Most insurance agencies have a procedural manual in place in order for staff and workers to know what guidelines they need to follow during the course of performing their duties. There are those, however, that advocate doing away with the manual, citing that it is a discoverable document. For example, in the event of an errors and omissions (E&O) claim, both attorneys (the one defending as well as the one that is suing the agency) will have access to it, and can bring it into evidence during litigation.
Although there are some circumstances where a procedural manual can be a cause of concern, it can also serve as a very useful and valuable business tool. The business of selling insurance can be fraught with difficulties, which is why every smart agency has insurance agent errors and omissions insurance to protect the business and their agents.
What makes an agency a good E&O risk?
Typically, the word “consistency” is used a fair amount; consistency is how the various procedures outlined in the company manual are performed. Allowing each employee to do things in their own way is usually not a good idea and can certainly help to cause problems. Another benefit of a procedure manual is for new employees to get a grasp of how the operation works with a shorter learning curve.
Unfortunately, when the plaintiff’s attorney, in the event of litigation, is able to discover a lack of consistency or that individuals in the agency did not even follow their own procedures, this can spell trouble. From time to time, it is a good idea to review agency procedures and to compare them to what the staff may actually be doing. Invariably it may become apparent that the staff is not performing the task the way that it is stated to do so in the manual.
However, the issue isn’t always that the employee was consciously looking to vary from the stated procedures, but oftentimes the issue is that the procedure in the agency manual had been changed, and while everyone was consistently performing it correctly, the manual had never been updated to reflect the change in the procedure.
Having a staff meeting where everyone has a copy of the manual can result in creating an updated manual and having a staff that knows what the manual states. Speak to an agent about any questions or concerns about insurance agent errors and omissions insurance, and make sure that adequate coverage is always in place.
Making mistakes is an unfortunate part of the real estate business, and becomes an issue when that mistake leads to litigation. While no one sets out to give poor advice, or intentionally forgets to sign an important document that affects the closing on a client’s dream house, these sorts of errors often due occur.
Regardless of whether the mistake was on accident or due to intentional neglect, most businesses need (and carry) errors and omissions insurance coverage to protect their companies. By choosing to forgo purchasing a professional liability insurance product like E&O coverage, a real estate agency or agent is putting their financial future at serious risk.
E & O coverage is not a typical insurance product
An E&O policy that doesn’t cover physical and tangible items like the office or a company car. Instead, it protects intangible valuables such as advice and ideas. Providing real estate advice to a client and if, for whatever reason, the deal falls through; odds are that the client may blame it on bad advice, or mishandling of paperwork. There are instances where the client may decide to take the matter to court to recoup actual and perceived financial losses.
By having an E&O policy, the insurance company will cover most costs connected to the trial, as well as any judgments awarded to the other party. This is a valuable type of protection that most businesses would be foolish not to have.
The best time to buy a policy is at the onset of meeting with clients. Purchasing insurance after a mistake is made doesn’t do much good. These policies are not retroactive and will not cover the individual or the business when the incident occurred beforehand. Also, many clients will not work with real estate agents that are unable to produce proof of professional liability coverage.
While it is true that many large real estate firms are already covered by E&O insurance policies that doesn’t mean that individual agents don’t need their own coverage. In fact, that coverage may be minimal; therefore it is up to agents to protect their own financial futures.
To find the right errors and omissions insurance coverage, consult with an insurance expert that has experience with professional liability coverage, as he or she can be vital in choosing the right insurance product. They will also be able to provide expert advice concerning which companies offer the best deals.
An insurance agency puts a lot on the line in their daily dealings. Their reputation, their business, and the well being of their clients is often at stake. First and foremost they must protect their clients and the relationships they have built, but they must also protect their book of business, and their reputation in the community they serve that they have worked so hard for. One way that agency owners protect themselves and their business is by purchasing agency errors and omissions coverage.
E and O insurance for insurance agents is truly a valuable product. Most independent insurance agencies and brokerages purchase coverage today because of the protection that it provides. Most agency owners buy agency E&O coverage to protect the assets of their agency, and this is necessary because statements are made that can be potentially damaging in a court of law.
Language on an agency website can cause potential harm
As is often the case, an agency website may state that the agents are “experts” and “specialists” and that they will make sure that the property values listed are updated each and every year. But what happens when a deal goes awry? The client may point to these statements, which were taken as fact, and say that this wasn’t accurate in how their particular situation was handled.
The agency website may also indicate that the company’s agents provide a wide variety of risk management services, and the agency producer may also make various verbal comments on their expertise saying that they will make sure that the customer is properly insured. Protecting an agency’s assets, both financial and reputational assets, is why most agency owners choose to carry an E&O policy. If an agent makes a mistake in anything that they do on behalf of a client, the insurance company ends up being responsible for it.
Most agencies understand the need for E and O insurance for insurance agents to avoid paying out those large losses which could result in bankruptcy; otherwise they would likely have to sell their book of business, or some portion of their book of business, or even their entire agency, in order to pay those types of claims if they didn’t have adequate insurance.