John Torvi - Herbert H. Landy Insurance Agency, Inc. | Nov 01, 2016
Many of you might know that the Landy Agency participates in numerous conferences and trade shows where we have the opportunity to meet current and future clients. Throughout the country there are common themes and questions that agents and brokers ask about E&O insurance and risk management, so here are some of the most popular questions and answers that may be valuable to you.
1. What are those cool things you are giving away? Yes, they are a tape measure and a level on a key chain!
2. From Agents – If I have a claim, who pays the deductible? Agents are often in the dark about their insurance protection in general, leaving it to the broker to handle. The potential of a malpractice claim should require that the broker and agent have a written agreement on how an insurance deductible is handled. Small firms may have deductibles as low as $1000, while large firms may have deductibles of $50,000 or more. Both broker and agent should be prepared in advance for what if any portion of the deductible the broker and the agent will each be responsible for in the event of a claim.
3. From Brokers – If I change my insurance carrier, will I lose my Prior Acts coverage? Prior Acts coverage is one of the most important and essential features of an E&O policy. It is the date that the firm is covered back to for their professional services (E&O claims typically arise months or years after the transaction or professional service). Unless there is some outstanding circumstance, such as a very poor claims history, almost all insurance carriers will assume the Prior Acts coverage if they provide a policy for a firm. If there is a claim, it is your current policy that will provide the claims service, assuming the claim falls within your Prior Acts date. There are other aspects to Prior Acts coverage that may arise, such as name changes, mergers, retirement, etc. that should be addressed with a knowledgeable E&O provider.
4. From Brokers – How much does it cost? The cost of a professional insurance policy is an important consideration, though whether it should be the first question asked is debatable. But to address that up front, E&O insurance premiums are typically driven by commission revenues. The higher the revenues, the greater the risk for the insurer, thus a higher premium. Other factors that influence cost relate to the riskiness of the service; residential and commercial sales or property management, appraisals, dual agency and so on. At least as important is what a firm is covered for and for how much. Insurance policies are not all alike, so the policy holder should be looking for what, if any, and how much coverage is provided for property management, owned-property sales, Fair Housing, Lockbox incidents, Open House coverage and much more. If your firm performs BPO’s, business brokering or any other professional service, are you covered?
5. From Agents (and Brokers) – I (my agent) want to do BPO’s or property management but my broker (I) won’t allow it. Am I covered if I do it and/or do I have to get permission? This very common question goes back to the importance of a clearly defined and in-place broker/agent agreement. An E&O policy provides protection for a firm’s (defined) professional acts, and for all parties authorized to do business on behalf of that insured firm. An agent acting outside the parameters of authorized services may not receive insurance protection. Similarly, an insurer can decline claims services for the whole firm should someone act outside the provisions of coverage or without authorization. Both brokers and agents are at risk if someone acts outside of the authority of the firm’s boundaries. A licensed real estate professional can perform a professional service and obtain coverage on their own, but should check the broker/agent agreement to determine if they are allowed to practice real estate outside the brokerage contract they have.
Numerous other questions and issues arise in our interactions with real estate professionals, and much can be learned from fully reading your E&O policy and consulting with a professional experienced in these areas.