$2M Professional Liability (E&O) Insurance for Real Estate Appraisers

For real estate appraisers whose lender, appraisal management company (AMC) or client requires $2M: it means a $2M per claim limit, so a $1M/$2M policy usually falls short.

What does a $2M requirement mean for real estate appraisers?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work caused a client a financial loss. For appraisers, that usually means a claim that a value was wrong. Most buy a form written for appraisal work, often called Appraisers E&O, not the real estate E&O that agents and brokers buy. A $2M clause might read:

• Per claim: the most the policy pays for one claim. Here, $2M.
• Aggregate: the most it pays for all claims in one policy year. Here, also $2M.
• The common mix-up: a $1M/$2M policy has a $2M aggregate but only $1M per claim. It does not meet this clause. See Professional Liability limits explained.
• Claims-made: the policy (almost always written this way) covers claims made while it is active, for work done on or after the retroactive date (the earliest work date the policy covers). That is why the clause asks you to keep coverage after the report goes out.

Who asks real estate appraisers for $2M?

A $2M per claim requirement is most often seen in commercial appraisal work, from larger lenders, institutional clients and some agencies. Residential lender and AMC panels often ask for $1M per claim or less. You may see $2M from:

• Larger banks and credit unions, often for commercial loans or high-value homes.
• Some AMCs that place work for those lenders, mainly on commercial or high-value assignments.
• Developers, real estate investment trusts (companies that own income property) and commercial owners.
• Some government agencies, for right-of-way (land for roads) work. Requirements vary.
• Law firms, relocation companies and investors, sometimes, for litigation or bulk work.

If your clients ask for $1M instead, see $1M Professional Liability for real estate appraisers.

How is $2M built?

A primary policy (the policy that pays first) at $2M/$2M is less common. To meet a $2M per claim clause, you may need a $2M/$2M primary, or a $1M primary plus an excess layer (a second policy that pays after the first is used up). Morrow can help you find it.

Excess should follow form, meaning it uses the same terms as the primary, but that is not guaranteed. Check the excess form and its exclusions. Confirm with the client that primary plus follow-form excess meets the clause.

A commercial umbrella almost never covers Professional Liability, so it usually cannot fill the gap (see Does a commercial umbrella cover Professional Liability?). Lenders usually cannot be added as an additional insured on Professional Liability. Some accept a certificate of insurance (a one-page summary of your coverage) instead, but check your contract.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage. For appraisers, they usually ask about:

• Your license level, and whether you supervise trainees.
• Your mix of residential and commercial work, and property types.
• How much work comes from lenders and AMCs versus private clients.
• Your report count, revenue, highest property values and litigation work.
• Prior claims, board complaints, your current policy and retroactive date.

What affects the cost?

• Type of work. Commercial and high-value appraisals usually cost more to insure than routine home loans.
• Volume. More reports mean more chances for a claim.
• Claims and complaints. Past claims or complaints can raise the price or narrow options.
• Limit shape and retention. $2M/$2M usually costs more than $1M/$2M. A higher retention (what you pay on each claim before the policy pays, like a deductible) usually lowers the premium.
• Policy terms. Defense outside the limit and an earlier retroactive date can add cost.

Frequently asked questions

Is $1M/$2M enough if my appraisal contract says $2M?

Usually no. A $1M/$2M policy pays $1M per claim. See how $2M is built above for the ways to reach $2M per claim.

I carry $1M today. How do I get $2M Professional Liability as an appraiser?

Request new quotes for $2M through Morrow. Morrow can ask for quotes that keep your retroactive date and prior acts coverage (cover for work you did before the new policy starts) where the market allows. Keep your current policy in force until the new one starts, and report anything that could become a claim to your current carrier before it ends.

What kind of claim could reach $2M for an appraiser?

A large commercial loan can. Here is a hypothetical. You appraise an apartment building for a commercial loan. Two years later the borrower defaults, and the property sells for far less. The lender says your income figures were off and sues for its loss. Defense costs plus a settlement can climb fast.

Does Professional Liability cover a licensing board complaint for appraisers?

Sometimes. Some appraiser policies include a smaller, separate amount for board complaints. Others do not. Read the wording, or send it to Morrow to review.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.