Risk Mangament and Personal Property Appraising

I am working on an assignment that has me thinking about personal property appraising and risk management.

I believe ASA offers members a program to purchase liability insurance through Marsh Insurance. I also believe ISA is starting to look into liability programs for their members as well. I don’t know for sure if AAA offers a program or not or if they plan to.

There are several ways of dealing with risk.

1. Avoid it. This means possibly passing on jobs where there are disputes or potential for disputes, or any assignment where there is potential for challenge. Avoiding risk works only to a certain extent, but the appraiser may be leaving a lot of money on the table by only taking the risk free assignments. Avoiding risk is a viable option so long as the appraiser performs a risk/reward analysis of the assignment, and decides the risks far outweigh the rewards. But if you are performing a risk/return analysis of each job, you are then managing the risk. The decision is of course how much risk to accept for what reward.

2. Transfer it. Transfer the liability to another entity, such as the client or other intended users. This is where a good initial contract and appraisal cover document come into play with items such as protecting the use of the appraisal and indemnification clauses.

3. Manage it. This involves using the legal system to your advantage, but in doing so you are incurring additional expenses. A good contract attorney to review documents and make sure risk is minimized and/or transferred. Purchase Errors & Omissions Insurance from a major insurance company that will actively defend you in a suit. Analyze and determine a risk/reward ratio.

4. Accept it. Once you accept the risk, you need to deal with it as a professional. Get O&E insurance, hire a lawyer to review documents, transfer risk, and have a fee structure that covers the cost of your risk management program.

5. Ignore it. Hope it goes away (it wont), or hope that an assignment does not come back and bite you (one eventually will).

6. Leave it. Change your career to one that has less exposure to risk.

I would recommend that all personal property appraisers review their risk exposure on annual basis. Make sure you have accepted the risks and understand that risk is inherent in our profession. Since valuations are typically opinions based upon research and experience, they are often open to debate and challenges. Therefore, look into an O/E policy, consultant legal experts, analyze your assignments and have a fee structure which takes risk into account, and review your contracts and documents. Above all, don’t fret and worry about risk, first asses and evaluate the risk, then manage the risk. You'll sleep better for it.