Realtor Liability Insurance: Must-Have Coverage for All Real Estate Agents
Most real estate agents in Ontario don’t have adequate insurance coverage. Although realtors are required to have Errors and Omissions insurance coverage, many don’t bother with liability insurance. This leaves them open to significant lawsuits with potentially catastrophic personal and professional consequences.
The issue of realtor liability first came to our attention when we heard the true story of a realtor we know. We’ll call him Paul. During the winter, Paul showed a valuable home to a couple. As he was leaving the property, he got a phone call which distracted him. He wasn’t aware that he left a door unlocked.
Later that night, a windstorm swept through the region and the door swung open. The sub-zero temperatures quickly cooled off the house and the pipes froze and then burst, creating massive water damage. When the homeowners returned the following week from their vacation, they discovered the disaster and proceeded to sue Paul and the brokerage he works for. The brokerage was covered by their liability insurance but Paul did not have realtor liability insurance. In the end, Paul owed thousands of dollars.
In our experience, we’ve noted three main reasons why realtors don’t have realtor liability insurance:
1. “I didn’t know it existed.”
2. “I’m careful on the job—it’ll never happen to me.”
3. “It’s too expensive!”
“I didn’t know it existed.”
Many realtors simply don’t know that realtor liability insurance exists, never mind that they need it. In reality, most brokerage contracts (the contract between a real estate broker and their real estate agents) actually explicitly list realtor liability insurance as a requirement for their agents. Unfortunately, many real estate brokers do not follow up or enforce this clause, leaving both themselves and their agents open to expensive lawsuits. In fact, bodily injury and property damage ranks 5th in the Top 10 claims against real estate agent.
Many real estate agents rely on their Errors and Omissions insurance to protect them from legal difficulties. Some agents find out too late that this kind of insurance, although important, is inadequate on its own to cover their needs. Errors and Omissions insurance coverage is designed to cover real estate agents for a mistake made on a contract or an accidental failure to disclose important information. It does not cover an agent for any physical damages (real or perceived) he or she caused.
Let’s imagine one possible scenario. Meet Cindy. Cindy showed an expensive house to a family with kids. Unfortunately, one of the young ones knocked over a vase worth over $8000. The homeowners are within their rights to sue Cindy, her real estate broker, and the visiting family. Although Cindy has Errors and Omissions coverage, it wouldn’t cover this kind of incident and she could potentially be held liable. At the very least, she would have to cover the cost of her legal representation.
“I’m careful so I will never get sued.”
Caution alone is not enough to prevent lawsuits. Consider a few examples where an agent—no matter how careful or fastidious he or she is—could be left open to an expensive lawsuit.
Georgia is a real estate agent who has shown hundreds of home without any incidents. Last Friday, she showed a property at three o’clock. Another agent showed the same property at one o’clock and a third agent showed it at four o’clock. When the homeowners returned from work that evening, they discovered that expensive jewellery had been stolen. They are now suing all three real estate agents. Despite the fact that Georgia has never had any previous incidents and escorted her clients through every room, she now finds herself in serious legal trouble. Without liability insurance, she will have to fund her legal defence out-of-pocket, which could cost her thousands.
Veejay is another successful real estate agent who is known for his great customer service. Last month, he hosted an open house. Unfortunately, an elderly woman slipped on the stairs and fell down, breaking her hip. Now her family is suing Veejay, his real estate brokerage, and the homeowners. Although the family may have a hard time proving Veejay’s negligence, he will still have to hire a lawyer at considerable expense and go to court. Whether or not the family wins the case, he will have had to come up with a substantial amount of money upfront to pay his legal bills.
“Liability insurance is too expensive!”
The good news is that although realtor liability insurance can save you big, it doesn’t need to cost you big. It is the kind of insurance coverage that is minimal in cost but can save you hugely should you ever have to make a claim.
Remember Paul? He was the inadequately insured real estate agent who was sued after a door swung open. He was deemed negligent and held liable for thousands in damages. Before this incident, Paul assumed it was too expensive to get realtor liability coverage. Sadly, he could have prevented this financial disaster by purchasing adequate insurance.
This agent’s unfortunate experience spurred us on to create a specialized, cost-effective realtor liability program with our friends at Gore Mutual. We’re currently the only brokerage in Ontario offering this specific program, which offers great coverage at excellent prices.
Find out more about our cost-effective realtor liability program here. Or call us at 1-844-807-1506 with any questions.