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Frequently Asked Questions (FAQs)

  • Frequently Asked Questions (FAQs)

Real Estate Errors & Omissions Insurance (also referred to as Real Estate E&O Insurance) is a form of professional liability insurance specifically designed to respond to the needs of the real estate industry.

If you make a mistake while performing any covered real estate professional service, that mistake represents a liability to you and/or your firm.  Real Estate E&O is designed to cover the cost of defending you against any legal action brought against you if someone finds that you breached your duty or failed to disclose aspects of a real estate transaction. 

This coverage is designed to defend you against any legal action and pay any settlements or judgements that may be issued against you.

Sometimes you will have handled all aspects of a transaction correctly and still be pulled into a lawsuit.  If you do not have Real Estate E&O coverage, you may incur significant legal fees trying to defend yourself. The purchase of Real Estate E&O can protect you from the expense of these frivolous lawsuits.

The Astara Real Estate policy is written on a “Claims-Made” basis meaning that the policy covers claims that are reported during the policy term regardless of the date of the original transaction.  The date of the claim triggers the coverage not the transaction date.  In comparison, the “occurrence” policy covers claims that result from transactions that occur during the policy period regardless of when the claim is reported.
The Prior Acts Date is the furthest date your professional liability insurance policy covers you for services you rendered to clients.
  • If the date is shown as “Full Prior Acts” it means that a claim can have occurred at any time prior to the policy effective date and be reported to the carrier within the policy period.
  • If the Prior Acts date is specified (the policy shows an actual date) the claim must have occurred after the date specified and be reported to the carrier within the policy period.
The key to retaining your Prior Acts date is maintaining continuous Errors & Omission coverage.  (See How does a Lapse in Coverage affect my Prior Acts Date?)
A lapse in coverage occurs if an Errors and Omissions Insurance policy is not renewed on the annual date of coverage. If the effective date is missed on purpose or by accident, it is considered a lapsed policy. Maintaining continuous coverage is imperative for claims to be reported and covered under the policy.  On rare occasions with underwriting approval, lapsed policies can be reinstated to retain Prior Acts coverage but this is the exception rather than the rule.  We therefore encourage all insureds to pursue the renewal process 30 to 60 days prior to the expiration date of coverage.
Everyone should have coverage when transacting Real Estate Sales, Leasing, Property Management, Appraisals, Business Brokering, Title, Escrow or Mortgage business.  All aspects of the real estate operation should be covered if possible.
The firm (a corporation, S-Corp or LLC) is covered as the named insured under the policy.  Within the firm, the principal broker, partner, officer, employee (including personal assistants) or independent contractors are all covered for any E&O claim resulting from the rendering of covered professional servicest
If you are a real estate agent or broker working in one of the Mandate States (Colorado, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Nebraska, New Mexico, North Dakota, Rhode Island, South Dakota, Tennessee and Wyoming) you will need to purchase the Astara Individual Licensee policy. In all other states, you may be covered under your firm’s policy.  The firm policy, while covering you, may have limitations and exclusions that may not adequately protect your interests. (See I am Covered Under my Broker’s Policy – should I Purchase an Independent Contractor Policy)?
We suggest you carefully review the firm policy with your insurance agent to determine if it adequately protects your interests.  Many agents choose to purchase their own policy to cover activities not covered by the firm’s policy, to reduce their retention (claim expenses), to ensure they are protected should the firm’s coverage lapse.   If you find you wish to purchase an Individual Licensee Policy, we will be more than happy to assist you and your insurance agent in this purchase.
Real estate transactions are complex and demand attention to detail.  With the complexities involved in these transactions there are no guarantees that you will never receive a demand letter or be named in a lawsuit concerning your professional services as a real estate agent or broker.  The most common real estate claims are:
  • Misrepresentation regarding the Condition of the Property
  • Breach of Duty
  • Breach of Contract
  • Misrepresentation regarding Flooding or Leaks
  • Misrepresentation regarding the Value of the Property
  • Negligence
  • Earnest/Escrow Money Dispute
  • Fraud
  • Bodily Injury / Property Damage
  • Consumer Protection Act
Even if you have done everything correctly there is no guarantee that you will not be named in a frivolous lawsuit forcing you to incur substantial legal fees to defend yourself if you’re not covered by E&O insurance.
The greatest exposure you face as an Appraiser is to incorrectly appraise the value of certain properties. The most common appraisal lawsuits seek damages due to an alleged error in an appraisal valuation. Even if you have done everything correctly as an Appraiser there is no guarantee that you will not be named in a frivolous lawsuit forcing you to incur substantial legal fees to defend yourself if you’re not covered for your Appraisal activities.

As a Mortgage Broker you have a financial duty that can lead to a few specific types of claims.  These involve:

  • Failure to properly review all loan documents
  • Failure to properly advise a client of the risks involved
  • Failure to properly qualify an applicant who subsequently was delinquent

Even if you have done everything correctly as a Mortgage Broker there is no guarantee that you will not be named in a frivolous lawsuit forcing you to incur substantial legal fees to defend yourself if you’re not covered for your Mortgage Brokering activities.

As a Property Manager you have several common claim issues associated with property management.  These include:

  • Complaints of discrimination are most common because potential tenants are unhappy for not getting accepted in a residence.
  • Failure to inspect property conditions and comply with safety regulations.
  • Complaints of substantial property damage which involve diminished value of the residence.

Even if you have done everything correctly as a Property Manager there is no guarantee that you will not be named in a frivolous lawsuit forcing you to incur substantial legal fees to defend yourself if you’re not covered for your Property Management activities.

Discrimination Coverage (also known as Fair Housing Coverage) is provided for both indemnity and defense of claims that you are legally obligated to pay due to violations of Title VIII of the Civil Rights Act of 1968 or the Fair Housing Amendment Act of 1988 or any similar state or local law or ordinance.
An Extended Reporting Period or (tail) provides 1, 2 or 3 years of continuous Errors & Omissions coverage after your Retroactive or Prior Acts date. This is not renewal coverage, but an extension of the current E&O coverage. The Extended Reporting Period is needed if you are leaving or retiring from real estate or selling your business.  It covers you for claims that may occur from your prior transactions after you no longer work in real estate or no longer own a real estate business.
Many real estate agents prefer to be the listing agent on the sale of their own, or their spouse/domestic partner’s residential one to four­ unit properties.  The standard Astara policy automatically provides coverage for the actual or attempted sale of residential properties owned fully or partially by the agent, subject to the following conditions being met in connection with such sale:
  • a written Home Inspection Report is issued by a licensed or accredited home inspector, or was waived in writing by the buyer prior to closing;
  • a home warranty policy was purchased prior to or at closing;
  • a seller disclosure form was signed by the agent-owner and acknowledged in writing by the buyer prior to the closing;
  • the agent’s ownership interest in the property was disclosed in writing; and
  • a state or local board approved standard sales contract was utilized.
In addition, the Residential Property endorsement extends the coverage even further by removing the conditions discussed above for the sale of the agent-owned and spouse/domestic partner owned properties. The policy is further broadened to provide coverage for the sale of other residential properties in which the agent has an ownership interest.

While many of Astara’s competitors require that you purchase a Home Warranty for each client that you represent in order to reduce your out-of-pocket claim expenses on claims generated from those sales.  Astara provides you with a variety of ways to reduce your deductible expenses.  These deductible reductions include:

  • The Deductible Waiver waives the insured’s obligation to pay the deductible up to $5,000 if the following conditions are met:
  1. a seller disclosure form was signed by the seller and acknowledged by the buyer prior to closing;
  2. a home warranty policy was purchased prior to closing;
  • either
  1. a home inspection was completed and a copy was provided to the buyer prior to closing; or
  2. if you act solely as the buyer’s agent, a statement outlining the reasons a home inspection should be completed and a list of at least three home inspection companies was provided to such buyer prior to the closing; and
  1. a state or local board approved standard sales contract was utilized.
  • The Claims Free Deductible Reduction reduces the deductible by $100 for each year the insured has had no losses to a maximum reduction of $1,000;
  • The Consent to Settle Credit provides 50% reduction up to $500 when the insured consents to settle a claim within the required time frame;

  • The Mediation Incentive reduces the deductible applicable to the claim by 50% or $25,000 whichever is less within 180 days of the start of the proceedings.

Claims are handled by AmTrust North America the parent company of CorePointe Insurance Company.  You may send your claim/potential claim to AmTrust via email or fax.  You should expect a call from AmTrust within three days of receipt of the claim notice.  The mailing address, email and fax for AmTrust are as follows:

c/o AmTrust North America
233 N. Michigan Ave., Suite 1200
Chicago, IL 60601
Attn.: AUI Claim Department
Email: anaclaimsreporting@amtrustgroup.com
Fax:  877-207-3961

RESPA is the Real Estate Settlement Procedures Act of 1974.  We strongly suggest you read it if you have not yet done so.

Click here to review the act.