I just recently attended a mini seminar on E&O insurance sponsor by my local board, and the information that I walked away with I believe is invaluable. Several things I discovered is unsettling. They are as follows:

1. Coverage for any prior transactions that may present themselves as legal issue, in the future will be covered by your present insurance carrier not your insurance carrier that you had at the time the transactions was closed. Example: Let say you sold a home in 2000 and there is a lawsuit file against you in 2005, the carrier that you currently have is the carrier that will be the one representing you. The part where it gets interesting is that you need to have coverage for all prior transactions included in your policy with this carrier , or they have the right to not provide coverage. It is called the tail. Check your policy to make sure that all prior transactions are covered by your current carrier.
2. Do not get a cookie cutter policy. Have your carrier design one that fits your needs.
3. Read your policy ASAP.
4. When you do have a legal issue arise, check the credentials of the individual that is representing you legally. Most E&O carriers do not let you choose your attorney they assign you one, and that person could be very inexperience. Ask about the persons ability to handle this situation. IE: How many times have they dealt with mold issues. If you are not satisfied ask for another legal representative.
5. Hitching on # 4, the more inexperience the legal representative is the more costly to you, and they will burn thru your deductible in a hurry.
6. Keep all your records on every transaction even the ones that do not close. Yes, there is legally limits that we all know about brokers, and agents are responsible for retaining records, unfortunately there is no legal limits for Fraud.
7. When filling out your application be honest. The E&O carrier can on a technicality not represent you because your application form was not filled out correctly.
8. Be aware that you get what you pay for cheap policies can be expense in the end.
9. Dual agency can be tricky with some E&O companies, make sure that your company covers a dual agency transaction. Presently there are few carriers that will cover a agent selling their own property. If they do provide the coverage it is expense. Check to see if your policy provides you coverage
10. Watch out for REO properties with Countrywide. They are asking to see your insurance carrier coverage, and they want the maximum coverage along with personal liability coverage of over three million dollars. The reason is that in the fine print of the right to sell this listing you must bring the property up to the most sell-able condition, and you will be held accountable if this home does not sell, and it gives Countrywide the right to sue you for non-performance. It presents a tricky situation. Have your carrier review the commitment on selling these REO's.

 Read your policy. Make sure you have coverage with your carrier for any past transactions. Don't let price be the deciding factor.With the real estate market changing more and more lawsuits are occuring. Be pro-active and document everything.

LDk