What is Real Estate Errors & Omissions Liability Insurance?
Real Estate Errors and Omissions Insurance (E&O) is a line of coverage designed to protect businesses that specialize in real estate. It mostly covers real estate agents and brokers, however it can be extended to cover landlords and a few other classifications. Just as any normal E&O policy will do, a Real Estate E&O policy protects the insured against any mistakes due to negligence or breach of contract made while doing business. The coverages are tailored for this specific line of work.
A Real Estate E&O policy can cover costs for legal defense as well as settlements for negligence and breach of contract. Hiring a lawyer or reaching a settlement out of court can cost a business a lot of money. Many small agencies do not have the ability to pay for these costs on their own. Even proving non-negligence in court can have huge costs. For example, a home inspector is hired to check a house before a couple purchases it. This inspector informs the couple about minor structural damage that should be taken care of, but it does not need to be fixed right away. A week later, that portion of the house collapses. The couple sues the home inspector for negligence. Without a real estate E&O policy the inspector would have to pay to settle or to hire a lawyer, which could potentially ruin his business. But with the right coverage the risk of negligence can be protected.
Why Have Real Estate Errors & Omissions Liability Insurance?
COVERAGE MAY INCLUDE
- Environmental Pollutants coverage
- Full Prior Acts coverage available
- Defense outside the limit
- Duty to defend
- Internet coverage provided
- Optional Package policy with errors & omissions, general liability and business personal property coverage. General liability includes coverage for bodily injury arising out of professional services
Real Estate Errors & Omissions Claims Example
Home Buying Misrepresentation
As part of her representation services, Susan prepared a mock closing statement for her realty client. This statement was meant as a guide for her clients to use to calculate the amount of cash needed to purchase a property in their price range. The statement contained errors, causing the buyer to save less than needed to close on the home. As a result, the sale did not go through at closing due to lack of funds. The buyer sued for misrepresentation, and had to pay the damages out of pocket.
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