What Does My E&O Policy Cover?
Managing the risk exposure for your firm through insurance is vital to avoiding or mitigating risk and effectively dealing with problems if they do occur. But between all the insurance jargon and charts, it’s difficult to interpret what your errors and omissions (E&O) policy actually covers. However, we want to make sure you fully understand the breadth of your E&O coverage.
As insurance experts, we’re here to help you understand your E&O policy so you can focus your attention on real estate.
In general, policies generally cover delivery of professional services by the insureds.1 Here is a list of what E&O insurance policies could cover:*
- Automatic fair housing discrimination
- Real estate agents, brokers, and more
- Residential transactions
- Commercial transactions
- Land transactions
- Agent-owned residential transactions
- Property management
- Mold claims
- Open house property damage
- Defense outside the limits
- Liberalization clause
- Innocent partner
- Subpoena assistance
- Extended Reporting Period (ERP)
- Network & privacy
- Public relations advisory services
- Defense for disciplinary proceedings
- Early claims resolution for defense and damages
- Personal injury
- Identity theft
- First-party cyber liability
- Other optional coverages
What do I need to know when I’m shopping around for coverage?
When you’re looking for E&O insurance, you want to make sure you get the coverages you need. These are a few things to consider when you’re comparing different companies and coverages:1
- Who and what is covered?
- Under which conditions am I covered?
- What are the costs, limits, and deductibles of coverage?
- How do my office policies impact my E&O insurance?
Coming up with a list of what is necessary for your firm can help you narrow down who has what you want and who doesn’t. Each firm is different, so your firm’s coverage needs could be drastically different than another firm’s coverage needs.
Is my firm eligible for coverage at Pearl Insurance?
Eligibility for coverage with AXA XL and Pearl Insurance is determined by various factors involved in the operations of your business. Some of these factors include your claims history, a mix of business including non-residential transactions, and whether your business is in a mandatory insurance state. For firms that don’t qualify for the AXA XL program, Pearl Insurance has the ability to provide coverage from additional carriers through our Specialty coverage unit.
Does it cover all of the agents in my firm?
In short, yes it does.
- Real estate agents
- Leasing agents
- Property managers
- Short-term escrow agents
- Referral agents
- Franchise corporations
- Employees of independent contractors
- Business brokers
- Notary publics
What is prior acts or retroactive coverage?
Professional liability and E&O policies are extremely different from your typical auto or homeowners policy. While auto and homeowners policies, and even general liability and workers compensation policies, are written on an occurrence form, E&O policies are written on a claims-made form. But what difference does that make?
The main difference between occurrence and claims-made policies has to do with the coverage trigger, or the event that initiates coverage.2
- Occurrence policy: Applies to claims which occur during the policy period, regardless of any later time at which a claim is made.
- Claims-made form: Applies to claims which occur on or after the “retroactive date” and for which the claim is received or recorded by an insured or the company during the policy period.
Claims-made policies cover claims that are made against you during the policy period. The event that led to the claim could have occurred during the policy period or before the policy inception date, but if the claim was filed, or made, during the policy period, it will be covered.2
If there is a coverage gap between one policy to another or if a claim is made after the policy expires, the claim will not be covered. This is why ensuring your policy is active and renewing on time is so important.
Pearl Insurance offers an extended reporting period (ERP), which is a certain amount of time after the end of the policy. If you report a claim filed prior to the end of the policy period or during the ERP, it will still be covered by your policy.
Are there any exclusions?
Most E&O policies have at least a few exclusions. Make sure to thoroughly read all of the exclusion language so you’re aware of what would be excluded from a policy. Some common exclusions on E&O policies include claims arising from:1
- Bodily injury
- Fraudulent or criminal acts (by the insured)
- Discharge of or failure to identify pollution
- Employment-related issues for the brokerage staff
- Misappropriation or commingling of funds
- Violation of securities laws
Coverage can be diminished by exceptions if you’re not careful in reviewing what the policy actually provides.1 The good news is that you can add endorsements if you’re qualified.
What endorsements can I add to my E&O policy with Pearl Insurance?
To offset some exclusions, Pearl Insurance offers endorsements you can add to make your policy comprehensive and customized for your firm.
- You can add coverage for bodily injury and property damage claims for all real estate services, and separately for property management services, when your general liability carrier will not cover the claim.
- Our construction/development coverage adds coverage for claims arising from a property an insured constructed or developed.
- With cyber threats being so prominent these days, we’ve created a cyber suite endorsement designed to help pay for the cost associated with restoring data and computer systems and to help clients respond to the financial burden and service obligations of a data breach.
- Pearl offers a deductible waiver if you do not want to pay the deductible associated with claims. In order to add this endorsement, you must use standard contracts, offer home warranties, offer inspections, and include a seller’s disclosure form.
What does the Pearl Insurance customer experience look like?
Getting quotes for and eventually obtaining E&O insurance doesn’t have to be a huge, long process. Most quotes can get turned around faster than you think.
At Pearl Insurance, we have an average quote turnaround time of 24 hrs. for firms that do mainly residential transactions.** If you’d rather not get on the phone, we can email out an application for you to fill out at your leisure or you can visit our website.
With decades of experience and in-house underwriting, you don’t have to wait to get excellent coverage.
At the end of the day, Pearl Insurance is here for you. We work tirelessly to help you find a policy that fits your firm’s exact needs. Pearl takes our responsibility to protect your business seriously and will always put people before profit.
*This list is not all-encompassing. Some of the coverages included in your E&O policy are not on this list.
**Firms that do mainly commercial, property management, or agent-owned transactions might have a longer quote turnaround due to the complexity of their transactions.
1“Real Estate E&O Insurance: Understanding the Basics.” NAR, 24 March 2014.
2“Difference Between Claims-Made and Occurrence Policies.” The Balance, 20 January 2020.