Archive for the ‘E&O’ Category
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7
Dec
2009
Real Estate Agents E&O 101
There are a lot of misnomers out there about Real Estate E&O insurance. A lot of our blog entries will surround answering questions and providing information to help clarify E&O policy myths. Here are a couple of frequently asked questions……that may receive frequently incorrect answers:
Per transaction insurance. This does NOT exist. What does exist (with a few insurers) is a payment plan on a per transaction basis. Because the policy is a claims made policy, you must keep paying for the insurance for coverage to apply. In addition, with the companies that offer per transaction policies, you typically need to report and pay monthly. You forget for a month and bam, you’ve lost coverage for all past transactions.
What is a “claim”? When does it need to be reported? The definition of a claim is determined by the E&O policy. Some policies define a claim as a demand for money or services. Others constrain the definition to written demands. Like the claim definition, claim reporting is also defined by the policy. Some policies require the “immediate” reporting of a claim while others require the reporting “as soon as practicable”.
How do claims impact premiums in future years? Your claim history will follow you for a 5 year period. The E&O insurers require 5 years of loss history to provide pricing. How these claims will impact future pricing will depend on the frequency and severity of claims. The more frequent or severe, the more likely it will negatively impact future premiums. In today’s environment, insurers are trying to push up deductibles, so rather than see a significant premium increase, a broker might see a substantial increase in the deductible.
What are some of the key issues to understand before purchasing an E&O Policy?
- What services are covered: residential, leasing, commercial, escrow, mortgage, property management, business opportunities, expert witness services, appraisal, etc.?
- What types of claims are covered: discrimination, environmental, lockbox, etc.?
- Is “agent owned property” covered and if so what are the requirements?
- What is the deductible, and does the policy have a deductible reduction component such as use of a home warranty policy?
- What is the “retroactive date” since any transactions before that date are not covered?
- Do I get to choose my attorney; is the attorney I get qualified and on my side?
- How strong is the insurer: financial strength, rating, California admitted, experience?
- What services are offered through the policy such as risk management?
- What risk management, file management and other tools can I use to reduce risk?
18
Nov
2009
Claims-Made Policies vs. Occurrence Policies
As we speak across California at various offices and local REALTOR® Associations, it has come to our attention that there is great confusion about differences between policies with an occurrence-based claim trigger and those with a claims-made claim trigger. Nearly all property, general liability, auto or workers’ compensation policies are written on an occurrence basis, while the vast majority of errors & omissions (E&O), directors & officers liability and employment practices liability policies are written on a claims-made coverage form.
With an occurrence policy, the policy in effect at the time of the accident or injury (or the occurrence), is the policy that will pay the claim.
Example: A REALTOR® purchases a workers’ compensation policy on May 1, 2008 (Policy A). One of the REALTOR’S® employees falls in the parking lot on the way home on Friday, April 30, 2009. The injured employee reports the injury to their broker on Monday, May 3, 2009. The workers’ compensation just happened to renew on May 1, 2009 (Policy B).
Question: Which policy will pay the claim? Answer: Policy A, the policy in effect when the injury occurred.
With a claims made policy, the policy in effect at the time of the claim is the policy that will pay the claim.
Example: A Broker purchases their first E&O policy on March 1, 2008 (Policy A). On November 20, 2008, one of the Broker’s agents sells a home. On March 1, 2009, the Broker renews their E&O policy (Policy B). On May 15, 2009, the Broker receives a lawsuit that alleges “failure to disclose” issues related to the home sold in November, 2008.
Question: Which policy will pay for the claim? Answer: Policy B, the policy in force when the claim was made.
Stay tuned……we’ll be providing more information about these differences in the future!