Imagine running a successful real estate brokerage business, with hundreds of clients coming through every week. Now imagine, in a rush, one of your associates makes an offer on a property that ends up too low, or advises a client to sell for too little; should any client feel they were wronged by this mistake, they could sue your firm – that’s why it is crucial that each of your associates has E&O coverage in place.

E&O insurance provides real estate brokers and agents with protection in case they’re sued over errors or omissions in their professional services, covering costs such as legal defense fees, court fees and any judgements awarded against their brokerage in case of legal proceedings.

Real estate professionals in 15 states must carry Errors & Omissions insurance (E&O). Brokers in other states, even those not mandating it, should strongly consider E&O coverage to protect themselves and their colleagues from errors or omissions that can prove costly to correct if clients choose to sue over them.

Many brokerages carry a real estate firm errors and omissions policy, which protects all employees, independent contractors, sponsored agents and personal assistants of the brokerage. Policies typically offer limits of $1 million or higher per claim. Some policies even cover personal assistants – however it is wise to check beforehand.

All insurance policies contain exclusions that it’s essential to understand, such as E&O policies not covering bodily injury and property damage claims that should be covered by general liability insurance (GLI). Also, E&O policies typically do not cover transactions involving properties developed or constructed by associates – these should be insured separately under D&O insurance policies.

Costs associated with E&O insurance policies for real estate brokerage firms can differ, depending on factors like firm size and structure, transaction volume handled, type of properties managed and other considerations. Choosing an extensive coverage and limit will have further an effect on total costs.

E&O coverage for real estate brokers is an essential investment, but it’s equally crucial that they review their policy thoroughly to make sure all relevant parties are named insureds and that its terms accurately represent the services offered. Furthermore, any ambiguities should be discussed with your broker and any special circumstances should warrant special consideration or additional coverage. Furthermore, your broker may advise purchasing tail coverage (an annual one-time fee covering Prior Acts for an indefinite period into the future) to prevent gaps in coverage between E&O policies and prior Acts coverage gaps arising between annual payments for E&O policies.