Claim Alerts

Septic Tanks...Again!!

It may seem like we talk about septic tanks quite frequently, and this is due to the persistent occurrence of claims stemming from septic tank problems. Rural properties often lack connections to public sewers, relying instead on septic tanks for waste management. It's essential for appraisers to dedicate attention to incorporating septic tank-related language into their reports. By doing so, they can provide valuable support when these claims arise, equipping their legal counsel with the necessary information to defend their case effectively.

While there is no magic language that will prevent someone from filing a lawsuit, employing carefully crafted language in the report can make it more difficult for the claimant to pursue the appraiser or to assert they relied on the appraisal report.

In a recent claim we, again, encountered a discovery where there was no septic tank on the property, leaving us to question how this situation remained unnoticed for such an extended period. When the sellers built the home they applied for the necessary permits to dig the septic tank, but it was never completed. Instead, an unconventional decision was made to divert the home's waste through pipes, ultimately depositing it into a nearby river.

The plaintiffs didn't deem a home inspection necessary when they bought the house, given its young age of just 4 years. However, a few months after moving in, they encountered drain blockages, with downstairs drains backing up into the bathtub. They called a plumber, suspecting potential tree root obstructions in the pipes that needed clearing.

Upon inspection, the plumber discovered the unexpected route of waste disposal, prompting the involvement of the Health Department. As a result, the homeowners were compelled to bear the expenses for an urgent rerouting of the pipes and the installation of a temporary holding tank.

Naturally, a lawsuit was initiated, citing the sellers, the real estate agents, and the appraiser, with the claim that none of them disclosed the absence of a septic tank. It's worth noting that if the buyers had chosen to conduct a home inspection before their purchase, this issue might have been uncovered, allowing them to hold the sellers accountable. However, the sellers have since moved to another state.

A motion to dismiss was submitted on behalf of the appraiser. There was caselaw in this State that held the appraiser owed no duty to the borrowers. The Judge addressed that law when ruling on the negligence claim. Additional language within the appraisal report was quoted by the Judge in his written opinion granting the motion.

Public records and MLS showed the home had a septic tank. When the property was appraised, the appraiser had the good sense to include this language:

"The appraiser noted from both MLS and public records that the property has a septic system. The appraiser assumes this information to be correct, but is unable to independently verify the accuracy of the records reviewed...

The appraiser is NOT a home inspector. The appraisal report is not a home inspection and is not meant to take the place of a home inspection. The appraisal does not guarantee that the home is free of defects....

No party, other than the intended user, should rely upon this appraisal for any purpose, whatsoever. The fact that some party, other than the client, paid for the appraisal, either directly, or indirectly, does not make them an intended user..."

After quoting some of the language from the appraisal the Judge stated that the plaintiffs could not possibly argue “in good faith that they relied on the appraisal report to provide them with information about the septic system in place at the subject property.”

We are all still learning how best to utilize and complete the new UAD forms. We encourage appraisers to continue to add disclaimer language in the "Commentary" Sections whenever possible.  In this case, adding language regarding the septic tank to the "Site Commentary" section might be appropriate.

Septic tank related claims continue to plague our insureds. While we cannot prevent the claims from being made nor can we prevent the lawsuits from being filed, the inclusion of our recommended language in your reports might expedite your removal from a case. By persuading the Judge that these claims do not implicate the appraiser, we can potentially assist your legal counsel in a quicker resolution of the matter. ◆