E&O Claims and Real Estate Liability Insurance

E&O Claims and Real Estate Liability Insurance

Real estate agents need coverage that protects them against financial losses from lawsuits filed as a result of any work performed in their profession. Errors and omissions coverage, called E&O for short, is the name associated with real estate liability insurance, which describes a type of malpractice insurance carried by most real estate professionals.

As carefully as you may carry out your duties, you may be at risk of a claim. You can even be held liable in a court of law, even from lawsuits without merit. Lawyers must be paid no matter who wins in court, and the legal expenses alone can be devastating to your finances. Fortunately, when you have E&O coverage, the insurance company defends the claim and pays any settlement or judgment against you up to the limits of liability stated in the policy. This is what makes having coverage so essential.

What does a typical E&O policy cover?

Policies can differ from one insurer to the next, so when trying to decide what type of policy you should purchase, you can use these very basic ideas about standard types of coverage. Most E&O policies cover claims that come about due to error, omission, or negligence in regard to your duties as a real estate agent.

Some common E&O exclusions

  • Claims resulting in dishonest or criminal acts by you
  • Claims associated with polluted property
  • Claims against you if you cause bodily harm or death to another person
  • Claims arising from damage you cause to someone’s property

Remember that it’s important to keep accurate records of all transactions. Keep records of all phone conversations that discussed anything pertaining to a sell or purchase. For example, you should note the buyer response to your question about whether or not they wished to purchase home warranty protection. Did a buyer decide not to do a home inspection against your recommendations? Write this down and put it in your file.

It’s not at all uncommon to ask your buyer or seller to sign a statement that you recommended a specific action. If your files contain a signed waiver, you cannot be held responsible for any problem related to the waiver. Document as many facts as possible during your real estate transactions that could help you later if your client becomes unhappy about some aspect of the sale. Having real estate liability insurance is the best protection against mistakes made or groundless accusations.