Mysterious “Notice of Claim”

This post is for appraisers who have received a document entitled “Notice of Claim — Appraiser” relating to lawsuits filed by the FDIC (see example below).

We have received multiple reports from appraisers and defense counsel about the mysterious “Notice of Claim.” The notices are so far nearly identical and state that the FDIC has filed a lawsuit for damages against one of two AMCS (either CoreLogic-eAppraiseIT or LSI Appraisal) based on one or more of the recipient appraiser’s appraisals and that the appraiser may be the subject of claims for negligence by one of those AMCs or by another party. The notices further direct the appraiser to report the notice to his or her E&O insurance carrier. The notices then attach the first page of a lawsuit complaint filed by the FDIC, a list of appraisers who are identified as having provided allegedly negligent appraisals in that lawsuit, and a “key” to the alleged appraisal deficiencies (these two documents come from the lawsuit complaints filed in court as well). The notices do not identify who is sending them.

If you’ve received one of these notices, please read on below. For a general update on FDIC appraiser claims, others may want to read: “An Update on FDIC Claims Relating to Appraisals.”

Notice of Claim Appraiser


Based on having seen several of the notices and based on my knowledge of the FDIC’s lawsuits mentioned in the notices, it is true that the appraisers who have received the notices provided appraisals that are the subject of the FDIC’s lawsuit against the AMC mentioned in each notice. The appraisers receiving the notices are not named as defendants in those cases, but they are identified by name as having provided negligent appraisals. The list of appraisers attached to each notice is the list of appraisers identified by the FDIC as negligent and is the same list attached to the FDIC’s complaints in each case. Based on recent documents filed in the cases, I do believe that appraisers receiving the notices may well receive subpoenas for depositions or documents involving their appraisals, but I do not think they will be sued by the FDIC because the time has passed for the FDIC to do that. Also based on the court documents, I do not think the appraisers will get dragged into those specific cases as counter-defendants. However, the notices hint at possible future claims against the appraisers by the AMCs or other parties. That is the real risk at issue. At this time, however, I cannot offer our thoughts about who is sending the notices or the purposes they serve.

With respect to whether an appraiser should report the notice to his or her E&O insurance carrier, my view is that an appraiser should do so for his or her own protection. There are two reasons I feel an appraiser should report the notice. First, reporting the notice is the appraiser’s honest course of action.

Second, if the appraiser does not report the notice or fails to disclose it on a renewal application, it’s possible the appraiser’s present insurance carrier might not cover a claim that actually arises later in connection with the issue in the notice. Reporting the notice now will put the carrier “on notice” of the potential claim and assure coverage in the future to the extent that coverage applies under the appraiser’s present policy. In addition, I have observed that two popular insurance carriers for appraisers frequently use an appraiser’s failure to report something such as a threatening notice or letter as a reason to deny other subequent claims about unrelated subjects by rescinding the appraiser’s policy. (I’m not referring to LIA’s program or all other appraiser E&O programs.) The downside with reporting something like this is that those same carriers (again, I’m not referring to LIA’s program or all other programs) may then choose not to renew the appraiser’s policy based on their underwriting rules. However, on balance, I think the risk of the consequences that may result from not reporting it are far worse than the possibility of non-renewal because failing to report the notice risks eviscerating the benefit of the appraiser’s insurance coverage.

Peter Christensen
Peter Christensen

Peter Christensen

Peter Christensen is an attorney, licensed in California and Washington. His legal practice primarily serves the real estate valuation community - Valuation Legal. He's the author of Risk Management for Real Estate Appraisers and Appraisal Firms, published by the Appraisal Institute.

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Mysterious “Notice of Claim”

by Peter Christensen time to read: 3 min