Errors and Omissions Insurance for Real Estate Professionals
E&O insurance for real estate professionals is an extremely specialized form of professional liability insurance designed to protect the real estate agent and the brokerage from the risks associated with real estate transactions. These policies are your most important and often most used form of insurance that a real estate agency can invest in. For this reason, it is critical to secure a policy that is aligned with the type of real estate business your agency conducts.
Errors and Omissions insurance for real estate agents can vary drastically from one insurance company to another and it is extremely important to have an expert in real estate E&O as your trusted insurance guide to ensure you have the Right Coverage at the Right Price.
At PBI Group, we work hard to balance the cost of insurance with the protection it must provide by giving you access to one of the strongest policies on the market.
What Is Errors and Omissions Insurance in Real Estate?
All professional services have their own form of E&O insurance to protect them from any errors or mistakes that may arise from conducting business with their clients. Real Estate professionals, like other service professionals for example:. Accountants, Lawyers, Doctors, Architects, etc, have their own specific risks that relate to their industry and business.
Real Estate is a fast-paced, often risky business with high value transactions that are complicated and filled with emotionally invested clients. Trust is the cornerstone of a real estate agent’s relationship with their client and if that trust is broken for any reason, it could lead to an E&O claim. Errors and Omissions insurance real estate claims can be filed against a real estate agent for almost any mistake (real or perceived) or omission that a client feels harmed their transaction. When that time comes, it is important to have the best policy available to protect yourself and your company.
What does errors and omissions insurance cover in real estate?
E&O Insurance covers any person (employee or independent contractor) performing real estate services on behalf of the named insured entity listed on the insurance policy. PBI Group’s firm-wide insurance policies are written for the business entity that owns the real estate brokerage who can have numerous real estate agents or brokers performing transactions on the company’s behalf. The insurance company does not distinguish between real estate agents or real estate brokers; for the purpose of the insurance coverage, both are considered a real estate professional.
At the most basic level, the coverage provided by errors and omissions insurance handles defense costs, legal costs, and court costs related to a claim. The insurance company is obligated to pay for expenses to defend the claim and any monetary settlements which may arise when dealing with the claim (minus the deductible).
What scenarios are covered vs not covered by the insurance policy are too many to list; however, some examples of topics that a reputable E&O insurance company provides coverage for are: Fair Housing, Property Damage, Failure to advise previous water or flood damage, Subpoena response, Permit issue, Pollution, HOA issues, Listing property incorrectly (e.g. Sewer, Water, Square Footage, Easements and Open house incidents, to name a few). As you can imagine, the coverages are extremely detailed and nuanced with their interruption a matter of law. This is why selecting the right protection requires a real estate E&O expert to guide you through the policy to ensure the coverages are configured properly and the insurance company will step up when you need them the most.
PBI Group’s insurance program – with exclusive access to Arch Insurance, a New York indemnity company – provides our clients with one of the strongest policies available for real estate agents.
Our term coverage and extended reporting period policies are underwritten with care and precision to provide the Right Coverage at the Right Price. Various policy terms are available, such as per occurrence and aggregate policy limits, deductibles waivers, defense inside the limits and defense outside the limits, as well as endorsements for specific liability. As a real estate professional, you work hard to provide quality services to your clients, and PBI Group does the same to protect your firm and agents with the best coverage available in this ever-changing world.
Common Mistakes that can lead to E&O claims against you
When an agent or broker lists a property for sale, both they and their company are taking a risk. The same can be said for the business of buying, leasing, property management, vacation rental,etc. All of the services that a client benefits from come with risk to your firm. At least ninety percent (90%+) of claims are filed on real estate agents by clients who are buyers or sellers.
It is in your best interest to lower your liability by implementing risk management procedures to reduce the likelihood of an incident that could lead to a claim. Some of the most common mistakes that lead to a claim are related to the property for sale. “Failure to Advise” is the most popular type of claim and is a catch-all term for a sell side agent not listing the property correctly or for the buy side agent not notifying the buyer of flaws, restrictions or obligations that are subject to the property. A strong E&O policy will provide cover for the real estate company when a seller or buyer claims negligence which has impacted the deal.
Real Estate Errors and Omissions Claims Examples
Here are a few examples of E&O claims. For a more comprehensive list of interesting claims worth learning aboutClick on our blog.
Failure to Advise: In the age of Airbnb and other home sharing services, it’s now easier (and more appealing) than ever for homeowners to rent out their property for an additional income. However, no homeowner should assume that they can rent out their property with no strings attached, and no real estate agent should provide information to potential buyers that they cannot guarantee is factual. (Read More)
Dual Agency Claims: In any real estate transaction, if a real estate brokerage collects commissions from both sides of the transaction, there is a significantly higher risk of claims of wrongdoing, including collusion, misrepresentation, or fraud. Whether or not these claims have merit is often immaterial to the legal defense costs; all a claimant has to do is file a lawsuit stating what s/he believes has transpired. (Read More)
Who Needs E&O Insurance for Real Estate?
All agents and brokers should have real estate E&O insurance and most already do for various reasons, most of all because it is required by a franchise, bank or state licensing board. Some states encourage their brokers and agents to purchase their own insurance via a state sponsored portal where they obtain an online quote in just a few minutes. These policies can be convenient to buy, but they are extremely rudimentary and are good for small agencies with fewer than 10 agents. When your business grows beyond 10 agents, PBI Group recommends a firm-wide E&O policy that provides broader protection without gaps in coverage between agents and the brokerage.
Finding the Right Partner
Errors and Omissions insurance for real estate professionals requires an expert trained insurance professional to guide you through the coverage selection process. At PBI Group, we have written over 50,000 real estate E&O policies for thousands of real estate companies throughout the 50 states. Many of these companies you know; they are your peers in your state or part of your franchise network.
PBI Group is founded on the principles of trust, partnership, fanatical service and, most of all one of the strongest E&O policies available. We do what we do because we believe there is a better way to buy professional liability insurance than online portals with cheap premiums and minimalist coverage or insurance agents who just want to sell you any policy. When your E&O policy comes up for review, don’t just accept your renewal quote without finding out the details of your coverage and the benefits that come along with being partners with an E&O expert. Let us know when your policy is expiring, and we will reach out to you to Get Started when the time is right.