Appraisers liability insurance
in Germany
BALTIC VALUATION CONFERENCE in St.Petersburg
15. Sept. 2006
Dipl.-Ing. Baumeister UWE TYCHSEN, Sachverständiger für Hochbau und
Wertermittlung
Mitglied des Verbandes der Bausachverständigen Deutschlands e.V. VBD
Postfach 1140, D-23730 Neustadt in Holstein
tychsen@t-online.de
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 http://tychsen.bei.t-online.de/engl/expert.htm
[02] Dr. Peter Bleutge: Die Haftung
des Sachverstaendigen fuer
fehlerhafte Gutachten ISBN 3-928 528-
13- 5
[03] Current judgement by the German
Bundesgerichtshof http://www.bundesgerichtshof.de
[04] Judgement by the Supreme Court in London http://search.hmcourts-service.gov.uk
© 2006 UweTychsen Last update
2006-october-20 tychsen@t-online.de