Real estate is a fast-paced industry involving complex transactions with emotionally invested clients and high stakes for any mistake or miscommunication that leads to financial loss for them or an agency/brokerage, leading to potential lawsuits from clients or customers alike. Errors & Omissions insurance provides professional liability protection. Covering legal fees, court costs and any judgments awarded against your agency provides financial security should one arise against them.
Real estate agents who make errors or omissions can face numerous forms of claims for errors and omissions, including negligence, fraud, misrepresentation and breach of fiduciary duty allegations. Real estate brokers must ensure that they provide clients with accurate and up-to-date information regarding properties they buy or sell – that’s why it is imperative that due diligence be performed on all documentation before providing it to clients.
No matter your best efforts, mistakes do happen despite them. Imagine showing a home to a client and not informing them about an electrical wire exposed on the ceiling that later leads to their injury from falling light fixtures – they might file an E&O claim against you for not disclosing this safety hazard!
Real estate can be a complex industry, and agents and brokers may make mistakes that cost money in terms of clients’ expectations or industry standards, contract parameters or legalese. Even unjustified lawsuits from clients can cost money for defense costs alone.
E&O insurance may not be mandatory in all states, but is recommended for real estate professionals. While many agencies and brokerages cover the costs for their rank-and-file agents’ E&O coverage, independent brokers typically must purchase it themselves. Cost and coverage will differ between policies; therefore it is wise to compare both when looking for protection for your business. Consider also an E&O policy with fair housing and discrimination coverage as this can be a concern for real estate agents. Furthermore, be sure to confirm whether your firm’s E&O policy covers your activities at open houses and showings as some firms provide shared policies among their agents.