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WHY DO I NEED E&O INSURANCE?
There are several reasons. First, you may be required to carry E&O insurance by the state where you work or by your customers. Second, if you have a claim filed against you (whether you did anything wrong or not), you will have an attorney appointed to defend you. Third, if you do make a mistake, you will not be at risk of financial disaster if you are required to pay damages.
WHY IS E&O INSURANCE GETTING MORE COSTLY?
When the real estate markets collapsed in 2007/2008, many people and banks lost a lot of money. These losses led to a huge increase in claims and lawsuits, which cost E&O insurance companies millions of dollars to defend.
OK, I UNDERSTAND THAT. THEN WHY ARE SOME CARRIERS STILL OFFERING LOW RATES?
Insurance is a cyclical business and not all carriers cover every profession all of the time. Some carriers had very little exposure to the losses caused by the collapse of the real estate markets so they can still offer low premiums. Other carriers just recently started writing E&O for real estate professionals, so they have a clean book and no loss experience, but they also have no experience handling E&O claims against your profession. Also, some carriers “cherry pick” clean businesses from other carriers by offering very low premiums to experienced professionals with no claims history. Unfortunately, once you have a claim, those carriers are likely to cancel you.
HOW DO I FILL OUT THE CLAIM SUPPLEMENT FORM?
For instructions and to download a Claim Supplement form, click here.
WHAT IS AN AMC ENDORSEMENT?
This endorsement expands coverage under an E&O policy. It includes the cost of defending the AMC if both the appraiser and the AMC are the subjects of a complaint by a lender client of the AMC involving any appraisal work done by the appraiser for the AMC and its lender client. To learn more about AMC endorsements click here.
WHY SHOULDN'T I ALWAYS BUY THE CHEAPEST E&O I CAN GET?
Price is just one piece of a complicated risk management puzzle. You want to be insured by a carrier who has claims experience with your profession, not one that just started selling E&O after the real estate market collapse. You want to buy coverage through an agent who knows your business and the risks you face. In other words, you should do business with a company as professional as you are.
IS THERE FINANCING OPTIONS AVAILABLE FOR INSURANCE PREMIUMS?
Yes, we have many financing options. To discuss them, please complete your application and once you have submitted it, call us at (800) 882-4410.
WHAT DOES "CLAIMS MADE" MEAN AND HOW IS THAT DIFFERENT FROM AN OCCURRENCE POLICY?
A claims made policy provides coverage only if a claim is tendered while your policy is still in effect, subject to any policy provisions for extended reporting for a period after your policy end date. Once your policy ends, coverage ends no matter when the issues giving rise to the claim occurred. In contrast, an occurrence policy provides coverage if the issues giving rise to the claim took place at any time you had coverage, even if the claim is reported after the policy end date.
WHY IS IT IMPORTANT TO HAVE PRIOR ACTS COVERAGE?
As long as you maintain your Prior Acts Coverage (retro date), even if you switch carriers, any work you have performed will be covered, subject to specific policy definitions, limitations or exclusions. Beware of the carrier who offers you a low premium in exchange for accepting coverage called “retro inception.” This means you are losing your prior acts coverage, which could result in you having to pay a claim out of your own pocket.
WHY WOULD MY PREMIUM GO UP IF I ONLY HAD ONE CLAIM AND THE JUDGE RULED IN MY FAVOR?
Insurance companies are for-profit businesses, so if you pay premiums for 10 years (let’s say a total of $20,000) and have no claims, you are a profitable account. If, in year 11, you have a claim and it ends up costing $25,000 in legal fees to get a judge to dismiss the case because you did nothing wrong, you are no longer a profitable account. In order to “fix” the profitability of your account, the insurance company can either decide to “cut and run” (cancel you) to avoid any future risk of greater losses, or decide to increase your premium in order to offset at least some of the loss incurred. If you are in a profession that has been hit by an avalanche of claims due to the collapse of the real estate market, you may find your premium increasing even if you personally have never had a claim. This is an across the board increase based on your occupation alone and not based on your personal loss history/profitability.
HOW CAN I AVOID CLAIMS AGAINST MY E&O POLICY?
Truthfully, you cannot. In the United States, anyone can file a claim or lawsuit against anyone for any reason, and this will not change until the penalties for filing frivolous actions are high enough to discourage them. So, to reduce your risk and to build a defensible position if a claim is filed, do the following: be thorough, detailed, and professional; don’t take an assignment that is beyond your level of expertise; check your work; do all your own research; and confirm all the information you are relying on when preparing your report. Next, if you get a call from a client who has any questions or issues, call that client back immediately. Nothing irritates a client more than being ignored, and irritated clients file claims and lawsuits.