Claim Alerts

Expert Witness Or Fact Witness? (part one)

Claim Alert Part 1: Fact Witness

We have recently received several inquiries from appraisers that raise concerns. In general, the appraisers do not understand the difference between being a “fact” witness and being an “expert” witness. They are unsure of who the client is, what they might be obligated to do, or who will pay them for their services.

Just the facts, please....

A “fact” witness testifies about first-hand and personal knowledge: what they did, heard, said, or saw. An appraiser would be called as a fact witness because an appraisal he, or she, prepared might be relevant in a pending case. These factual questions may include:

• Who retained the appraiser?
• What instructions they were given in connection with the assignment?
• Whom did they speak to about the property?
• What they were given, or told about, during the inspection?
• What fee were they paid to complete the assignment?
• What did they observe, or did not observe, during the inspection?
• If a copy of the appraisal shown to them, is a true and correct copy of the report they prepared and submitted to their client?

Fact witnesses are typically not paid for their time. They may be obligated (subpoena) to testify because they have personal knowledge that could be relevant to issues in a case.

Depending on the amount of time that has passed between the time of the appraisal and the time of the testimony, a fact witness might have to say he or she does not recall certain facts or details. Testimony must be given under oath. As long as the answer to any question is a truthful answer, there is no such thing as a “good” or a “bad” answer. In most cases, a fact witness should not be asked for, nor should they testify regarding their opinions.

For example, the appraiser acting as a fact witness might be asked if he recalls observing any evidence of a roof leak, or evidence of a prior leak during the inspection. Did he recall seeing anything like a water spot on any ceilings? Is it his custom and practice to inspect every room in a home? Does he have any reason to think he did not inspect every room of the subject dwelling?

Those are examples of appropriate questions to be asked of a fact witness.

A fact witness should not be asked to respond to a hypothetical question. An example would be: “What if you were told that the buyer received an estimate of $20,000 to repair significant roof damage...would that have impacted your value opinion? In what way?”

Those are not questions a fact witness could answer. It goes beyond his or her “personal” knowledge. It would require the witness to perform additional research and investigation. It is not the kind of question a witness could answer based upon his actions, his observations or his recollections.

An appraiser might be forced to testify due to a subpoena. A subpoena is like a court order. Appraisers are sometimes angry about subpoenas. They argue that producing documents, or attending depositions, takes too much time and it is not fair that they do not get paid a reasonable rate for that time. The complaints might be valid, but that does not change the fact that subpoenas are a part of doing business and the appraiser might face consequences if he or she does not comply with the terms of a subpoena.

---

Appraiser Unprepared: That’s a Fact

An appraiser in NJ was hired to appraise a commercial property in what turned out to be a nasty dispute between 2 heirs, a brother and sister arguing about how to dispose of the family business after their father’s death. The appraiser had prepared a few appraisals of commercial properties, but mostly did residential work, and had never prepared an appraisal in connection with this sort of dispute. The appraiser’s client was the brother who was being sued by his sister. They were both supposed to get appraisals to see if they could resolve their differences.

The insured appraiser was instructed by his client (the brother) that his appraisal had to reflect a property value as of the date the lawsuit was filed. The appraiser was still not really clear about what he was supposed to do, but the client agreed to a fee of $5,000, so the appraiser supposed the assignment was too good to refuse.

The appraisal was completed and sent to the brother’s attorney. The appraised value, as of the date the lawsuit was filed, was $8 million. The lawyer said that the client (the brother) was a bit “disappointed”. He had hoped the appraiser would come in with a value of at least $10 million. The appraiser learned that the sister was offering to buy out the brother so that she could continue to run the business. The sister claimed the property was only worth about $6 million and that was at the heart of the dispute.

Almost a year later, the appraiser was asked to testify at a deposition. He met with the lawyer prior to the deposition and tried to find out what had transpired over the course of the past year. He said the lawyer seemed “rushed” and that he was not able to answer many of the appraiser’s questions.

The appraiser asked if he could look over the sister’s appraisal and the lawyer said he had not seen it “yet”. The deposition was over in a few hours and the appraiser was a little surprised that he had not really been challenged about anything in his report.

A few months later, the appraiser received a “demand” from counsel for the lawyer...who had been sued for negligence by his client, the brother. The appraiser learned that counsel for the sister had filed a motion for summary judgement, which was granted. The motion argued that the only relevant value in the case was the value “as of the date of death.” The sister had submitted her appraisal as of that date, which reflected a value of $6 million.

The brother had no evidence to “challenge” the sister’s value. His appraisal reflected value, but as of the date the lawsuit was filed, and that was irrelevant. The judge agreed. Since the only “proper” evidence of value was the value in the sister’s appraisal, he ruled for the sister and said the brother had to accept $3 million for his share of the property.

The brother sued his lawyer for negligence. He said the lawyer should have known that the appraisal he had was worthless because it did not reflect the value as of the date of death. He said the lawyer’s negligence cost him at least $1 million. The brother was expecting that his sister would have to pay him $4 million, but due to the negligence of the lawyer, he was only paid $3 million. The lawyer’s counsel sent the demand letter to the appraiser saying he was equally at fault for not realizing that his report should have reflected value, as of the date of death.

The appraiser admitted that he really was not qualified to take on the assignment. He had never done any work involving estate and inheritance issues. He knew the attorney was not giving him much guidance, but he told himself that it really didn’t matter. He was upset, and embarrassed, and did not want to be sued.

The insurance carrier hired an expert appraiser who agreed that the value of the property, as of the date of death, was about $6 million. The brother really had no damages. He was paid $3 million, which is what he would have been paid if the insured’s appraisal was correct. His only “damages” were the fees he had paid to litigate against his sister. If he had known that $6 million was a reasonable value estimate, and that $3 million was the most he would be paid, he probably would not have spent almost $100,000 in attorney’s fees to fight.

The E&O carrier for the lawyer settled with the brother and the appraiser was never sued, after all.

Click here to read "Expert Witness Or Fact Witness? (part two)"

Copyright 2019. LIA Administrators and Insurance Services. All rights reserved.

---