Although real estate appraisers seldom lose in court when a homeowner sues them, it’s still a good idea to have appraiser e&o insurance as a protection against any losses that might occur. The errors and omissions insurance protects the appraiser in the event that something does fall through the cracks in the course of an appraisal, although its frequency in the real world is rare.
People who buy homes and suffer disappointment afterwards because of falling values or becoming disenchanted with the home itself may opt to blame someone for their purchase, stating that they bought without full disclosure from all the agencies involved, including the real estate agent, the appraiser and the lender. Less frequently, the homeowner does have a reasonable complaint, and when an appraiser used normally reliable data from trusted or licensed agencies to complete an appraisal, the appraiser is vulnerable for legal action.

Having insurance for appraisers takes the edge off a lawsuit, and while it won’t fix a liability issue, at least it removes most of the financial burden from the appraiser. In fact, not only are appraisers liable from homeowners, mortgage lenders can pursue appraisers under the guise of inflated appraisals. The recent collapse of the residential real estate market left lenders in a weak position because of falling home values and upside down borrowers. When an appraiser has errors and omissions insurance, she can turn to the insurance policy to protect her against actions from lenders or even the FDIC, who can also initiate a claim against an appraiser.

When the housing market is good, everyone wins and insurance for appraisers is something good to have, although may be nothing more than a tax deduction. However, when the markets are as weak as they currently are, errors and omissions insurance is a necessity for appraisers.