Lawsuits filed against real estate agents are not uncommon, regardless of how careful the agent is at performing their job. The unfounded lawsuits still cause legal expenses that must be paid no matter who wins in court, which can become financially devastating for an agent. No matter the degree of their expertise, real estate agents need to know about the kinds of protections available to them.
Errors and omissions insurance, also called E&O for short—is insurance coverage that can assist real estate professionals. It will cover the costs of claims regarding errors, omissions, or negligence related to an agent’s duties. The coverage will pay all the settlement or judgment costs that are posed against the agent up to the liability limits stated in the policy.
Coverage Provided by Brokerages
Many real estate brokers offer E&O insurance to their agents as a component of their larger package of services for a flat fee. Agents do not always consider this critical insurance policy’s specifics, even if they know they have the coverage.
Sometimes this coverage is even required by law to receive and maintain a real estate license. Realtors often have little to no say regarding the terms of the policy provided by the brokerage. This coverage is typically shared by all agents associated with the firm.
Common E&O Exclusions
There are certain exclusions for this insurance policy that explicitly states the company will not cover certain events.
Common exclusions in E&O coverage include:
- Claims that are due to dishonesty or criminal acts by an agent
- Claims associated with a polluted property
- Claims that arise due to an agent causing bodily harm or death to another person
- Claims arising from damage caused by an agent to someone’s property
E&O Insurance Deductibles
Agents will need to pay a deductible toward a claim before the insurance coverage kicks in. It is common for E&O policies to have two payment factors. There could be one deductible for defense costs and another for payment of damages if they are indeed found guilty.
No deductible is sometimes offered for real estate E&O packages if the agent maintains a complete file with documents required by the brokerage and the law. If the agent is not able to provide complete documents when closing, then this method could backfire
Protection Where it Counts
Real estate businesses must understand their risks in a litigious society. Clients are sometimes quick to file complaints, especially regarding the real estate commission.
It is in your best interest to keep all records up to date of all transactions and interactions. If issues do arise, this information can significantly help your defense. Consider supporting electronic or handwritten journals to document client names, dates of interactions, and conversation memos. You could find it very beneficial to be consistent with taking detailed notes throughout conversations with clients. Record client responses and lender statements, along with the home inspector and any home warranty recommendations. You may want to ask clients to sign documents stating specific actions you recommended and if the client agreed or did not agree with the recommendations.
Document as many facts as possible during real estate transactions to protect yourself if a client is ultimately unsatisfied with any aspect of the sale. You can even keep records of text messages and emails. When all else fails, E&O coverage will defend the claim, and the more facts you can hand over about the case, the better.
iPro Agency is a specialty insurance brokerage with the expertise to protect your firm, assets and to help you retain clients. Our services offer all types of professionals the protection they need so they can stay committed to their work with ease. We are connected with leading insurers to bring you the best coverage for your unique needs and areas of risk. Get in touch with us at 888- 673-8039 so we can begin to safeguard your success.