancelling a policy midterm or willingly
giving up your prior acts coverage to save a few dollars, even a few
hundred dollars, can cost you should a claim arise from the past and
there is no coverage.
Ryan: Price is always front and center. Appraisers I speak
with ask why their premiums have gone up year after year even though
they have a clean record. Brauner: Yes, premiums have risen over the last two to three
years industry-wide at all programs due to an increase in claims. I
have observed that carriers do one of two things when a program’s
losses exceed a certain threshold due to claims: they either raise
rates or stop writing the business. This is why rates have gone up
for all appraisers in the last few years. The volume of work created
by the refinance boom and housing bubble, and the subsequent pain
caused by its collapse, have caught appraisers in the middle. Claims
against appraisers have skyrocketed as a result. The good news is
that we are seeing signs that the worst is over. Claims are slowing
down, premiums are leveling off but it’s been a rough couple of
years.
David
Brauner Insurance Services/ OREP/Working RE Magazine
David
Brauner Calif. Insurance License: 0C89873
(story
continues)
Ryan: What about appraisers with clean records?
Brauner: Again, it’s not fair but we have seen
every carrier raise their minimum premiums in the last
few years for appraisers, even those with clean records.
But if your record is clean, take comfort knowing that
at our company, at least, you receive the minimum or the
lowest premium possible. And this is true from day one,
which means you don’t pay higher rates than you need to
until the insurance company decides you’ve earned a
“good appraiser” rate. Appraisers with clean records get
the best rates, which are always among the lowest
available. Call us and see!
Ryan:
Many appraisers say they hear stories of appraisers
being “dropped” by their carriers for a single claim
after years of having a spotless record. Brauner: It’s true that carriers have tightened
up underwriting and are refusing coverage to some
appraisers with claims- even just one. It’s true but it
is always case by case. That’s what insurance companies
do- they manage risk. In some cases, you should be glad
certain appraisers are not part of your insurance “pool”
any longer. But the point is well taken. We receive
calls from appraisers looking for coverage regularly who
have been dropped by our competitors and I’m sure our
competitors take some of the same types of calls.
Ryan:
What about getting coverage with a claim if you are
dropped? Brauner: The good news is that many times you can
obtain coverage from an alternate carrier if you are
dropped. Don’t give up! Sometimes all it takes to obtain
coverage elsewhere is a fresh set of eyes, especially if
the issue/claim is not too serious or costly. We advise
clients on how to prepare their claim summaries and
rebuttals for the best possible outcome: concisely,
professionally and with inclusion of new procedures that
might prevent the problem from happening again.
Conversely, and I say this respectfully, handwritten
scrawl, ranting, incoherence, blaming others for
everything, even if it’s true, works less well in
persuading an underwriter you are a good risk. It pays
to put time and attention into these responses.
Ryan: Is obtaining coverage with a
claim/disciplinary action on your record more expensive? Brauner: Sometimes the new coverage is more
expensive but not always. We have several markets we
turn to for the harder-to-place business. We seldom are
unable to find insurance for someone. In general, we
place clients with the best program/carrier for them,
depending on many factors, such as the various services
they provide- appraising and real estate sales for
instance- we have low-cost combination policy that saves
them money, and things like staff size, claims history,
location, etc.
Ryan: What other advice do you have for the
growing number of appraisers who find themselves with
claims or disciplinary actions? Brauner: First, report the event to your
agent/carrier when it happens for your own
protection. To be covered, claims must be reported
during the policy period with Claims Made
policies. To my knowledge every appraiser has a
Claims Made E&O policy. If you fail to report a
claim, let your insurance policy lapse either
intentionally or by forgetting to renew on time and
then try to obtain a defense from the carrier, you
may very well be left without coverage, even if you were
insured when you did the appraisal. But if you get a
claim or even the hint of a claim on the record during
the policy period, it should be covered down the road
even if you have let your insurance lapse and the policy
is no longer in force. Also, the terms of most insurance
policies require you to report claims and incidences in
a timely manner. This language allows a carrier to
potentially refuse coverage if they feel the delay in
reporting hurt the defense. It hardly ever happens but
you don’t want to be the one exception.
Ryan: So honesty is the best policy when it comes
to insurance? Brauner: It sure is. You should always report any
claim or disciplinary action on any and all insurance
applications. It may seem counterintuitive to disclose
something that is easier to hide and maddening if the
incident or complaint is frivolous. But disclosing is
for your own protection, not only for making sure that
there is coverage when you need it. You also don’t want
to report having “no claims or incidences” on an
application and then have a claim surface that you
clearly knew about prior to submission of the
application. Underwriters are the opposite of insurance
agents- underwriters look for any reason possible not
to write your business. If you are dropped for this
reason, what the industry considers dishonesty, it makes
it harder to get coverage elsewhere, as you might
expect.
Ryan: So appraisers should report claims and
incidences for their own good? Brauner: Yes. Seeking professional assistance
early, in some cases, also can diffuse an issue and make
it go away. If you have a disciplinary action, we advise
seeking the advice of counsel, which is covered in most
cases.
Ryan:
Any other advice for appraisers with claims/incidences? Brauner: We advise our clients who have a claim
or disciplinary action to submit their renewal
information, including claims documentation, far in
advance of expiration to allow time for quoting and
shopping. It’s always good to have choices, especially
if your livelihood depends on having coverage. Renewals
with claims are more complicated and take longer to
underwrite. So beginning the process early can relieve
the stress as your policy expiration date approaches. As
noted, we market these applications to a select group of
carriers and are largely successful.
Ryan: Renewing ahead of time is a good idea for
business reasons as well, right? Brauner: Yes. AMCs/lenders have begun asking
appraisers for updated insurance documents well in
advance of their policy expiration date, sometimes 30
and even 60 days in advance. I take these calls every
day. Some appraisers report being cut off from work
until the new documents are furnished even though the
old documents are still current! New documents can
usually be furnished in a day or so but no one wants to
lose even one job these days. To avoid this scenario, we
encourage our insureds to renew early so they can have
their docs ahead of time to provide to their clients.
I’m sure other agents do the same. We also find that
most lenders and AMCs require a minimum limit of $1
million, so we advise purchasing this amount right off
the bat rather than not having the coverage when you
need it and possibly losing work.
Ryan:
What other insurance advice do you have? Brauner: I’ll answer with some health advice I
once heard a doctor offer about living longer: he said
don’t smoke and wear your seat belt. I think he was
saying that while there may be many keys to longevity,
we know that two things work for sure. In the same
spirit, the best advice I can offer about insurance is
to make sure you have it when you need it: renew before
the policy expiration date to ensure continuous coverage
for all past appraisals. We contact our insureds through
mailings, e-mailings and phone calls as expiration
approaches to make sure that if they are not renewing
with us, it is intentional. I’m sure other agents do the
same. We also provide regular risk management guidance
in Working RE magazine of course. But in this
environment because there is a much greater chance of an
appraiser being sued than ever before, it’s more
important than ever to keep your insurance current. If
you’re retiring, consider Extended Reporting Period
or “tail” coverage so you can sleep at night. This
covers all your old appraisals into the future.
Ryan: And if you don’t have insurance?
Brauner:
If you don’t have insurance, consider getting it because
even good appraisers get sued. Consider this: as
expensive as E&O seems, the most recent “average cost of
defending a claim” that I have heard is $25,000. If you
have to defend yourself, that is several decades’ worth
of premium.
Ryan: Finally, 2011 marks the 10 year anniversary
for David Brauner Insurance Services/OREP.org and
Working RE Magazine. Congratulations! Is there
anything exciting to report?
Brauner:
Well, covering Dodd-Frank, the rise of AMCs, customary
and reasonable fees and other appraisal industry issues
for Working RE has not been dull! I’m proud of our
contribution to this profession with the magazine, our
Customary and Reasonable Fee Survey with over
13,000 responding, HVCC Talkback Survey and our
consistent reporting of what appraisers tell us is
really happening. I believe it has made a difference.
At OREP, we are offering the continuing education course
Appraiser Liability: Understanding Disclosures and
Disclaimers at cost in partnership with Mckissock
Education for our insureds, as one new benefit, along
with many others like Working RE magazine. Many
OREP insureds have benefited from this approved
coursework already, gaining valuable liability insights
while saving about $60 on the course.
Ryan: Anything else as we close? Brauner: Well, it’s hard to believe how quickly
time flies. I’ve been providing E&O to appraisers and
covering issues important to this profession through
Working RE, and the Communicator magazinebefore that, for nearly 20 years- most of my
professional life. I’m about the same age as the average
appraiser, 52, and I think I probably have a pretty
similar outlook and ethic. Nothing fancy, just saying
what I mean and meaning what I say. I also tend to want
to do things my own way. It’s been a good fit for me and
very gratifying to serve this profession. I began this
business from nothing and built it on hard work and
reputation. This is why I take to heart all the
appraisers who tell me their businesses have suffered or
been lost since HVCC because they can’t compete freely
as independent fee appraisers and as business people any
longer. It’s the most un-American thing imaginable.
We’ll continue to be one voice for appraisers.
Ryan: Any last thoughts about ten years of
business? Brauner: Our mission at OREP.org is Business
by the Golden Rule. I think this comes from the top
down at a company. It’s evident to me whether someone
values my business by how and even whether they answer
the phone- if they can help me when I need it instead of
when it’s convenient for them. There is nothing more
frustrating than having a problem I want off my plate so
that I can get back to work and not being able to speak
to a person who can help. I get even madder when it’s
obvious that the person I’m talking to couldn't care
less. I’m sure they care about cashing my check but they
don’t care about solving my problem. That’s why we
answer the phone, so that you don’t have to play phone
tag. If you get voice mail at OREP, either all lines are
busy or we’re closed. Our mission is to treat everyone
the way we want to be treated; with honesty, efficiency
and courtesy. I think that, as much as possible, we
practice what we preach and I’m proud of that. My final
thought is to thank everyone who has entrusted their
insurance to us over the years.