Legal & Ethical Considerations in Appraisal Flashcards

In a total loss situation, the insurer's duty to act in good faith requires:

Answer: Prompt and fair investigation and settlement based on actual vehicle value

The implied covenant of good faith and fair dealing requires insurers to conduct a prompt, thorough investigation and offer fair compensation based on actual loss.

A state-licensed vehicle appraiser operates across state lines in a neighboring state without that state's license. This practice is:

Answer: A violation of the neighboring state's licensing laws

Vehicle appraisal licensing is state-specific, and practicing in a state where you are not licensed violates that state's professional licensing statutes.

During arbitration of a disputed vehicle value, an appraiser serving as an umpire must:

Answer: Remain impartial and base decisions solely on evidence presented

An umpire in appraisal arbitration must be neutral and base their determination on the evidence and merits, not on who selected or pays them.

What is 'steering' in the context of automotive damage repair, and why is it unethical?

Answer: Directing vehicles to specific repair shops for personal financial gain, violating consumer choice

Steering occurs when adjusters or appraisers improperly direct claimants to preferred shops for kickbacks or cost-reduction purposes, violating consumer rights and ethics codes.

Which element is NOT required for a valid appraisal contract to be enforceable?

Answer: A notarized signature

Notarization is not a standard requirement for an appraisal contract; valid contracts require offer, acceptance, consideration, and mutual assent.

An appraiser is subpoenaed to testify in a lawsuit involving a vehicle they appraised. Regarding their work file, the appraiser should:

Answer: Retain all records and comply with the legal process

Appraisers must comply with lawful subpoenas and preserve work files; destroying records after receiving a subpoena constitutes obstruction of justice.

The doctrine of 'privity of contract' traditionally limited appraiser liability to:

Answer: Only the parties directly named in the appraisal agreement

Under traditional privity doctrine, appraisers were only liable to the contracting parties; however, modern negligent misrepresentation theory has expanded this in many jurisdictions.