So in an earlier blog we talked about Litigation 101 and discussed the process by which lawsuits generally proceed, you can read about it here. What are the most frequently made claims that most likely would be brought against you as a Realtor®?
THE AVERAGE COST OF LAWSUITS IN OTHER INDUSTRIES
First things first, lawsuits can get very expensive, trust me I know, when I was CEO of my company I went through this, both in terms of cease and desist letters, Restraining Order/Injunctions and finally full blown litigation. If you're sued and the party suing you is hell bent on litigating, it'll cost you a lot of time and money. You'll probably be in court for several years and expect to pay well over $100,000 when it's all said and done. The down side is if you can't fund to defend yourself against a civil action you'll probably have a judgement awarded against you and lose the entire case.
If you do not have contract litigation insurance you should probably think about getting it as an agent, like yesterday, you can check it out here. If you think your company's E&O insurance will pay to defend you, think again. They may initially, but check their policy to see if you're covered and for what they'll pay in a lawsuit and the types of suits, remember if their deductible is $25k and your broker is being sued because of something you allegedly did as an agent.....guess who's paying that deductible, I'll give you a clue, not your broker! Remember when it's all said and done they can come after you along with their underwriter to recoup costs in what's called a derivative lawsuit. More on that later.
Lets look at average costs associated with certain litigious actions in other industries.
A DUI in the state of Arizona will cost you anywhere from $8,000-$24,000, if you get one as a broker in AZ, chances are you may not be one for much longer. An average divorce case in the US costs $15,000. I ended up obtaining a Federal Restraining Order and the initial cease and desist letter alone cost my firm $20,000 you can read the entire Federal Restraining Order here, that order cost over $40,000. Likewise, I in my capacity as CEO sued a former investor and company employees and that lawsuit cost over $100,000 and only after they settled, when I and some company board members met with several firms to figure out who we'd retain they said it'll cost us close to $500,000, maybe more to litigate, you can read the entire lawsuit here, it'll blow your mind.
So what are the top ten most frequently made claims against Realtors?
- Fraud
- Breach of Duty
- Breach of Contract
- Negligence
- Bodily injury/Property Damage
- Misrepresentation regarding the condition of property
- Consumer Protection Act
- Earnest/Escrow money dispute
- Misrepresentation regarding flooding or leaks
- Misrepresentation regarding the value of the property
Like we discussed in the first blog, if you can mediate, mediate, if you can arbitrate, arbitrate, and if you can settle, settle. Imagine rolling the dice and going all the way thinking you're going to win only to lose miserably and get a default judgment awarded against you totaling hundreds of thousands of dollars like this one here 
. It'll follow you around for the rest of your life, and you don't want that right?
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