Real Estate Agents Insurance Errors and Omissions (E&O)
Real estate agents and property managers are very different and also very similar in the exposures they face. Traditionally, these would be considered two very distinct and separate classes of business. In today's market however, real estate agents are looking to expand revenues and have increasingly become real estate agents who more than dabble in the property managers arena. While real estate agents in the mid-west may have a smaller property management exposure, real estate agents in resort communities and along the coast may seem like property managers who also happen to sell real estate. As properties sit on the market for longer and longer periods of time, a seller may decide to rent a property rather than take a massive loss on his or her investment. As this trend continues, more and more real estate agents are finding the move into the property management arena an easier transition to make.
So what exposures does a real estate agent face? Real estate agents help people through what can be one of the most stressful experiences in life - buying or selling a house. They rely on the expert advice of the trusted real estate professional. The agent is responsible for conveying facts about the house to the perspective buyer, leading to one major issue facing our professional - misrepresentation. Sure an application and spec sheet are available, but what if the information is wrong? What happens when an agent tells a family that they will be in school district "A," but after purchasing the house they are shocked to find out the school zones were reconfigured and they are going to have to send their kids to the school "on the other side of the tracks"?
Another issue facing real estate agents borders on a GL type claim. Most real estate agents E&O programs worth their weight in paper will provide a sub-limit for lock box coverage. These limits can vary from carrier to carrier. Let us help you find the carrier that will provide the limits and enhancements that are right for your client.
What if someone buys a big new beautiful home only to discover that their house is sitting on a toxic mess? Now you may be thinking, as everyone does until it happens to them, that this will never happen to my client - he only sells residential homes in a well established neighborhood. A lot of old neighborhoods still sit on septic systems. If an old septic system needs to be torn out because of a ruptured tank, not only does the old tank need to come out, so does any contaminated soil. Then you have to fill in that hole and replace the system. Costs can rise pretty quickly. Our client the real estate agent can find themselves in a situation where they need defense from a claim they never saw coming. Realtors can also face liability for errors in crafting contracts, failure to submit offers on a timely basis, and negligent referrals of other professionals, such as home inspectors, mortgage brokers or appraisers.
What exposures does a property manager face? Property managers face some big exposures that they are often unaware of. Claims can come from both ends of a contract. If they are managing properties for a 3rd party, the property owner can sue them for improper management. This can include things like failure to promote a vacant unit or failure to pay taxes on the property if that is part of the management contract.
Suits can also come from the tenants. This is where the coverage can become a little tricky. At Gaddis, we like to make sure that our clients’ E&O coverage extends to third party discrimination claims (we want to see these claims covered under an E&O policy, not your insurance agents E&O!). Several carriers provide this but not all. Some carriers will provide a separate limit of liability stating that the insured has tenant discrimination coverage. Other carriers will amend the discrimination exclusion so that it does not apply to 3rd parties. Both ways provide the client with the same coverage. Let us help you navigate tricky policy language and decipher what is and isn't going to be covered BEFORE a claim happens.
How much is all this going to cost me? We have programs that start as low as $400 for residential real estate agents and $1,000 for commercial agents depending on geographical location. Please call for pricing in your insured's area.