Agents are Targets

Unfortunately, in today’s litigious society, lawsuits and grievances against real estate agents are very common. Real estate agents are frequent Targets for lawsuits. A common lawsuit scenario involves a buyer
of property suing the seller and the seller’s agent for failure to disclose defects in the property. In some cases, the buyer also sues his or her own agent to the transaction. The lawsuit alleges not just negligence, but also alleges that the seller and the agent conspired to keep defects hidden to facilitate the sale at a higher price and earn a higher commission. The buyer may also file a disciplinary grievance against the agent. The grievance threatens not just monetary risk for the agent, but the risk of also losing their professional license. The agent may be forced to defend him or herself in two forums simultaneously.

Most times the lawsuit and grievance are highly defensible. Typically, there was absolutely no collusion or conspiracy with the seller to fail to disclose defects existing on the property. The agent likely had no knowledge of any hidden undisclosed defects. At best, the seller may be at fault. Nevertheless, a public lawsuit alleging fraud and conspiracy by the agent is unsettling at best for the accused agent. Reputation is extremely
important in a referral business like real estate brokerage. In addition, defending lawsuits is expensive and time consuming for the agent.
Every day working with defense counsel, reviewing documents and providing testimony is another day lost from practicing as a real
estate agent.

Check out some best practices to avoid being sued.

*McCune, Daniel R., Perdue, Kimberly and Charlton-Perrin, Gawain, “Top Ten Tips for Real Estate Agents to Avoid Getting Sued,” Hanover Insurance Group, August 2016.

Keep Some Opinions to Yourself

Service oriented real estate professionals can sometimes get themselves into trouble if they feel compelled to give advice on matters that are beyond their professional scope.  You are not hired to be an expert in all things pertaining to home/land/building ownership.  To help avoid a lawsuit…never offer opinions on:

Legal Issues: Encourage your client to retain an attorney early on in the transaction, they can be a valuable resource during the property evaluation phase.
Zoning: Unfortunately your client will have to do some leg work on their own to figure out the specific zoning laws pertaining to their property or they can always hire an attorney.
Property Boundaries: This can be a very detailed and complicated part of a transaction, defer to the surveyors who are the experts and attorneys who are more qualified to interrupt the reports.
Anything not on MLS: Focus your area of expertise around information in the MLS, this can be challenging enough without adding in all of the above.

*McCune, Daniel R., Perdue, Kimberly and Charlton-Perrin, Gawain, “Top Ten Tips for Real Estate Agents to Avoid Getting Sued,” Hanover Insurance Group, August 2016.

What is a deductible waiver?

Does your E&O policy have a deductible waiver? It should if the following conditions are met:

  1. Seller disclosure form signed by Seller & acknowledged in writing by Buyer prior to closing;
  2. Home warranty purchased or waived in writing by Buyer prior to closing;
  3. Written Home Inspection Report was issued by licensed or certified home inspector, or waived in writing by Buyer prior to closing; and
  4. State/local board approved standard sales contract utilized

*Based on policy information provided by Hanover Insurance.

About The Blog

Errors & Omissions Insurance (E&O) is a very nuanced form of malpractice or professional liability insurance designed to protect yourself from lawsuits filed because of your work as a real estate professional. The more years of service and transactions you conduct, the higher exposure you have to being sued. Even if you think the demands are unfounded, these claims come with considerable legal expenses and potentially financial damages that can exhaust your deductible, distract you from your business and harm your reputation. Therefore, it is important to have the right coverage for your premium investment as well as be vigilant with your education and documentation.

Our Maximum E&O Insurance blog is a resource to help real estate professionals do just that. At PBI Group we care about protecting our clients and believe in a comprehensive approach to reducing our risk.

  1. Education to help avoid a lawsuit: Everyone wants to be claims free, but merely wishing for it is not good enough, there are steps you can take to improve your odds. In our blog, we will share best practices and claims scenarios and other “need to know” information to educate and increased your liability awareness.
  2. The Right Insurance Policy: A broad policy form designed to provide protection when and where you need it most based on your specific real estate services offered. Not all policies are created equal, some have considerable exclusions which could leave you without protection!
  3. Documenting the Undocumented: It is important to document the numerous conversations during a real estate transaction to provide evidence which can be referenced during a lawsuit. Today’s various forms of communications (text messages, calls, emails, social media, disclosures, contracts, etc) can make it a challenge to keep
    complete records. It is important to moralize these discussions, in the event of a claim you can be confident in your records.

About Us

PBI Group is a boutique insurance brokerage firm focused exclusively on the insurance needs of real estate professionals throughout the country. Our meticulousness care, pride in operating at the highest level in our industry, and unique knowledge of the real estate professional liability (E&O) market are what define us.

If you’d like to get in touch, please contact us at:

23114 Expedition Drive
Ashburn, VA 20148
O: (443) 502-5645

www.pbigroupsolutions.com

sales@pbigroupsolutions.com