A Louisiana appellate court has held that a real estate licensee professional liability insurance policy does not provide coverage for services performed by a nonlicensed employee. Specialized Commercial Lending, Inc. v. Murphy-Blossman Appraisal Services, L.L.C., 2007 WL 3246074 (La. Ct. App. Nov. 2, 2007). A real estate appraisal company was hired to inspect construction progress and to submit written verification that certain construction phases had been completed as a condition precedent to the release of construction loan disbursements. The office manager failed to inspect the correct properties and certified that certain lots that were actually vacant and undeveloped had reached sufficient construction phases to warrant the release of additional funds. The real estate appraisal company was sued for breach of contract and sought coverage under a real estate licensee professional liability insurance policy.
The appellate court determined that there was no coverage under the policy, which covered "all sums which the insured shall become legally obligated to pay as 'damages' because of a 'wrongful act' in the rendering or failure to render 'real estate services.'" "Real estate services" was defined as, inter alia, services performed or advice given while appraising real estate "when such services are conducted by a licensed or certified real estate appraiser." The court reasoned that the negligent office manager employee was not a licensed or certified real estate appraiser when she appraised and certified the lots. Accordingly, the court ruled that there was no coverage under the policy for her actions. Additionally, the court held that, although the insured negligently failed properly to train and supervise the employee, such failure did not fall within the definition of "real estate services" as defined in the policy, but rather fell "within a general administrative or managerial type function, traditionally insured under general liability insurance."