Window to the Law: What You Need to Know About E&O

Window to the Law: What You Need to Know About E&O - Transcript

Hi, I’m Deanne Rymarowicz, Associate Counsel at NAR.

Real estate errors and omissions insurance claims are at the highest levels in 12 years due to increased market activity. As the frequency and severity of claims increase, it’s more important than ever to review your E&O policy to ensure adequate coverage. In this brief video, I’ll cover four key areas to focus on when reviewing your E&O coverage, and provide tips for how you can ensure that you’re sufficiently protected by your E&O insurance.

First, be sure your policy covers your expanded suite of services.  Thanks to the pandemic, the evolution of brokerage services into online and virtual services has accelerated at an unanticipated pace. Over the last year and a half, many brokerages expanded their digital offerings to include tech-driven services such as virtual showings and virtual staging, as well as writing “sight unseen” offers. Other brokerages have expanded even their traditional services, and now offer property management, commercial brokerage, or relocation services. Any time your service offerings change, you need to ensure that your entire portfolio of services is covered by your E&O policy, to avoid a potential claim denial.

Second, check your policy for discrimination coverage. There has been a significant increase in discrimination claims over the past year making this type of coverage even more important.   While many E&O policies do not include coverage for discrimination, a rider or endorsement may be available for an additional premium. 

Third, understand the limits of your cyber coverage. Cybercriminals have been on an Internet crime spree during the pandemic, with more than 790,000 complaints filed with the FBI’s Internet Crime Complaint Center in 2020. Ransomware attacks are up 486% from 2018 to 2020. And, real estate fraud continues to be a top 10 internet crime, with more than $213 million stolen last year. It’s vital that real estate professionals seek coverage for the variety of cyber risks they face, yet not all real estate E&O policies adequately cover these risks. Consult your insurance broker to review the cyber coverage details in your policy, including what’s covered and what the coverage limits are.  Ask your carrier whether the policy covers third party losses, such as when your client loses money as a result of a wire fraud scam; cyber extortion expenses in the event you are the victim of a ransomware attack; expenses related to the loss of personal information, such as credit monitoring; and crisis management services to assess the scope of the issue to ensure your business is back up and running as quickly and smoothly as possible.  Consider whether a separate cyber policy is needed to maximize your cyber coverage or to fill in coverage gaps in your E&O policy.

Finally, be familiar with and check for policy exclusions. Real estate E&O policies often exclude claims related to earnest money errors, bodily injury, environmental issues, and lockbox damage. An endorsement may be available, so talk to your insurance broker if you need coverage for these risks. 

Taking the time now to review your E&O policy can help ensure that you’re prepared and covered should a claim arise. Always remember to report both formal and potential claims to your carrier as soon as you become aware of them to avoid a denial of coverage for an untimely report, and be sure to take full advantage of all of the resources offered by your insurance carrier because avoiding E&O claims in the first place is in everyone’s best interest.  Many carriers offer pre-litigation assistance, trainings, and other risk management tools to help educate brokers and salespersons to avoid costly mistakes.

Thanks for watching this episode of Window to the Law.