Uberrimae Fidei (what?)


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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 isaac@orep.org for your free consultation.

New Course: The OREP Education Network is now offering a new online continuing education course, How to Raise Appraisal Quality and Minimize Risk (7 Hrs), designed to help appraisers stay out of trouble with their state boards and avoid lawsuits. Learn to build a stronger workfile and a bulletproof appraisal report. Visit OREPEducation.org today!


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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; dbrauner@orep.org (888) 347-5273 toll free. Visit OREP today for a same day quote on appraiser insurance.

Send your story submission/idea to the Editor: isaac@orep.org

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One Comment

  1. Thank you for your recent Uberrimae Fidei webinar. Although I was unable to watch it last night and it was very informational. I did find it sad that we just keep dancing around the AMC & lenders as they continue to look for ways to get rid of and use in ways I would have never thought of when I started this 20 years ago. The constant revisions request that have nothing to do with Fannie/Freddie, USPAP or any other governing body. They will do anything to avoid paying more for an appraisal. The already have appraisers working for peanuts. Name one other occupation that has not seen an increase in income in the past 20 years. It is unbelievable that the lenders made it impossible for use to hire trainees by requiring that we go to the property for appraisal with someone who has already been trained to inspect the home for appraisal purposes but instead would rather someone with no appraisal experience (realtor) to provide us with the information we need to produce a credible appraisal. I wait I know why because it cost them less money. For all their additional lender specific guidelines they are not looking for the best evaluation but the cheapest and fastest. I am also a broker and receive request for BPO’s and other similar products for fees I am not sure why any experienced broker would do them for ($50 or less). So most likely the broker that is doing the inspection is also had less experience and is even lesser qualified to do so that an appraise trainee. After all my time in this industry I struggle to determine why the appraisal is the lowest paid party in a purchase transaction with the most liability. What is even more disturbing to me is that lenders are the ones we are working for to ensure that they do not lend money on a property that is not worth it. We are there for you, but they treat us as if we were there enemies and that our soul intention is to ruin them. Their lack of trust in our occupation and the treatment we get from AMC’s is a contradiction to what they are asking from us. The faster and cheaper appraisal is never the best. I am not saying that it is wrong but never the best. At the end of the day I cannot understand why they can’t see the that they are the ones that caused the so-called appraisal shortage by not allowing us to use trainees anymore and but instead use real estate agents or somebody else to do an appraiser trainee job. What part of that makes no sense. I the mean time keep the appraisal fees low and continue to drive appraisers away from this business and continue to keep new ones from coming in. I also am in disbelief that every part of the Dodd-Frank has been implemented but the part that refers to reasonable and customary fees. The government will not enforce it than tries to punish us when we try to because it is an unfair trade practice. What entity is responsible for enforcing it and why are not all appraisers standing at the front door of that office. We have plenty of data from many sources that tell us the reasonable fee but, yet we still receive request for less significantly lower than that. I never understand why most loan closings take 30 to 45 days, but the appraisal is asked to complete the appraisal sometimes in less than 48 hours.

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