Archive for the ‘E&O’ Category
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3
Feb
2011
Apps, Twitter, and Risk Concerns – Social Media for Realtors
Every day I seem to come across some article, blog or conversation about a new cool app for my phone. It’s amazing how connected we can all be. If I’m hungry, there’s an app for that. If I want some entertainment, there are lots of apps for that. If I’m stuck in traffic, there’s an app for that too. And the list goes on and on. Even real estate is in the game which I think is awesome for when it’s time for me to look for an apartment or house. Face it, like most people, I’m all for convenience and easy updates.
Here are some of the top real estate apps as provided by TopAppCharts.com:
- Property Evaluator
- Zillow Real Estate
- LoopNet Commercial Real Estate Search
- Realtor.com
- Trulia Real Estate Serch
- ZipRealty Real Estate
- Real Estate Investor
- Classifieds2Go
- Property Flipper
Using these apps or creating your own can really give you great opportunities to expand your reach. Twitter updates for open houses and listing are also a good way to take advantage of social media. It’s a chance to be really creative and fun.
Social Media Concerns:
If you’re weary about risks that can come with social media, then you have options to protect yourself using business liability insurance. Unique E&O policies can be tailored to your needs to cover your internet risks.
24
Jan
2011
Is the California Real Estate E&O Market Due for Higher Premiums & Deductibles? By Tom Byrne
How long can the California real estate E&O insurance market withstand the continued declines in premiums and deductibles for California residential real estate brokerages? From our perspective, not very! The anticipated change in the market is important to forecast, as we have to prepare our clients for the likely changes ahead.
Since the decline in the real estate market – dating back to 2006 – we have seen intense competition in the E&O insurance marketplace. Premium trends show year-over-year declines, along with inexplicably low deductibles. In this business cycle – referred to in insurance circles as a “soft market,” insurance companies risk not collecting enough premiums to pay for the claims their program incurs. When this happens, they eventually pull up stakes and leave you hanging in the breeze.
This much is clear; there is no way the CA real estate E&O insurance market can continue to provide the same low premium and deductible rates that we have seen over the past 4-5 years. If this trend continues, insurance companies will either incur unsustainable losses and/or they won’t be able to compete with the low cost/quality providers. Either way, they will leave the market or we all will lose.
So, what does this mean for you when deciding on which insurance program to protect your business, your reputation, and your agents? Make sure you place your E&O with a reputable insurance company (or at least make sure you are fully informed when you are entertaining a riskier program). Remember that if it seems too good to be true, it probably is. Ask your insurance broker about it: How long have they been writing in California? How many CA real estate companies do they write? Who defends me if I have a claim/law suit? How long do you see them being a player in the market? What’s not included in this policy? What’s their claims departments reputation?…etc.
Tom Byrne
Vice-President Real Estate Division
10
Jan
2011
2011 New Year’s Insurance Resolutions by: Tom Byrne
#1 – “Get ‘Er Done”
As with most New Year’s resolutions, you probably are attempting to do something you really don’t want to. But, you know if you do you will be better off for doing so. By following the below guidelines, your small investment of time will lead to the insurance peace of mind you so deserve!
#2 – Find the Right Broker
If you find the right one, your problems are solved. So, what do you look for? Trust is everything, so make sure they earn it. Every few years, test the waters to evaluate your broker’s performance. Determine what’s important for you and don’t use cost savings as the only barometer. Service, expertise, cost, choices, professionalism, referrals, credibility, locality, personality, communication skills, responsiveness…etc., are all good measuring sticks. Everyone has their own service preferences, so prioritize yours and evaluate what you have and what’s missing.
#3 – Review Your Policies
Over the course of a policy term, things change. Like your investment portfolio, your insurance portfolio needs love to. Don’t neglect it! Every year, you should review you insurance programs. How do you do this? Simply ask your broker to do it for you. Wow! That was easy. Advise them of what you are interested in reviewing and/or their suggestions. You wouldn’t want your house to burn down to be lessened in being underinsured!
#4 – Be Proactive!
Don’t procrastinate! Those that wait to submit their renewal applications at the last minute are those that are upset with having to make decisions in the 11th hour. Have your homework done in advance and you might begin to even tolerate the insurance process.
#5 – Educate Yourself
You don’t need a Master’s Degree in insurance to properly protect yourself agaisnt insurable risks, but you should know the basics – even if your broker is a “trusted advisor.” The internet is abundant with resources. Find quality blogs, newsletters, tweet feeds,…etc that best suit your lifestyle/schedule and preference. Ask around for recommendations. CSI’s dedicated social media webpage libraries a wealth of easy to access information: http://www.costelloandsons.com/socialnetworking.html
Until next time…
Tom Byrne – Vice President Real Estate Division
3
Jan
2011
2
Dec
2010
Professional Liability, Not your Standardized Policy Form
When looking at professional liability coverage also known as errors and omissions (E&O), it is vital to do a detailed analysis because there are differences from carrier to carrier. Curtis Pearsall, president of Pearsall Associates Inc, explains these common differences to watch for in the article, E&O Insights: Nothing Standard About Professional Liability. Here is a summary of those points.
Overall Form
The main difference on the overall form may come from claims-made basis versus occurrence form. Hutchinson Traylor Insurance defines the differences as, “Occurrence forms cover losses that happen during a given period of time (the policy term). The loss can be reported years later, but the key is when it happened. A claims-made policy covers claims made during a given period of time. The loss may have happened many years in the past, but is reported during the current policy term.” In addition, one of the differences is occurrence policy costs more than claims-made policy.
Key Terms
- Retroactive Date vs. Full Prior Acts: This is important because it impacts the validity of the claim. For example, claims after the retro date is only covered and not before; whereas, if it’s full prior acts, it is covered regardless of the date.
- Covered Activities: You should have full understanding of the activities your policy covers.
- Definition of Insured: There are differences of gaps in coverage and in no coverage for areas of former employees, independent contractors, leased or temporary staff, or board of directors.
- Exclusions: A policy form with only 2 exclusions versus 15 does not mean it is better. The 15 exclusions may be a result of greater detail of the coverage.
- Defense Provision: There is a difference in policies with “defense in addition to the limit of liability” or “defense within the limit of liability.” “Within the limit” will reduce the limit available for any settlement.
- Deductible: The difference here is between a loss-only basis and a combined basis. Loss-only coverage is handled by the carrier. On the other hand, “a combined loss and expense deductible, the insured would participate in these expenses up to the deductible limit.”
- Extended Reporting Period: This is usually called a “tail.” This means that after the policy expires, there is often a period of time that claims are still accepted. However, the period varies.
- Receipt of the Policy: Be sure to review your policy.
Let us help you review your E&O policy today!
9
Nov
2010
Errors & Omission Insurance Tips
Errors & omission insurance (E&O) is a way to safeguard your business and the professional you. This insurance provides protection from potential financial losses and suits filed against you. There are unavoidable risks that come with most jobs and the real estate industry is no different. E&O suits are not an experience most agents want to go through. Christopher J. Boggs, CPCU, ARM, ALCM writes about the general and basic “do’s and don’ts” of E&O claims, even if some are commonsense. Here is a short summary of his points:
The “Don’ts”:
- Don’t overreact.
- Don’t change any details in the clients file.
- Don’t discuss the claim with anyone outsides the members involved.
- Don’t admit to wrongdoing.
- Don’t try to manage the claim by yourself.
The “Do’s”:
- Notify your E&O insurance carrier right away of the claim.
- Gather and organize all records and information relevant to the claim.
- Be cooperative with your E&O carrier.
- Be sure to comply with all the policy conditions.
Remember these are general tips that can be customized for the real estate business. Some of the unique E&O policies include: lockbox protection, franchisor coverage, Real Estate Seller E&O coverage, and Sale of agent-owned property coverage. Furthermore, you should consider risk management in addition to E&O insurance. At CSI, we work to provide the support our clients need.
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!