The witness trap
How appraisers can avoid transforming from expert witness to defendant
Appraisers should only be in a courtroom if they’re paid to be
there as consultants or expert witnesses. Unfortunately, some
appraisers have discovered that their expert testimony
can quickly transform them from expert to defendant.
How does this situation happen, and more importantly, how
can it be avoided? Following are three tips that can help keep
appraisers who testify as expert witnesses from becoming
the focus of a professional liability lawsuit.
1Trust your instincts about clients and assignments. One distinguishing
and perhaps obvious feature of expert witness work is that appraisers are
working with parties who already are in litigation. They are involved in
a case, they have lawyers and — not surprisingly — they probably are not very
happy about it. Anger may have led them to file a lawsuit or maybe they’re
angry about being sued. Appraisers need to consider that their potential
clients may be predisposed to filing lawsuits and that, as their expert witness,
they could be the target of a liability claim if their clients are dissatisfied with
and allegedly harmed by the work.
When is it best to back away from an assignment? If potential clients are
expecting an unrealistic valuation or an impossible litigation result, or if they
have gone through a series of lawyers or appraisers — especially if they are
bad-mouthing them. These actions indicate that clients may be impossible to
satisfy, may make it difficult for appraisers to perform their assignments and,
worse, may leave appraisers vulnerable to lawsuits. When our office receives
reporting claims for litigation assignments, many appraisers start the call
by saying something like, "I knew this guy was going to be a problem. I wish I hadn’t taken the assignment."
2Develop a strong engagement agreement
for expert work and get it signed. Claims
about appraisals prepared for mortgages
come from myriad parties: lenders, investors,
borrowers and even sellers. In contrast, viable
claims against expert witness appraisers
principally come from just one party — the
appraiser’s client (or the client of the attorney
who retained the appraiser). Why? Typically,
the opposing party has no standing to sue the
other side’s expert witness, and legal immunities
generally protect witnesses from being
sued by unhappy opposing parties. However,
most courts agree that an expert witness,
such as an appraiser, can be sued by his or her
own client.
Fortunately, appraisers have one very
effective tool to combat legal claims by clients:
a strong engagement agreement. For the purpose
of liability prevention, there are several
key points that need to be included in a strong
agreement for expert witness services:
- Clarify that opinions and testimony are
based on independent, professional judgment
and are in no way predetermined.
- State the agreed date(s) of value in the
agreement or note that the client will be responsible for providing the date(s) if the
assignment involves performing appraisals,
because the date of value often is a purely
legal issue and should not be the responsibility
of the appraiser.
- Clearly spell out the timing and terms of
payment.
- Appraisers should state that they have the
right to immediately withdraw as an expert
from an assignment for non-payment and
also in the event of an ethical or professional
standards issue or disagreement.
- Consider including limitations of liability
— an important subject covered in the
Rest Insured column in the first quarter
2015 issue (www.valuation-digital.com/
resourcescatalog/2015_1q?pg=8#pg8).
- Make sure you get the agreement signed —
in ink or with an electronic signature.
The Appraisal Institute offers sample
engagement agreements online in its
Professional Practice section (www.appraisalinstitute.org/professional-practice/professional-practice-documents/sample-agreements-for-services/); the samples can serve
as a good starting point for addressing the key
points mentioned here.
3Be prudent in fee collection. Appraisers
deserve to be paid for their time and
services as experts regardless of the
outcome of a case — compensation legally can't be based on the verdict. Unfortunately,
when a case doesn't go the way a client had
hoped, they may be less inclined to pay the
appraisal fee. Therefore, it's important to
have clients pay upfront or in installments
throughout a case rather than in one lump
sum at the conclusion of a trial.
This arrangement not only is fiscally prudent,
it prevents appraisers from having to
threaten to file a collection action or actually
sue a client to collect a fee. In these situations,
the client frequently will file a counterclaim
against the appraiser alleging the reason for
non-payment is appraiser negligence. Our
office has seen it happen — in one such case,
appraisers sued to collect a sizable fee at the
end of a long and complex case that did not end
the way the client had wanted, and the appraisers
were then countersued for several million
dollars in alleged damages. (Remember the
first lesson above: because clients already are
in litigation, they may be predisposed to sue.)
Appraisers aren't the only professionals
who suffer from whiplash when trying to
collect unpaid fees. The American Bar
Association has published statistics showing
that around 20 percent of negligence claims
against lawyers are made in counterclaims
when lawyers sue for unpaid legal fees.
Accordingly, when appraisers find themselves
in a position of thinking about suing their
client, I recommend answering the following
four questions:
- Will the time, effort and cost of suing be
worth the recovery?
- Were there any genuine problems with the
work that the client could seize upon?
- Has the client expressed grievances to the
appraisers about the work?
- Are the unpaid fees worth the risk of having
the client countersue for professional
negligence?
Appraisers should carefully consider their
answers to these questions, weighing the
consequences of each one before heading
down to the courthouse to sue their client.
This article originally appeared in, and is reprinted from, Peter's regular column "Rest Insured" in the Appraisal Institute’s Valuation (4th Quarter, 2015). © 2015 by the Appraisal Institute, Chicago, Illinois. Archives of Valuation magazine, including Peter’s past columns, are available at http://www.appraisalinstitute.org/publications/valuation-magazine/
Companion Article
-
Feb 2016
Can I get a witness? By Michael Brunson- SRA, Peter Christensen
Litigation consulting and expert witness work is a rewarding area of practice for many appraisers. The work often is intellectually stimulating and well-compensated — indeed, the hourly rates for highly regarded expert witness appraisers regularly top the rates charged by the attorneys with whom they work....
Read Article