Frequently Asked Questions about Real Estate E&O Insurance

Why should I choose CSI as my broker?

There are no “standard” policy wordings for real estate E&O insurance coverage. Each policy must be read carefully to make sure that the coverage being offered fits your exposures. There is no “one size fits all” E&O policy. That is why it is very important to select a specialty insurance brokerage that understands the real estate errors and omissions coverage marketplace.

CSI is one of California's leading erros and omissions insurance brokers. We have access to EVERY major insurance carrier in the Real Estate E&O space. We have personal relationships with Real Estate E&O underwriters, claims adjusters, and Senior Management. As the exclusively endorsed C.A.R. P&C Broker, CSI has been able to and will continue to secure policy coverage enhancements and deductible/premium reductions for CAR members.

What does an insurance underwriter want to know about my company when it determines my premium?

A real estate insurance company will consider several factors in determining the extent of any coverage it is willing to offer. These factors may include:

the type of professional real estate services activity(ies) engaged in
the number of real estate professionals
the experience level of the real estate firm
how long the company has been in existence
how many complaints or law suits have been brought against the real estate company over the last several years
whether there are written office policies and procedures and whether they are followed
the level of internal supervision and office management
the extent to which training is provided
the amount of premiums paid in the past

The amount of the real estate E&O insurance premium will be influenced by the underwriter’s assessment of these factors, among others, as well as the amount of insurance desired.

Is real estate E&O insurance coverage really essential?

Whether you're new to the real estate industry or have been in the business for years, the risks you face every day make you a prime target for lawsuits. Over the past two decades, your chances of being sued have risen dramatically. Even if your name is cleared, the time taken away from your business, money spent on defense, and added stress of handling the situation can prove to be taxing. That's why choosing an E&O insurance program that meets the needs and budget of your real estate firm is essential. E&O Insurance helps ease the burden by responding to, defending, and sharing the monetary risks for whatever claims are brought against you.

How can I reduce my real estate insurance premium?

CSI can negotiate many innovative rate credit features to help you reduce your E&O insurance premium, including:

Attend Risk Management Seminars. Not only will you learn why risk management is important to your real estate firm, but we'll also provide you with 12 key risk management techniques you can begin implementing that same day.
Maintain an Office Procedures Manual. A good training manual will not only help new real estate professionals acclimate to the field, but seasoned real estate agents will also benefit from having a standard set of procedures in place to help ensure compliance in all client transactions.
Offer Home Warranties. By offering your clients a home warranty at the time of purchase, you are shifting some of the risk to the warranty company for possible problems that could arise with the house that first year.
Earn Professional Designations. If 15% of your real estate firm earns professional designations, you will be eligible for additional premium credits.
Use standard forms from local and state REALTOR® associations. By using standard forms from local REALTOR® boards, you can eliminate some risk factors by making sure your transaction forms and documentation are complete and up to par.

What if I am sued tomorrow over a past activity?

As long as there is a claims-made E&O insurance policy in force at the time the claim is made and that insurance policy provides coverage for prior acts, there would typically be coverage.

Who will defend me if I am sued?

Quality real estate insurance companies employ a staff of highly experienced and specially trained claim adjusters. If defense counsel is needed, your insurance company will appoint legal counsel from a panel of law firms who have extensive experience in real estate E&O liability.

What size deductible should I carry?

This depends on your comfort level, claims experience, cash flow position and range between different premium and deductible levels. This should be reviewed with your Costello & Sons Insurance broker, as they will provide you with a complete, understandable analysis of your options.

Where do I report a claim?

If you have been pre-approved to select your preferred claims counsel or you have been assigned a C.A.R. Strategic Defense attorney, we recommend having them submit the claim to your insurance carrier on your behalf, via some form of certifiable mail delivery. If unsure, please contact CSI at 1-800-949-0640 and we will direct you.

Source and frequency of E&O losses?

Breach of Contract 7%
Negligence 29%
Fraud/Intentional Acts 11%
Misrepresentation 40%
Breach of Fiduciary Duty 5%
Breach of Good Faith 1%
Concealment 3%
Others* 4%

* Breach of warranty, antitrust, civil rights/fair housing, indemnification & security violations

Source: 2006 CNA/Victor O. Schinnerer

Alleged problem areas?

HVAC/Fire 3%
Sewer/Well 10%
Plumbing 3%
Roof 6%
Structure 10%
Floor/Wall 3%
Insect Damage 5%
Boundary 5%
Financing 4%
Investment Value 3%
Valuation 4%
Specific Performance 7%
Drainage 5%
Buyer’s Financial Stability 3%
Code Violation 3%
Other* 26%

* Escrow, flood plains/wetlands, improper repairs, electrical, zoning, etc.

Source: 2006 CNA/Victor O. Schinnerer