May 26, 2018

5 Tips for Selecting the Right E&O Carrier

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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:

TIP: Although it’s not widely available, it’s possible to get insurance coverage for fair housing claims.

1. Find a specialized agent. To quote E&O insurance coverage effectively, an agent needs specialized knowledge. Be sure your insurance company has an expertise in both real estate and malpractice insurance.

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 you.

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. If a listing salesperson deliberately fails to disclose important property information without the brokerage's knowledge, the company would be an innocent party. It  would want coverage for such a claim.

Adapted from “Errors, Omissions, and Lawsuits, Oh My!,” Guy Chipman, Texas REALTOR®, Texas Association of REALTORS®, February 1996

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