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REALTOR® Emeritus |  | Risk management Insuring Against Risks | | ||
|  Three Lines of Defense Against Risk Keeping Risks Under Control Controlling Transaction Risks Agency Disclosure Avoiding Antitrust Risks Minimizing Liability from Contracts Fair Housing Risks Controlling Personnel Risks Communications Policies to Minimize Risks Insuring Against Risks More Resources: Controlling Business Risks Code of Ethics: Controlling Business Risks | 5 Tips for Selecting the Right E&O Carrier Benefit from these lessons learned by one real estate broker on a quest for E&O coverage. 1. Find a specialized agent. Not every insurance office has an agent who is knowledgeable about this type of insurance. It's a specialized field, and an agent will need expertise in both real estate and malpractice insurance to quote this coverage effectively. 2. Make sure all your services are covered. If the insurer can't cover all of the services your company offers—residential, commercial, property management—it's probably not the right company for your needs. 3. Look carefully at prior-acts coverage. Most E&O policies provide coverage on a claims-made basis rather on an occurrence-basis one. That means they cover only claims made during the life of the policy, regardless of when the alleged injury occurred. Some claims-made policies exclude all prior acts from coverage; some cover acts that occurred within a specified time before the policy was created; and others provide full coverage for prior acts. When changing carriers, be aware of when one policy expires and a new one takes effect to avoid gaps in prior-acts coverage. 4. Consider “tail” protection. If you are changing carriers and full prior-acts coverage is unavailable under the new policy, consider purchasing extended reporting period coverage, or tail protection, from your previous carrier. 5. Be sure your policy offers innocent party protection. Assume that a listing salesperson deliberately fails to disclose important information about a property, but the brokerage doesn't know about his actions. The company would be an innocent party and would want coverage in case of a claim. Adapted from “Errors, Omissions, and Lawsuits, Oh My!,” Guy Chipman, Texas REALTOR®, Texas Association of REALTORS®, February 1996 TIP: Although it’s not widely available, it’s possible to get insurance coverage for fair housing claims. TIP: According to statistics from the NATIONAL ASSOCIATION OF REALTORS®, more than two-thirds of E&O claims involve misrepresentation or failure to disclose information about the condition of a property . TIP: Some states require real estate licensees to carry E&O insurance. To learn more about the E&O coverage offered through the NAR, visit REALTOR.org. 14 E&O Policy Exceptions > | |