The world of real estate offers plenty of opportunity for growth and development. But even if you take the utmost care to provide excellent service to your clients, there will always be misunderstandings, mistakes, or unforeseen issues that arise. If, or when, these happen, your Errors & Omissions (E&O) insurance becomes invaluable, offering protection against claims.
But, what exactly is a claim? And how does it work?
What is a Claim?
In the basic sense, and in the context of E&O insurance, a claim is a demand for money or services by a client or third party due to alleged negligence, errors, or omissions in the services provided by a real estate professional.
Claims can arise from various scenarios, such as:1
- Misrepresentation: A client may claim that you provided incorrect or misleading information (e.g., about a property).
- Negligence: A client may allege that you failed to disclose important information (e.g., property defects or issues) that lead to financial loss or harm.
- Breach of Duty: A client accuses you of failing to act in their best interests, therefore violating fiduciary duties.
- Errors in Documentation: Any mistakes (e.g., in contracts, agreements, or other essential documents) can also lead to claims.
- Legal Action: A client decides to sue to recoup financial losses.
For a claims scenario example, check out this E&O Risk Manager article: “Agent Gets Too Involved in Sellers Property Disclosure Statement.”
Claims Process
It’s important to know how to respond once a claim is filed against you. Here is how the process typically unfolds:
- Notification. The first step is to notify your insurance provider as soon as you become aware of a potential claim. Timely reporting is crucial to ensure coverage under your policy.
- Investigation. Once notified, your insurance provider will initiate an investigation. They gather all relevant information including your account of the incident, supporting documents, and communications with the claimant.
- Legal Defense. If the claim does end up going to court, your insurance provider should cover the loss, which is the amount you are legally required to pay resulting from the actual or alleged wrongful acts (e.g., defense costs, judgments, settlements, damages, or fines, as defined by the E&O policy).1
- Resolution. Depending on the findings, the claim may be resolved through negotiation, settlement, or court proceedings, if necessary.
Understanding what a claim is and how it works is crucial for real estate professionals. When you partner with Pearl Insurance, we can help you navigate the complexities of claims, along with the stress that can come with them, knowing that you have expert support and comprehensive coverage.
Pearl Insurance is committed to helping you manage your risk. Our carrier, AXA XL, rated A+ (Superior) on AM Best, has been partnering with Pearl for 20 years, providing you with the best E&O protection.
Ready to get a quote for your E&O insurance? Give our experts a call at (855) 465-0200 or click on the button below to fill out a quote form.
Want to know more? Find out for yourself.
(800) 447-4982 | pearlinsurance.com/professional-liability-insurance/
1“Professional Liability Insurance Explained.” Insurance Training Center, 2024.
