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Real Estate Insurance E&O: Don’t Sell A Home Without It


 Real Estate Insurance E&O Don’t Sell A Home Without ItE&O Insurance Covers Legal Bills and Judgments

A few months ago, we were interviewed for an article that appeared in the Wall Street Journal on why real estate agents should consider purchasing Errors & Omissions Insurance. The WSJ piece discussed a case in which a couple sued a pair of agents because they were allegedly never told about a murder-suicide that took place in the home a year prior to purchasing it. The legal battle took seven years to settle with the state’s highest court eventually exonerating the real estate agents. But during this time, significant legal bills racked up. Fortunately, the real agents had an Errors & Omissions (E&O) insurance policy in place to cover most of the expenses.

As the article points out, however, many real estate agents go without E&O coverage thinking that they won’t be sued. About a dozen states require real estate agents to purchase this insurance, with the rest leaving it up to the agents and brokers to choose for themselves whether they should secure protection in the event of a lawsuit. That’s a big risk – especially in today’s litigious environment and with the high cost of legal representation. Even if you win, as in the case featured in the WSJ article, you could end up drowning in legal bills.

Real Estate E&O insurance, also known as Professional Liability, provides protection against financial losses from lawsuits filed as a result of the real estate transactions you perform on behalf of the buyers and sellers you represent. This coverage is vital to help reduce the costs involved in potential liabilities. A policy can be designed to pay for the defense in a lawsuit, while also paying for judgments or settlements per the policy limits.

What’s more, all real estate professionals should have E&O insurance. As a real estate broker, your E&O insurance can cover your entire firm, including all the sales associates in the office. Additionally, policies are available for other real estate professionals as well as home inspectors, appraisers, auctioneers, mortgage brokers and bankers, property managers, title agents and title abstractors.

Claims against real estate agents typically involve:

  • Failure to disclose material facts
  • Failure to inspect property
  • Breach of contract
  • Failure to recommend a reasonable price
  • Failure to provide documentation or reports
  • Delays in closing transaction
  • Discrimination
  • Libel or slander

It’s important to work with a professional advisor when purchasing Real Estate E&O insurance, as there are different policies on the market.  There are also endorsements and specific enhancements that may make sense for your business and individual practice. You also need to clearly understand how a professional liability policy works. Most are typically issued on a claims-made basis, meaning that for a loss to be covered you must have your policy in force when the alleged incident occurred and have that same policy in force when the lawsuit against your business is filed.

As specialists in E&O insurance for the real estate industry, Axis Insurance Services can review the type of coverage you need. Give us call today at (877) 787-5258 for a review of your policy needs and for a competitive, comprehensive E&O insurance proposal.

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Blogged on: November 24, 2014 by Mike Smith
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