A & E Appraisals Blog - Maricopa County Arizona - Real Estate Blog

We all have read the recent announcement that FNC/AppraisalPort® emailed to appraisers regarding the upcoming changes to their Users Agreement. Specifically the change to the Hold Harmless Agreement that they are requiring all of AppraisalPort® users to sign, effective 9/13/2008. (See Appraisal Scoop)

It reminds me of Angelo Mozillo's posts last year in which he stated that Countrywide was going to take over the world and it was in great condition, don't worry about Countrywide. It was all spin, spin, spin. While he was "spinning" he was selling hundreds of millions of dollars of Countrywide stock he owned.

So now we're supposed to believe that there are no problems with AppraisalPort's Agreement. I have been in close contact with my E&O carrier, and my own attorneys, and there are significant issues about which we have to be aware.

Included below is the text of the response I received from my E&O carrier that presents ALL parts of this issues - even the ones AppraisalPort does not want us to be aware of.

The response from my E&O Company is as follows:

"FNC is trying to put your mind at ease by telling you their agreement does not affect your E & O. But they are obfuscating the issue. Of course it does not affect your E & O, because your E & O is governed by the terms of your policy. The problem, which FNC does not address is that your E & O does not cover you for promises made to third parties."

"You can promise your next door neighbor that if you get sued you will buy him a new car, but that does not obligate your insurance carrier to pay for that car . You will be on the hook for it."

"FNC is asking you to pay for their defense costs and any award which may be made against them, anytime they are the recipient of a claim over anything which involves your appraisal. So they are correct when they say their agreement does not affect your E & O, but it certainly would affect YOUR bank account in the event you have to pay to defend them against a lawsuit, because your E & O won't pay it. One wonders why they are trying to hoodwink you into believing otherwise."

"As for the hold harmless clause, they are being utterly disingenuous when they talk about software firms asking you to agree to a hold harmless clause. Think about it. Of course a software firm which provides you with software asks for a hold harmless clause because they can’t control what info you add to their software."

"Data companies also ask for a hold harmless clause to be signed. For example, if your data source is NDC Data, they get their data from County Assessors and Recorders offices. Sometimes that data is erroneous. USPAP requires you have at least 2 sources of data for checks & balance purposes. NDC Data tells you, in its user agreement, that they are providing you with information which has been passed on to them. Accordingly, a hold harmless clause is entirely appropriate."

"FNC is doing no such thing. They are acting as a conduit for your appraisal and are apparently data-mining your appraisals too. You don’t know what they are doing with that data and therefore there is a high level of potential for you being dragged into a lawsuit in the event FNC gets sued. They can scapegoat you by saying they got the info from you. If you sign the hold harmless agreement you will be on the line for their lawsuit, and any counter claims against you. Again, your E & O does not cover you for the transgressions of others. One wonders if FNC is having difficulty getting their own insurance, because their own coverage should be enough to protect them."

"Their specious explanations to their "Valued” AppraisalPort users doesn’t look to me as though they value their users very highly." So, it all boils down to a business decision."

Are you willing to 'roll the dice" and assume that you will never be sued. I am not!

Related Comments:

General Counsel - Liability Insurance Administrators (LIA) "I would like to make some clarifications regarding the commentary about AppraisalPort's agreement and E&O insurance coverage." Click here

Author: John C. Carlson, John C. Carlson Real Estate Appraisals, is a Certified General Appraiser in Diamond Bar, CA and specializes in luxury/historical/architectural home appraisal, along with industrial buildings and apartment building appraisals. He is in his 30th year as a professional appraiser. john@jccrea.com

AZ Real Estate Commentary

AppraisalPort® User Agreement becomes effective 9/13/2008. E&O providers offer some insight on the "Hold Harmless" issue!