Real Estate Agent Errors and Omissions Insurance (E&O)

E&O insurance protects real estate agents in case of lawsuits

For sale sign in front of home
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No matter how carefully you perform your job, lawsuits can be filed against you, even those that may be unfounded or frivolous. Legal expenses must be paid no matter who wins in court, and those costs can be devastating to your finances. Errors and omissions insurance, E&O for short, is the name used to describe a type of malpractice insurance coverage for real estate professionals

When you have E&O insurance coverage, the insurance company defends the claim and pays any settlement or judgment against you up to the limits of liability stated in the policy.

 The coverage protects real estate professionals against financial losses from lawsuits filed as a result of their work in the real estate profession. 

Many real estate brokers sell E&O insurance to their sales agents as part of a larger package of services provided to the agent for a flat fee. As such, agents don't always know or think about the particulars of this important insurance policy. Here are some basics about E&O insurance coverage.

Typical E&O Coverage

  • Pays claims that come about due to error, omission, or negligence related to your duties as a real estate agent.
  • Pays claims that are made during the policy period.

Common E&O Exclusions

  • Claims resulting in 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.

E&O Liability Limits

  • Varies depending on your policy. Ask the agent to explain your options.

    Deductibles

    In insurance, a deductible is the amount of money you must pay before the insurance coverage kicks in. Some E&O policies have two deductibles.There might be one deductible for defense costs and another for payment of damages if you are found to be at fault.

    Protecting Yourself

    If a person files a lawsuit against you, chances are that person will also file a complaint with your state real estate commission.

    As a general practice and to protect yourself in the event of a lawsuit:

    • Keep accurate records of all transactions and interactions with clients. For example, some agents keep electronic or handwritten journals that document client names, dates of interactions and topics of conversation.
    • When you take phone calls from clients, have a notepad handy and take detailed notes as you talk.
    • Note the client responses to things like your lender, home inspector and home warranty recommendations.

    As a real estate professional, you should feel comfortable asking your clients to sign statements that you recommended -- and they agreed to -- specific actions. For example, the buyer who declines a home inspection may come knocking on your door if the air conditioning breaks down the day she moves into the home you sold her. If your files contain the signed waiver showing that you recommended a home inspection and she declined, you're covered appropriately.

    Document as many facts as possible during your real estate transactions. It could help you down the road if your client becomes unhappy about some aspect of a sale.