COMPETENCY RULE or SCOPE OF WORK RULE: Which Rule Rules? (part 2 of 2)
(by William M. Novotny, AQB Certified USPAP Instructor. This is the second part of a two-part article focusing on the generalist appraiser and the issue of competency. For Part One, go here.)
This article builds upon the competency issues developed and discussed in Part One, and it explores those issues further by means of two hypothetical appraisal assignments performed by John Morgan, a hypothetical, experienced generalist personal property appraiser. In these two mini-case studies John must deal with critical competency issues for an insurance total loss appraisal assignment and for a separate equitable distribution appraisal assignment.
Hypothetical Insurance Assignment: A Competency Disclosure or a Scope of Work Disclosure?
In this hypothetical insurance assignment fictional appraiser John Morgan was contacted by Rachel Barnes, a senior insurance adjuster, to appraise some items of personal property involved in a fire loss claim.
The insured in this case owns specialized items of personal property including some antique furniture, decorative art, a Japanese folding screen (Byobu) and a very large HO brass scale model train collection with an extensive tabletop model train layout. John Morgan is asked to appraise the property that suffered damage as a result of exposure to fire, smoke and water, and by subsequent asbestos contamination caused by a remediation crew removing drywall and accidentally distributing asbestos-laden insulation.
The claimed items were a total loss and are covered under a standard homeowner’s replacement value insurance policy. According to the policy, in case of total loss appreciating items of property are covered up front at their replacement value, but for depreciating property the insured is only entitled to the item’s actual cash value up front until such time as the property is actually replaced and a purchase receipt is submitted. At that time the insured is paid the difference between actual cash value and the actual replacement cost.
John has handled similar assignments for this client, adjuster Rachel Barnes, in the past. The client again came to John because of his demonstrated knowledge and experience with many different property types. But upon examining the damage claim, John recognizes two properties which may present competency issues: the model train and the Byobu.