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Real Estate Errors and Omissions (E&O)

The typical E&O lawsuit against real estate agents amounts to $44,000 in legal costs alone

The demanding and fast-paced nature of the real estate industry can give rise to errors, often resulting in costly legal fees and settlements. The typical E&O lawsuit brought against real estate agents amounts to approximately $44,000 in legal costs alone, with settlements averaging much higher.

Thirteen states require agents to purchase individual insurance policies as their firms’ coverage can leave professionals exposed to significant losses due to shared limits. Even agents in states that do not have this mandate should have their own policies to ensure they are properly covered.

Real Estate Errors & Omissions Coverage is designed to protect your clients from unexpected litigation costs stemming from their business activities.

Coverage Details and Features

  • Claims-made and reported, duty to defend policy forms with admitted and non-admitted capabilities on “A” rated paper
  • Broad definition of Insured including – Independent contractors, spouses
  • Policies can be tailored to include coverage for sale of owned residential/commercial properties and leasing/property management of owned properties
  • Comprehensive policies including coverage for:
    • Pollution Coverage (including fungi and bacteria) – failure to disclose
    • Third-party / Fair Housing discrimination
    • Lock-Box Coverage applies to bodily injury & property damage
    • Open House Coverage applies to bodily injury & property damage
    • Personal injury coverage
    • Network information and security offense
    • FHA/OSHA/ADA regulatory coverage
  • Coverage for punitive damages, where insurable by most favorable applicable jurisdiction
  • Choice of Counsel (with approval)
  • Innocent Insured language
  • Defense of licensing proceedings and subpoena assistance
  • Lost earnings at attendance of trial/hearing
  • Mediation and Deductible credits included in most base forms
  • Free risk management and loss prevention services including contract review services

Target Classes

(including but not limited to)

  • Real Estate Agents/Brokers and Leasing Agents
  • Property Managers (owned and non-owned)
  • Broker price opinions (BPO’s)
  • Short term escrow agents
  • Real estate auctioneers
  • Real estate consultants/counselors
  • Referral agents

Questions to Ask

What services do you perform?
The services that real estate agents perform can vary from by state and agency, with each service having its own potential for claims. An agent acting as a mortgage broker, for example, must collect all documents for the client to begin the loan process and find a lender to do the loan. A buyer might be unhappy with the loan officer or feel he is paying too high an interest rate and file suit. If the agent does property management and rents to an objectionable tenant, or sells a house and the buyer insists information was withheld, the real estate agent can be at the wrong end of a lawsuit. Performance of any services carries risk, especially where large amounts of money are concerned.
What are your coverage needs?
Beyond determining how much risk the real estate agency can comfortably handle, the insurance agent also needs to know about any contractual insurance obligations that must be met. An agent who is part of a franchise, for example, may need $1 million limits for E&O and perhaps coverage for discrimination claims. A client working with a builder to sell new-home construction might need $2 million per claim/$2 million aggregate limits. Every contract is different, and the insurance agent needs to know about coverage obligations right from the start.
Do you already have coverage in place? When does it expire? Why are you looking now for coverage?
When the cost of errors & omissions (E&O) coverage is high, clients sometimes have buyers’ remorse. A few months into a policy, they may contact another insurance agent for a better deal, then attempt to cancel the first policy. Shopping a midterm change can be an expensive and disruptive practice for insurance agents and brokers since many reputable markets will refuse to write a claims-made policy while another is still in force. In such cases, it is usually best to wait until renewal. Sometimes, though, a real estate agency enters into a new contract that has with coverage requirements its current insurer can’t meet, so it must find the coverage quickly. By understanding and explaining the material reason for a midterm renewal, an agent is much more likely to get a client a good midterm placement.
Are you working with another agent to get a quote for errors & omissions coverage?
In segments of the real estate industry, it may be routine for several agents to try to sell the same piece of property at the same time, but in the world of complex liability insurance, there is a decided disadvantage to the client to have several agents shopping the same piece of business. In most cases, a carrier will consider a piece of real estate E&O business just once. That means if the first insurance agent or broker fails to effectively explain the risk causing underwriters to reject the business or provide a very high quote, that market is blocked. Another, more savvy insurance broker, has no chance to use their expertise and relationships to make a better case for the client.
What does your agency do to keep your sales agents up-to-date on changes in your industry?
A good program of risk management can limit claims and improve a risk’s profile. One successful real estate agency holds mandatory monthly in-house seminars on topics like market changes, legal changes and handling risky transactions. It also encourages Realtors to take continuing-education classes.

At Burns & Wilcox our expertise becomes your expertise. Our marketing materials are designed to help you give your clients what they want to hear – yes to almost any hard-to-place-risk.


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