E&O Forum: Please give us your two cents' worth!

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Real Estate Broker/Owner with Buyers' Choice Realty

 

Reading about E&O Insurance is about as exciting as doing your taxes or getting a root canal, yet with the increasing number of "distressed" sales (short sales, foreclosures, REO's), the Real Estate field will become a lot more litigious, so looking the other way is no longer a viable option.

 

Passing the buck (the blame) is already being observed within these mega organizations throwing us the REO crumbs.  Now, more than ever, a tight and well fitting E&O Insurance policy is imperative.

 

How to choose, how to choose... that is the question.  I recently wrote a blog on the subject titled: E&O Insurance Check-up.  You might want to study it and use the information to analyze your own E&O Insurance policy. 

 

Let's exchange tips and information here!  Which E&O Insurance company do you use?  Do you have any E&O horror stories?  Let's learn from each other!

 

Myrtle Beach Real Estate by Mirela Monte                                      Proud Optimist!

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Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

For an organization as large as AR, we have amazingly little information on E&O Insurance.  We have tons of self promotion of e&o reps, but little exchange from members who have endured through the nightmarish situation of being denied coverage after the fact, based on some technicality buried in the fine print. 

Exchanging information here can benefit us all.  I emphatically encourage you to contribute and make this a worthy thread!

Sep 19, 2008 04:31 PM #1
Rainmaker
123,035
Marie Westerman
Blanchard and Calhoun Real Estate/ Wilson Parker Homes - Evans, GA
New Homes Sales Specialist Evans GA REALTOR

I'm forwarding this to my Broker.

Sep 19, 2008 04:32 PM #2
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Thank you Marie!  I look forward to getting his/her input!

Sep 19, 2008 04:35 PM #3
Rainmaker
75,730
Shannon Ziccardi
A+ Mobile Notary / "A Quick Note" - Lake Forest, CA
A+ Mobile Notary/"A Quick Note"

Well, I'm a Notary Signing Agent.  I purchase the (State of CA) required bond which protects the public to $15k which is really nothing.  I also have an E&O policy to $100k that is some protection.  Some lenders are upping their request to $500k which for an NSA is a very cost prohibitive amount of coverage.

I personally have adopted my brothers attitude:  Insurance and attorneys are expenses you hate to have every time you pay your bill.  That is, until you NEED that coverage...then you are so happy you have it...I suppose this translates to purchasing as much as is affordable.  Works for me!

Sep 19, 2008 04:37 PM #4
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Shannon:  Thank you for your contribution!  You are so right:

Insurance and attorneys are expenses you hate to have every time you pay your bill.  That is, until you NEED that coverage...then you are so happy you have it...I suppose this translates to purchasing as much as is affordable.  Works for me!

Sep 19, 2008 04:39 PM #5
Ambassador
1,863,704
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Mirela, our broker arranges the E&O and just recently changed carriers. I will continue to read your replies here.

Sep 19, 2008 04:47 PM #6
Rainer
13,161
Stephanie Pitel
Smart Referral Network, LLC - Glendale, AZ

Your post is so timely!  I've been trying to research E&O online this week and it's not as easy as I thought it would be.  I'm off to read "E&O Insurance Check-up"!  I'm looking forward to feedback from others on companies and tips.

Sep 19, 2008 05:50 PM #7
Rainer
336,010
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

Yes we are looking at our EO now. Its so crazy to just get a simple policy on anything anymore. I will find out who this new one is and get back at you.

Sep 19, 2008 10:25 PM #8
Rainer
116,722
Bo Hussung
Bell Title /Triserv LLC - Nashvle, TN

Mireal, given the recent events in the financial sector, particularly AIG, I would want to know the financial stability of the E & O insurer. Be careful.

Bo

Sep 20, 2008 01:45 AM #9
Rainer
25,291
Joe Woutersz
HUNT Real Estate ERA - Queensbury, NY

Mirela, I have a small brokerage in upstate NY. (29 agents) I don't see a lot of differences between E & O policies.  My main concern has been affordability.   I have found that our state Association's sponsored ins company is charging almost half of what a normal ins. company charges.  I have also been able to purchase an environmental hazard and fair housing riders at about $100 each year.  I have also found a democratic method of sharing the cost of the policy with the agents.  Because the policy is providing protection for the agents, it is reasonable to pass the cost along.  I take the annual premium anddivide it equally by the number of agents currently on board.  I continue to charge each new agent coming on board the same amount and when the next policy comes around I credit the overpayment I have recieved and rebill for the adjusted amount.  The agents are appreciative and so am I for the arrangement. 

Sep 20, 2008 01:18 PM #10
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Joe:  Thank you so very much for the advice!  This is exactly what I was hoping for.  I couldn't find your name (I didn't want to call you Hearth & Home), so I perused your blogs and home page.  Your posts on preventing burn-out enticed me to read, then your re-blog of the vision board....   To make a long story short, you now have a new subscriber.  You are good Joe!  I enjoyed reading your posts.  I will come back on Monday and read the rest.  Thank you for this great advice! 

Sep 20, 2008 05:22 PM #11
Rainmaker
322,769
John Petrella
Local Hawaii Real Estate - Hilo, HI

Aloha Mirela Monte,

We all have to look at the cost, benefits and risk of having E & O insurance. 

Usually the policy is based on your volume and type of Real Estate you sell.  E & O policies for Brokerages selling Residential properties seem to be cheaper than Brokerages specializing in Commercial Properties.  The lowest premiums are available in your first year and require a high deductible.   

I have seen Brokerages sued just because they have E & O.  I have seen E & O companies make deals and pay outs based on the cost of going to trial --  not on the merits of a Broker's case.  

So what happens when you get sued?  The "wronged" party will go for all they can get out of you.  Including your home and other assets you have in your name. 

Here are some suggestions to help lower your risk of being taken to the cleaners.

1.  Hold your home as tenants by the entireties.

2.  Place a car insurance rider on your vehicle that covers clients.

3. Put into place policies and procedures that all agents must follow on each and every listing.

4.  As a Broker, take an active role in all listings. 

5.  As a Broker, put into place continuous training and quality improvement.

6.  Should a "wronged" party contact you, be professional, and get the facts. 

7.  No matter how right you think you are, Always MEDIATE before you attempt to litigate. 

8.  Should you list a home that does not have home owner's insurance on it -- place a warning in the MLS. 

9.  Always make sure you know who you are talking to when you give that code to enter the home or location of a key over the phone. 

10.  Insurance companies are not the same.  Some are easy to work with and others will do all they can to keep from paying you. 

11. Most E & O companies will take the path that costs them the least amount of money. 

12. Make sure your insurance has the right numbers.  For example.  If you have experienced well trained agents and you are only selling $5,000 lots that have been surveyed and each lot has title insurance with a General Warranty Deed and each lot is not in some sort of hazard zone, purchasing an E & O policy of $500,000 just may be a waste of money.  Why? Most E & Os have a deductible of about $5,000. 

13. Should you have many assetts, consider an umbrella policy.

14.  Make sure all solo buyer agents are Accredited Buyers Represenatives.

Kind Regards,

John Petrella, REALTOR®
ABR®, GRI, Broker/Owner

Direct: 808.640.3953
Local@LocalHawaiiRealEstate.com

Local Hawaii Real Estate
Honesty • Integrity • Commitment

159 Keawe St., Suite 1
Hilo, HI  96720

REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is Member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.

Sep 20, 2008 06:50 PM #12
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

John, how do I say this the best way possible?

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

THANK YOU!   THANK YOU!   THANK YOU!   THANK YOU!    THANK YOU!   THANK YOU!   THANK YOU!

I appreciate your advice so very much!  (Can you tell?)

Sep 20, 2008 07:04 PM #13
Rainer
150
Leia D
AMW - Everett, WA

Here are a some points to look into relating specifically to your E&O policy:

Owned property coverage - Are you covered if you or your agents sell personal property - Do you sell your own investment property also and are you covered for that?  Do you manage your own properties?
Lock box - Do you have a sublimit?  Full limits are better but make sure you have the coverage. 
Disclosure of pollutants - Same here, do you have a sublimit?  Full limits are better but make sure you have the coverage. 
Tenant discrimination for property managers - sublimit?  full limits?
Personal Injury - Wrongful entry or eviction, Trespass, Other invasion of right of private occupancy

** Watch for referral exclusions - we have recently seen companies excluding coverage if a claim arises from your referal of a client to an escrow company, mortgage broker, etc.  Many agents consider that part of their customer service. 

** Watch for sub-prime exclusions - they can be very broad

Sep 22, 2008 08:24 AM #14
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Leia:  Thank you very much for your valuable input! 

I appreciate it very much, as I know many others reading this do as well!

Sep 24, 2008 03:09 AM #15
Ambassador
1,398,527
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

I use my state's preferred vendor: PEARL.

I have a pretty low deductible: 2500.

I charge agents PER TRANSACTION. I don't call it E&O... I call it Risk Management on the line item. Then it goes into a RM fund that I keep separate. At the end of the year, that's used to pay the E&O bill.

Any leftover is used for future "problems" so it grows a little slush fund hopefully.

Currently I charge agents $35/deal for this. I set a cap on it, too. So after you do 18 deals in a year (hopefully!) you won't pay any more into the pot.

Sep 24, 2008 06:46 AM #16
Ambassador
527,968
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Erica:  Great input!  Thank you very much!

Sep 24, 2008 07:55 AM #17
Rainer
22,017
Jerry Hill
Hill Realty - Bryant, AR

Mirela,

Thanks for the post and all of the feedback.  I just started my own company with my wife, just to avoid paying all of the big company fees.  I desperately need to find a good company that charges reliable rates.  Based on everything that I have been reading in AR this is a real issue with Realtors.  I guess what I don't understand is why NAR has not tried to negotiate a deal for its members.

Oct 29, 2010 03:08 AM #19
Anonymous
Shawna

How about this: Our office charges all agents $550 per year for E&O.  I paid it, then promptly left for another company. The insurance is for July 2011- July 2012.  Am I entitled to get it back?

Jul 12, 2011 11:06 AM #20
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