Last Update: 04/18/16
Does paying for errors and omissions coverage, mean that Florida real estate agents think they may face a claim arising out of an act or omission in the performance of their services?
In Florida, there is no legal requirement that real estate agents, those duly licensed by the State of Florida, carry errors and omissions (E&O) insurance coverage a/k/a professional liability insurance. However, Florida law does allow for real estate brokers to be held liable for the mistakes of their agents, which essentially means that most real estate professionals in Florida are covered by some form of E&O insurance.
What is Errors and Omissions Insurance for Real Estate Agents?
E&O insurance is also known as malpractice insurance — it is insurance coverage for mistakes made by real estate professionals in the course of their services. Just like they do for doctors and lawyers, architects and engineers, insurance companies offer these policies to real estate agents and real estate brokers to cover their financial loss when they make a mistake that hurts someone. In addition to covering damages to injured parties, these policies also pay for punitive or exemplary damages, where insurable by law, and pre-judgment and post-judgment interest as well.
A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.
E&O Policies have their limitations.
First of all, these policies (see a sample policy here) only cover damage claims made during the policy period. Meaning, if the real estate agent or broker fails to keep up their premiums, then an injured party (homeowner, buyer, landlord etc…) will not be able to recover financial relief under an old policy (thereby forcing the injured party to look to the real estate professional’s assets as its sole source of compensation).
Second, these policies cover only mistakes — errors or omissions. Most malpractice policies covering real estate brokers or real estate agents will not provide coverage for things like:
- Fraudulent acts by the real estate agent
- Criminal acts by the real estate agent
- Personal injury claims (bodily harm or wrongful death)
- Discrimination claims.
Finally, most Florida real estate professional E&O policies will have a policy limit, just like other kinds of insurance coverage.
E&O Coverage Does Help Victims of Florida Real Estate Agents or Brokers
There are all sorts of ways that someone can be victimized by a real estate agent or real estate broker in Florida. In the past decade, the number of bad acts perpetrated by agents and brokers, which have harmed buyers, sellers, and investors, has been increasing (some of the increase can be attributed to the foreclosure crisis, i.e. short sale fraud, deficiency judgment issues, flopping, etc…).
While intentional acts are not covered by E&O insurance policies (meaning for things like FRAUD), negligent acts (which are the most common bad acts) are often covered by most policies (Negligent acts are those mistakes that were made without dishonest or malicious intent).
Therefore, learning that an agent or broker maintains this types of insurance policy is good news — especially when most real estate agents (that’s my opinion, based upon my experiences) do not have enough liquid assets to cover the losses they cause an injured party.
A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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