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New Coverages Appraisers Should Be Aware Of
by Isaac Peck, Editor
As the appraisal industry continues to evolve and advance with regulatory, economic, and technological changes, appraisers will be delighted to hear that their E&O coverage is expanding to keep pace. Here are the latest coverages to help protect you and your business.
Most appraiser policies now have a broad definition of Professional Services that provides greater coverage for appraisal reviews, desktops and hybrid/bifurcated appraisals. Additional new coverages include bodily injury/property damage (BIPD) coverage, that protects appraisers while they are at the subject property, security incident coverage, that protects against certain cyber risks, coverage for mold/fungi, discrimination coverage and much more.
Here’s a look at some of the latest coverages that are now available to appraisers.
Bodily Injury/Property Damage
One of the most valuable additions to coverage for appraisers is BIPD coverage, which stands for Bodily Injury and Property Damage. BIPD protects you for what E&O does not cover: accidental damage to property or persons (bodily injury) which you may be responsible for while providing your professional services at an appraisal inspection.
One example is if you knock over a valuable vase (Grandma’s favorite 100-year-old vase, for instance) causing property damage, or God forbid, hurt someone in the course of doing your subject property inspection.
These types of claims are not very common but I have seen a few over the years, and I expect they will increase, since FHA appraisals require testing or inspecting appliances, attics, crawl spaces, etc.
Here are some real life examples of BIPD-related claims that we’ve seen here at OREP:
• Insured exits the rear sliding door onto a patio to measure the home but steps into newly poured cement ($5,000+).
• Insured flushes the toilet and it overflows causing water damage to expensive flooring ($15,000+).
• Insured opens an attic hatch and (allegedly) causes damage to popcorn ceiling and wardrobe ($5,000+).
• The home seller trips and falls on the insured’s ladder during the inspection (bodily injury—amount of loss unknown).
Just a few years ago coverage for these types of claims required the purchase of a separate General Liability policy. Today BIPD is included at no extra charge in many appraiser policies, including OREP’s flagship policy. Check with your agent to see if this coverage is included in your policy.
New Coverage: Discrimination
Another issue on the horizon for appraisers is housing discrimination. Recent Congressional hearings, New York Times articles, and even a “position statement” from then-candidate Joe Biden, call for tougher standards for appraisers to help address housing discrimination. Justified or not, appraisers are in the crosshairs when it comes to discrimination lawsuits.
To address this, OREP’s base policy for individual appraisers now includes $200,000 of discrimination coverage, with the option to increase that coverage to $500,000 for Appraisal Firms (2 appraisers or more) who request it. This expanded coverage protects appraisers against allegations of discrimination of all kinds, not just race.
New Coverage: Mold/Fungi
Fear of mold claims has been a constant worry for many appraisers for decades. Until recently, most appraiser policies excluded all mold and fungi claims. Mold claims can be complex and “gray.” The reason is that often there is not a clear distinction between a claim involving unreported water damage (which may be covered) and the presence of toxic mold (which is excluded under many policies). This is why “water” claims can be ambiguous—which rhymes with dangerous. The good news is that OREP’s flagship program now includes up to $500,000 in mold/fungi coverage in one of its policy forms. This is very broad coverage, protecting you against allegations that you failed to disclose the existence or presence of any type or form of “fungus, including mold or mildew and any mycotoxins, spores, scents or byproducts.” This valuable coverage is included at no extra charge in OREP’s Standard Program. The coverage is not included automatically in every OREP appraiser E&O policy, so if you want to explore this coverage, please be sure to ask your OREP agent before placing coverage.
Expanded Coverages
State board complaint coverage has also expanded, at least at OREP. Many appraiser policies include a small amount—$2,500 or less—toward legal expenses if you find yourself “invited” to a disciplinary board hearing by the state. OREP’s new program offers a policy that includes up to $25,000 per complaint in state board coverage. Like mold, this coverage varies by program, so please ask your OREP agent before placing coverage.
OREP’s policy also includes $25,000 of coverage for subpoena expenses, $10,000 in loss of earnings coverage, and $25,000 in Security Incident coverage, which covers you for expenses related to a security incident, such as hiring a cyber forensic analyst or covering regulatory expenses following a security breach.
Covering Your Tail
When the time comes for you to stop appraising or retire, most appraisers know that they need to purchase tail coverage, or Extended Reporting Period coverage (ERP). With Claims Made professional liability policies, when you let the policy lapse, the coverage for prior work ends unless you purchase “a tail.” It’s usually offered for one to three years into the future. ERP can be a bit pricy—up to one and a half times the expiring premium—but worth it in my opinion for the peace of mind. The good news is that certain programs, like OREP’s, provide free, unlimited ERP when you retire. There are certain qualifying requirements, like being of retirement age and being with the program for a minimum number of years. If you’re within five years or so of retirement, free ERP can be a very valuable benefit that could save you thousands. The coverage, even if you pay for it, is the best sleeping tonic there is. Check with your agent if you plan on retiring in the next five years or so.
Extra Coverage
With OREP’s individual appraiser policy, the limit is outside of defense costs. What? That means that the $1 million coverage limit you purchase will not be “used up” by the defense costs. Defense costs are also covered up to the same $1 million limit. While it’s unlikely that you’ll ever need all that coverage (we sure hope not), that is a lot more coverage for the same price. Again, not every policy includes the “limit outside of defense costs” so please ask your OREP agent.
Add to all this broad coverage, OREP’s zero deductible, and well, the news is very good: at least the errors and omissions news. If you also do real estate sales, you can get combined coverage with appraising in one policy. Not so long ago, you would have needed to buy two policies. Again, this is a special policy, so please be certain you have the coverage you want before binding insurance.
If you have any questions or want to compare your coverage, feel free to visit OREP.org or call us at 888-347-5273. OREP also offers free state board complaint consulting and 14 hours of free appraiser continuing education for OREP members in 46 states. Stay safe out there!
About the Author
Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at OREP.org, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.
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