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Misrepresentation of Property is the Top Claim Filed Against Realtors®

by Leighton, Kelly on

Lisa Scoble of Pearl Insurance joined 2021 PAR President Christopher Raad for a webinar yesterday to discuss managing risks as a Realtor® and how errors and omissions insurance can help protect agents.

“You should think of errors and omissions policies as your professional liability coverage, just like doctors, lawyers and accountants have insurance,” said Scoble. “They are designed for third-party transactions.”

Especially in today’s market, where buyers have been waiving inspections, “there are a lot of folks who get into homes, commercial properties and so on and they are unhappy. They want to shift some of the financial risk burden to you, to the Realtor®.”

Scoble said that the percentage of Realtors® who have had claims against them has increased in recent years. “You can do everything right in the transaction, but it’s the perception of the other person, if they think you made the mistake. Attorney fees and court costs add up. About half of claims are closed without any settlement or judgement, but there is still cost in settling them. The average claim costs $40,000,” she said.

One of the top reasons Realtors® receive complaints is the misrepresentation of property, making up about 70% of claims, and the majority of those have to do with water issues, like water infiltration, mold and leaks, she said. Additionally, sewer and septic represent a large number of claims. Zoning issues and square footage are also common claims, she said.

Cybercrimes are generally not covered, except for some breaches. Scoble recommended brokers obtain cyber coverage, in addition to errors and omissions.

“Be cautious with high-risk clients,” she added. “Documentation is your best defense. If there is a claim, it is your word against their word unless you have it in writing.” She recommended  printing emails, text messages and other communication and putting it in your client’s folder.”

“I encourage education, especially legal updates. Then you can get in front of it and know it’s coming your way. I would encourage Pennsylvania Realtors® to do the same thing. Keep on top and know what is going on in the industry,” she said.

“Don’t step outside your area of expertise,” she added.

Topics

Errors and omissions insurance Pearl Insurance
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