Canadian Underwriter

Real estate E&O cases particularly difficult to defend: lawyer

October 29, 2010   by Canadian Underwriter

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Insuring real estate professionals on a E&O policy is particularly challenging for underwriters because of the vulnerability of appraisers, the fact that plaintiff’s experts are only too willing to testify against their own, and trials are highly emotionally charged and difficult to settle.
Gary Nijman of Alexander Holburn Beaudin & Lang LLP raised these points during The ARC Group of Canada’s 5th Annual Seminar & Cocktail Reception on Oct. 28 in Toronto.
Nijman noted appraisers are particularly easy targets. This is in part because standards and education vary within the profession, and also because of the subjective nature of the appraisal process.
“As long as you get a customer, anyone can appraise real estate,” Nijman said. “Two appraisers acting reasonably can appraise the same piece of property and come to widely differing values, even dramatically different values, and still be considered not negligent.”
Nevertheless, real estate professionals will find themselves under the legal microscope if any fault is to be found in a real estate deal that goes sour.
“Ninety per cent of people have not dotted every ‘i’ and crossed every ‘t,'” Nijman observed. “But when asked about all of the relevant stuff that [real estate professionals] didn’t actually do, people find it embarrassing [to respond].
“And it starts to sway the opinion [of fact finders] sitting at trial. They get a jaded view of this professional, and they question whether in fact he or she followed the standard on the remainder of the rules.”
And these rules are easy to find, Nijman said. Trial lawyers know professional standards are easily obtained on the regulators’ Web sites.
Plaintiff experts, however, are not always easy to find. Nijman observed that plaintiff lawyers typically find it difficult to find expert witnesses to testify in civil actions against professionals, largely because members of a profession tend to “stick together.” He cited medical professionals and lawyers as examples.
Not so much in the cutthroat world of real estate professionals. “They eat their own,” Nijman quipped. “It’s a highly competitive area.”
Because of the “he said/she said” nature of a real estate deal, the profession tends to be a liability magnet.
E&O claims involving real estate professionals are “charged with emotion,” Nijman said. “They involve multiple parties, they can be extraordinarily difficult to settle and they can drag on for a long time. You have to be very, very persistent in pressing these ahead and get them resolved in a cost-effective manner.”