Professionals are people who are supposed to produce work that they can be held accountable for. This could imply that the slightest mistake could lead to a disagreement between the professional and the client. These disagreements may cause the client to sue the professional.
Should the claim be made, the real estate professional would spend quite an amount of time and money in defending against the claim. A lawyer will have to be hired at a cost and if he/she loses the case, they will have to pay whatever compensation that the court may deem necessary to the complainant. For realtors, real estate errors and omissions insurance policies are designed to address such circumstances.
Errors and omissions insurance caters to the financial obligations of any wrong doing on the part of the real estate professional (known as an error), or something that they have failed to do that they should have done (known as an omission).
Real estate E&O insurance will ensure that the professional does not suffer grave financial constraint, should there be a charge against them.
Finding a lawyer who has specialized in professional liability or negligence is time consuming and costly. This may make it difficult for the professional to find a suitable lawyer, and if they do, they will still pay high charges, whether they win the case or not. An insurer will have established links to such lawyers and finding one will be a downhill task. Also, with the aid of an insurer, you can get better payment terms. An example of such an arrangement is in a situation where the lawyers are tied a ‘no win, no pay’ agreement. This is beneficial to the realtor because it motivates the lawyer to try their best to ensure that the case is won.
Some professionals form Limited Liability Companies to protect them from errors of omission and commission but such companies will not protect them from being sued for negligence. Obtaining an E&O insurance ensures that the company does not lose its assets in the event of a claim.
An E&O insurance policy is structured to cater for unforeseen expenses, thus providing savings in both time and cost.
Post by Katya