Appraisers liability insurance

in Germany

на по-русски


15. Sept. 2006
Baumeister UWE TYCHSEN, Sachverständiger für Hochbau und Wertermittlung
Mitglied des Verbandes der Bausachverständigen Deutschlands e.V. VBD
Postfach 1140, D-23730 Neustadt in Holstein

1. Kinds of liability insurance

Professional liability insurance for the duration of his/her certification.

Professional liability insurance (inheritable) for 30 years after his/her activities end.

The risk to stand liable for loss of customer’s assets sufficiently included.

The risk to stand liable for loss of third parties assets is usually included.

2. Must?

[01] The Chamber of Industry and Commerce claims:

The expert must take over a professional liability insurance in sufficient amount. It shall be large enough in accordance to his/her job performance or the average figure of his/her valuations. In cases of collective partnership the insurance policy has to cover the common risk.

[02] The Standards for the Certification of Property valuation experts ( IfS-Zert in Koeln) say in the points:

8.10.1 the expert must assume full responsibility for the correctness and completeness of his/her services. Limitation of liability and exemption from liability is only permitted for cases of simple negligence in the form of individual contractual agreements.

8.10.2 the expert assumes full responsibility for the use of his/her staff. He/ she must therefore select, initiate, instruct and train them carefully with due regard to their technical competence and personal reliability. The manner, content and extent to which he/she assumes the duty to supervise and instruct the auxiliary staff will depend on the individual case and the degree of their knowledge and experience as well as on the circumstances and the difficulties of the actual commission.

8.10.3 to cover this liability risk the expert must take over a professional liability insurance
to an appropriate extent and maintain said insurance for the duration of his/ her certification. In the case of an expert in an employment relationship an appropriate liability insurance of the employer will be sufficient.

3. Acceptation by financial institutions

Financial Institutions like Mortgage Banks or others accept normally an appraiser, who is

- public certified by an Chamber of Industry and Commerce or

- certified by hypZERT (DIN EN 45013) or

- in person checked by the bank in accordance to the rules above.

4. Are insurance companies willing?

There are Insurance companies enough to take over the Professional liability insurance for appraisers. There are cases of termination by the insurance company after their reorganisation or after the expert had one large or more cases of damages and claims for the company’s money. There is more and better competition between insurance companies after we got the ECC.

5. What are the preconditions?

5.1 Requirements of banks in appraisers qualification

The banks require the same things like the Chambers of Industry and Commerce or the Sector Committee Certification of property valuation experts do, if they have to certify an expert. Those are:

[01] Technical aptitude. Experts must have above-average technical knowledge and practical experience in his/her certification scope and he/she must be able to apply these capacities in an understandable and substantiated manner with the intention of bringing about a result. He/ she has to proof his/her special expertise in a test procedure determined by the certification body. The procedures of the sector committee or the standardising bodies have to be observed.

[02] Personal aptitude. The expert must be personally reliable. This requires in particular that he/she lives under sound financial circumstances, he/she has no previous convictions, and he/she guarantees to satisfy his/her duties in accordance with the certification conditions. In the case of an expert in an employment relationship, he/she submits a confirmation from his/her employer that he/she can work on his own responsibility, is not bound by instructions and can perform his/her work in person; in particular he/she must be conceded the right to sign in accordance to [07]. He/ she disposes of the requisite equipment to do his/her work properly.

[03] Conscientiousness. Every order must be executed with the due care of a proper expert under consideration of the current state of the art and experience. The expert must determine carefully the actual basis of his statements. The appraisals must be structured systematically, divided in a clear manner, substantiated in an understandable manner and be concentrated on the essentials. If several solutions seriously come into consideration to answer the question posed, the expert must present these and weigh up the degree of probability between them. If there exist minimum requirements for experts’ performances in his/her certification scope he/she must use them.

[04] Independence. In the rendering of services and the performance of contracts awarded to him/her the expert may not be exposed to any form of influence which may impair his/her actual statements, assessments and conclusions in such a manner that the required objectivity and credibility of his/her statements is no longer guaranteed. In particular, the expert must ensure that he/she renders his/her services irrespective of contractual value or business relationships to individual clients (economic independence) and wishes of the client as to outcome (personal independence).

[05] Impartiality. The expert must provide his/her services in such a way that he/ she is not exposed to the reproach of partiality neither in court proceedings nor in the case of a private commission. He/ she must maintain strict neutrality when drawing up his/her appraisal, must answer the questions posed objectively and impartially. In court proceedings he/she may be neither related nor related by marriage to the parties involved in the proceedings and in the case of a private commission he/she may be neither related nor related by marriage to his/her clients. He/ she must notify his/her client forthwith of any circumstances, which justify a suspicion of his/her impartiality.

[06] Independence from instructions. The expert is prohibited from taking instructions that could falsify the result of his/her work as an expert.

[07] Personal satisfaction of duties. The expert must provide the expert services demanded of him/her in person, applying the expertise for which he/ she is recognised.  For courts the expert may only employ auxiliary staff for the preparation of the appraisal and in general only to the extent that he/ she is able to correctly supervise their work; the extent of work performed by the auxiliary employees must be specified in the appraisal. The expert may only sign by himself/herself the appraisals drawn up in this way by him/her; therefore, nor the signature of the auxiliary staff neither that of his/her employer may be put on the appraisal.


5.2 When professional liability

Professional liability insurance of appraisers will be required in all cases. Ordinary it's secured through the public certification. If the appraiser isn't certified, the bank will check this requirement too.

5.3 The usual required sum

The crucial point is the insurance amount for loss of customer’s assets. It's starts by € 250.000 and is normally not higher and € 2.500.000 with a premium p.a. from app. € 250 to € 5.000. As percentage of sales appr. 1%, of income appr. 0,4%.
It can be cheaper if there come no damages in several years. It can be cheaper too, if for cases of occur is an amount of self-portion.

I have no data or own experience about a usual required sum. I think, banks are looking first for the experts trustworthiness and personal integrity, second for his/ her professional competence and than perhaps for other things like insurance and so on.

6. Case of occurs

[01] What can take place as claim of liability: Damage to any person, damages to tangible assets of anybody or loss of customers or other affected person’s assets.

[02] It can be in cause of handling against law or in cause of contract with the customer. As legal expert in first item only.

[03] Three conditions must exist: 1. The expert opinion must be objectively incorrect. 2. It must be the expert’s duty responsibility. 3. It must be a damage, a shortcoming in the customers or implicated others fortune.

[04] The law allows only a certain amount of time for someone to claim damages. In this cases of loss of customers or other affected persons assets there are thirty years limitations.

[05] It can be beneficial for the expert to have disclaimer of liability in his contract. It is possible to have an exemption in cases of simple negligence. In cases of gross negligence a contract can mark limits of the amount of damages and of the thirty years (perhaps down to five years). It must be suitable to the commission and not be in contravention to the Unfair Contract Terms Act. (Now paragraph 305 and following in the German Civil Code).

[06] The expert opinion is giving protection to other implicated persons. The expert is responsible for third-party use too, to make his/ her expertise in a proper kind and free of faults.


6.1 My experience in cases of liability to a bank

I am thirty-three years in work as appraiser and I have had up to now no problems with claims of liability from a financial institution. All colleagues I was asking about that said the same. But there are several judgements and publications and all the experts are carefully so good as they can.

I think professional customers try to solve such problems most already by selection and if it occurs by changing to an other appraiser.

What's happening, that other persons (not the customer) are claiming damages. I had in the last years two cases, where my insurance company has to go to the court for rejecting it. It makes some trouble, but the professional liability insurance company pays all costs. If I had lost the lawsuit, they had to pay their part of the damages too -  besides the amount of my self-portion.


7. Publications

[01] Uwe Tychsen: what it means, to be
     a publicly certified and sworn expert

[02] Dr. Peter Bleutge: Die Haftung
     des Sachverstaendigen fuer fehlerhafte Gutachten  ISBN 3-928 528- 13- 5

[03] Current judgement by the German Bundesgerichtshof

[04] Judgement by the Supreme Court in London

© 2006 UweTychsen    Last update 2006-october-20