E&O policies are in the "Claims Made" form  meaning that if my policy is in effect in 2008, and a claim is made against the policy in 2008, the claim is covered  within the policy period, even if the loss being claimed actually happened several years earlier.

That is why E&O insurers question you about possible pending claims before issuing a new policy.

(The other form of insurance is called "Occurrence" and means a loss is covered by the policy in effect on the date of the loss.)

A local independent broker closes his office and joins mine.   The possibilities:

  1. If he  cancels his E&O policy, he is losing coverage on all his prior transactions.  Experienced agents know this is not a good idea.  Problems can rear their ugly heads years after a transaction is closed.
  2. I could assume liability for his previous transactions.  Even if all his agents have been meticulous in all their transactions, do I want to have to review years of old files? No, thank you.
  3. He purchases "tail coverage", this is a policy issued to a closed company to continue E&O coverage on prior acts. 
  4. Or he continues to maintain his existing E&O policy, even though his company is no longer actively selling.

If all this seems odd, remember to adjust your thinking to the "Claims Made" form of insurance.  :-)  Remember, with E&O insurance it does not matter if you had insurance in effect on the date the loss occurred.  What matters is that you have insurance in effect on the date you first become aware of the claim.

Article with good explanation here: http://www.eqgroup.com/Pdf/ClaimsMade_expl.pdf

 
Post is included in group: AR My Name is Cheryl
Post is included in group: Club Chaos
Post is included in group: e-PRO Internet Technology
Post is included in group: Independent Brokerages

5 Comments on Notes About E&O Insurance

SEP
30
2008

I think that "Claims made" form of insurance is self-perpetuating, and only benefits the insurance industry. It makes self-insurance a real contender for the best use of your insurance dollars.
6:39am • #1
490,739 Points 28 Featured Posts Outside Blog Hit Router Attended Rain Camp Called Shot Master

It's alot to process through one's brain, that's for sure.

If you let a "claims made" policy expire, you've lost the coverage for all those years you paid for and maintained the policy.  The policy needs to be in effect as of the date you learn of the claim.

On the other hand, you could go without insurance for years, then finally obtain a policy.  After you obtain the policy, someone makes a claim about something that happened a few years back, and you're covered because the policy is in effect at the time the claim is made.  (Assuming it clears all the conditional hurdles.   :-)  )

 
9:06am • #2
290,126 Points 33 Featured Posts Outside Blog

Cheryl- Wow, I hadn't even thought of this with different Offices merging.  Interesting for sure, thanks.
11:50am • #3
OCT
03
2008
135,259 Points 3 Featured Posts

Cheryl- Very interesting. I am going out on my own in 09 and did not know that my past transactions would not be covered etc... I really need to get my head around E&O insurance quickly. Thanks for the post.

Best,

Scott
3:09pm • #4
196,421 Points

I switched offices this week, I need to make sure all is well with my world.  thanks  cw
3:31pm • #5

Login or register to leave a comment
 
Cat-hat-cj Rainmaker_large

Cheryl Johnson

Highland Park, CA

More about me…

Cheryl Johnson, Bob Taylor Properties, Inc., Los Angeles, CA

Address: 5526 N. Figueroa Street, Los Angeles, CA, 90042

Office Phone: (323) 257-1080

Email Me

Caution: CAT BLOG AHEAD

Including random thoughts on life, art, business, stuff, and occasionally Real Estate.

What is a CAT BLOG?

According to Seth Godin: "Cat blogs are for, by, and about the person blogging. A cat blog is about your cat and your dating travails and your boss and whatever else you feel like sharing in your public diary." Well, I am the boss, my dating years are behind me, but I do love my cats.

Enjoy!

We’re Bloodhounds. We teach our clients to demand better service from real estate professionals.



Listings

Links

Archives

RSS 2.0 Feed for this blog