Real Estate Errors & Omissions FAQs

Real Estate Agents’ Errors & Omissions (E&O) policies provide coverage for agents and brokers against claims of negligence or failure to perform their professional duties. The most common claims made against these policies typically involve allegations of:

1. Failure to Disclose: This is one of the most frequent claims, where the agent is accused of not disclosing or inadequately disclosing material facts about a property. This can include issues like structural defects, pest infestations, or zoning restrictions.

2. Misrepresentation: Claims arise when a client believes the agent misrepresented the condition or value of a property. This can be due to either providing incorrect information or omitting relevant facts.

3. Breach of Duty: This involves claims that the agent did not act in the client’s best interest, failed to follow the client’s instructions, or otherwise breached their fiduciary duty.

4. Negligence: These claims allege that the agent failed to exercise the appropriate level of care or diligence expected in their professional duties, leading to a financial loss for the client.

5. Errors in Contract Documentation: Mistakes or omissions in contracts, leases, and other paperwork can lead to claims, especially if they result in financial loss or legal issues for the client.

6. Failure to Secure Appropriate Price: Clients may claim against an agent if they believe the agent did not achieve the best possible price for a sale or rental, or if they overpaid based on the agent’s advice.

7. Property Management Issues: For agents involved in property management, claims can stem from alleged negligence in maintaining the property, resulting in damage or loss, or from disputes over management fees and services.

8. Violation of Fair Housing Laws: Claims that an agent engaged in discriminatory practices or violated state or federal fair housing laws are also seen.

These claims highlight the importance of thoroughness, honesty, and professionalism in real estate transactions, as well as the value of E&O insurance in protecting against potential liabilities.

At IronPointREO, we understand that knowing the potential financial impact of errors and omissions (E&O) claims is crucial for Real Estate professionals. While the cost of an E&O claim can vary widely based on the specifics of the case, including the nature of the claim, legal fees, and settlement amounts, industry data suggests that the average cost for real estate E&O claims falls within a range.

For Real Estate agents and related service industries, the average E&O claim can range from a few thousand dollars for minor issues to tens of thousands or even hundreds of thousands of dollars for more significant claims involving substantial legal battles or large financial losses. It’s important to note that these costs encompass not only potential settlements or judgments but also legal defense costs, which can accumulate regardless of the claim’s outcome.

Prior acts coverage is a crucial feature of any Real Estate Errors & Omissions (E&O) insurance policy. This coverage protects you against claims made for wrongful acts that occurred before the effective date of your current E&O insurance policy but were not known or reported until after a policy began.

In the fast-paced real estate environment, issues can arise from transactions completed in the past. Prior acts coverage ensures that you are safeguarded against claims for these past transactions, as long as the claim is made while your policy is active and the wrongful act happened after your retroactive date specified in your policy. The retroactive date is often the date when you first obtained continuous E&O insurance coverage.

At IronPointREO, we understand that Real Estate professionals often have unique concerns, especially when it comes to transactions involving properties they own. Based on industry data and our expertise, it’s observed that Agent-Owned Property (AOP) transactions can indeed carry a higher risk of claims compared to non-agent-owned transactions. This heightened risk is primarily due to the dual role an agent plays in such transactions, which can lead to potential conflicts of interest, misrepresentations, or omissions, whether intentional or accidental.

To mitigate these risks, IronPointREO offers specialized coverage options tailored to the specific needs of Real Estate professionals engaged in AOP transactions. Our policies are designed to provide robust protection, recognizing the complexities and increased scrutiny associated with these deals. We also encourage our clients to adhere to best practices, such as full disclosure and obtaining independent appraisals, to further reduce the likelihood of claims.

With ClaimShieldTM, policyholders can get access to on-call local attorneys, ready to assist with your inquiries, assist in drafting letters, or help review contracts. Whenever there’s even the slightest chance of a claim arising, these legal experts are just a phone call away to offer guidance and support in preventing potential claims. This proactive approach to claim prevention sets IronPointREO apart in the industry, underscoring our commitment to not just protect, but also to advise and safeguard our clients’ interests.

The typical real estate transaction involves various professionals, each contributing to different parts of the sale. The areas within these functional transactions that often lead to claims include:

1. Appraisal Discrepancies: Disputes or inaccuracies in property valuations can lead to claims, especially if a buyer or seller believes an incorrect appraisal affected the sale price.

2. Inspection Issues: Failures or errors in property inspections can result in claims, particularly if significant defects are missed or misrepresented.

3. Title and Escrow Conflicts: Issues arising from title searches and escrow handling, such as errors in closing documents or failure to clear title defects, can lead to legal challenges.

4. Agent-Owned Property Transactions: When real estate professionals sell properties they own, the risk of conflicts of interest and claims of misrepresentation increases due to the dual roles involved.

5. Failure in Duty of Care by Professionals: This includes any negligence or errors made by real estate agents, appraisers, inspectors, and escrow officers, where their failure to perform their responsibilities leads to financial loss or legal disputes.

IronPointREO aims to support real estate professionals by offering comprehensive coverage that addresses the complex risks involved in real estate transactions. Recognizing these potential areas of conflict and ensuring that all professionals involved in the transaction are adequately covered can significantly reduce the likelihood of claims, providing peace of mind and protection for our clients.

Open house and lock box coverage is specifically designed to protect Real Estate professionals against the specific liabilities that are uniquely performed by real estate professionals, like Open House showings and using a Lock Box:

1. Open House Coverage: This part of the policy is designed to protect agents and brokers in the event of accidents or damages that occur during an open house. Whether it’s property damage, theft, or injury to visitors, our coverage ensures that you’re protected against claims resulting from incidents that can happen when showcasing a property to potential buyers.

2. Lock Box Coverage: Given the trust placed in real estate professionals to manage access to clients’ homes, lock box coverage is crucial. It safeguards against claims arising from misuse, theft, or other security breaches related to the use of lock boxes. This includes situations where property is damaged or stolen after third-party access is granted through a lock box.

Our goal is to ensure that Real Estate professionals can conduct their business confidently, with robust support in place to handle the unforeseen incidents that can occur in the day-to-day operations of real estate transactions.

Obtaining a quote from IronPointREO is designed to fit your style and schedule, offering four convenient methods:

1. Start Online: Initiate your quote process on our website, where you can quickly input your information for our agents to review.

2. Email Your Application: Download our application form, complete it at your leisure, and email it back to us for a prompt response.

3. Work with a Local Agent: For personalized service, connect with one of our local insurance agents who can guide you through the process and tailor a quote to your needs.

4. Give Us a Call: Prefer a direct approach? Simply pick up the phone and call us for immediate assistance and a quote over the phone.

Choose the path that best suits you, and we’ll ensure the process is smooth and efficient, getting you the coverage you need without the hassle.