Advice for Realtors




What You Need to Know About
Errors & Omissions Insurance


  Errors and Omissions Insurance, (E&O) is a form of malpractice insurance intended for real estate professionals to protect them against financial losses from lawsuits filed as a result of their work in the real estate profession.

  "Regardless of how carefully and meticulously you do your job,' says Dick Plumb, a highly regarded Sarasota Florida real estate agent, "you are at risk of lawsuits, some of which may be unfounded and/or frivolous." The problem is that your expenses for legal representation must be paid regardless of who wins the suit. Those costs can be quite sizable and can cause you financial ruin.

    With Errors and Omissions coverage, your insurance carrier defends the claim and pays any settlement or judgment against you up to the limits of liability of your policy.

    You need to have legal advice as well as the advice of a insurance professional before making any decisions regarding E&O insurance, but we will offer a few points here to help introduce you to the major features and limitations of E&O insurance ocverage:

  • Typically E&O Coverage pays claims that come about due to error, omission, or negligence in regard to your duties as a real estate agent for claimed filed during the term of the policy.
  • E&O insurance generally excludes coverage for claims resulting from:
    • Claims resulting from 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
    • Check with your insurance provider for any other exclusions not listed here
  • Limits of liability depend upon the type and amount of coverage you purchase.
  • Policies may have "deductibles" - an amount of money you must pay yourself before your insurance coverage begins. There may be multiple types and amounts of deductibles for different circumstance and types of claims.

  Let's assume you've decided to buy E&O coverage. Is that all there is to it? -- Hardly !  To defend yourself successfully in the unfortunate event of having a claim filed against you, it is important that, as you conduct your real estate business, you keep an accurate log of all transactions and interactions with each client. Record in your log the date, time and a summary of every conversation and its outcome. For example, if a buyer asked you about whether or not he needed to endure the expense of having a pre-closing home inspection and decided against it in spite of your advice that it was an imprtant protection for him, record that fact along with the time and date of the conversation Document as many facts as possible during each of your real estate transactions.

  You many even want to create "waiver agreements" in concert with your broker and an attorney to cover particularly important topics where the client may choose not to take your advice.

  According to Brian Ward, a Sarasota real estate expert, "errors and omission insurance coverage should probably simply be viewed as a prudent cost of doing business. While you will undoubtedly try your best to avoid problems, sometimes 'things happen' that are beyond your control. You don't want to lose your real estate career over them," she says.

Information and opinions expressed above have been derived from a variety of sources
and are believed to be accurate and timely but are not warranted.


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