Intended Use and Liability
Q: " I have an E&O question for you. I think I know the answer, but want to hear what you think. I received a request from a potential client (property owner) who would like to hire me to prepare appraisals for a portfolio of properties they own. When we asked what the intended use is, and who the intended users would be, we got this somewhat vague response:
"The intended use of the appraisals is undetermined. It could be for asset valuation, for possible marketing decisions, or for proposals to be made to potential investors. As far as the intended users, that could be all or some of the current owners, possible future owners, and possible future investors”
I know owners will often do what they want with our appraisals, regardless of the fact it is not the intended use, but this seems pretty vague to me. I hate to pass up what might be a hefty fee, but I am thinking I should get more clarification. Do you agree?
Also, would this work be covered under my E&O?"
A: OK, putting aside the issue of any potential USPAP violations, why don't you just post the appraisals on a billboard for the whole world to see, and for the whole world to use, for any purpose, whatsoever. That is basically what you would be agreeing to here. You agree to appraise an entire "portfolio" of properties without knowing who will rely on them and for what purpose the reports are being requested.
This is about as wide open as anything could get. You are exposing yourself to an unlimited number of potential claimants. Plus, when you do not find out (specifically) how your appraisals will be used, your carrier has no idea whether any claims may or may not be barred from coverage. There is really no way I could answer your question about coverage.
Whether or not to pass on the assignment is your choice. If you decide to take this one, without further clarification, I think you are exposing yourself, and your company, to unlimited risk.