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What is a Claim?

Back to the basics for real estate appraisers

A"claim" generally means a demand against you (the insured) seeking damages arising out of a wrongful act by you in the rendering of professional services which you are legally qualified to perform as a real estate appraiser. If you have obtained the required endorsement, your policy may also apply to professional services rendered as a real estate agent or broker.

It is helpful to have an understanding of some basic legal terminology. Many times, people may be unsure of what questions to ask. They may be intimidated by the prospect of speaking with attorneys or they may feel a bit embarrassed about asking questions that demonstrate their own lack of knowledge.

If you are a professional that has been an expert many times, or who testifies in court on a regular basis, then you probably know all of the following terms. For the rest of the professionals with no legal experience, this information should be helpful when you find yourself forced to navigate what can be choppy legal waters

Common Legal Terms:

Complaint
The first document a Plaintiff files with the Court to commence a lawsuit. It will list the facts of the case, what the Defendant allegedly did wrong and what the Plaintiff is looking to recover. In some states this is called a Petition.

Damages
That which the Plaintiff sues to recover in order to compensate them for the loss or injury caused by the Defendant. This is usually some form of monetary compensation. Fines, penalties or injunctive relief would not typically be considered to be "Damages."

Demand
When one party seeks some kind of relief from another party. The relief sought can be monetary compensation or some kind of action.

Deposition
A type of discovery conducted during a lawsuit. A witness gives oral testimony under oath, which is later transcribed to be used as evidence.

Duty
An obligation one party owes to another or a requirement to act in conformance with a certain standard of care.

Subpoena
An order directed to a person requiring attendance at a place and time in order to give testimony as a witness. It may also direct that the witness produce documents that will be used as evidence.

Summons
A form of notice and instruction that must be served along with a Complaint. The form contains information like the location of the Court where the lawsuit is pending and how long the Defendant has before a response must be filed.

Signs of Potential Claims May Include:

1. Letter of a bad review from a lender
2. A subpoena for a deposition.
3. A threatening phone call.
4. Discovery of a possible error in your appraisal report.

Some Examples of Common Claims are:

1. A complaint filed in court seeking damages from you in connection with an alleged error in one of your appraisals (in most states, a complaint will be accompanied by a summons or you may be served with a citation or a petition).
2. A demand letter from a lender or property owner seeking damages from you for an alleged error in one of your appraisals.
3. A letter alleging potential damages or "putting you on notice" of a claim

Better Safe than Sorry

An appraiser was served with a summons and complaint. It was his first experience with a lawsuit and he did not know what to do. He read over the complaint and became furious because the borrower was accusing him of all sorts of things and was stating complete and total lies.

The appraiser addressed a four-page letter to the judge whose name appeared on the first page of the summons. He explained that he owed no duty to this borrower and that the complaint contained numerous lies. He denied that he did anything wrong and asked the judge to dismiss the lawsuit immediately. The appraiser did not notify his insurer or even discuss the lawsuit with an attorney.

A few months went by and the appraiser heard nothing more about the disturbing complaint. He assumed the judge had received his letter and that he had nothing more to worry about. The insured did not mention this lawsuit on his professional liability renewal application because he assumed the issue of his involvement was resolved.

Sometime later the appraiser received mail concerning the lawsuit. He did not understand the legal jargon and decided to disregard it. Later, the appraiser received a document stating that a judgment was entered against him. He called the attorney for the plaintiff to explain that he had done nothing wrong. The plaintiff 's attorney requested that he answer some questions under oath and the appraiser agreed. He testified at a deposition for several hours and volunteered the name of his insurance company. After the deposition, the plaintiff 's attorney refused to dismiss the appraiser and refused to set aside the judgment; he indicated that he intended to call the appraiser's insurance company to demand payment of the judgment.

The appraiser's insurance company declined coverage due to late notice (after finding out 2 years after the lawsuit took place) and due to the appraiser's failure to disclose the lawsuit on his subsequent renewal application. ⍟

This article originally appeared in, and is reprinted from, The Right of Way Magazine (Jan/Feb 2020). © 2020 by International Right of Way Association, Gardena, CA . Archives of Right of Way magazine are available at https://www.irwaonline.org/members/publications/archives-2015-present/