Real estate agents are held to high standard and level of accountable when it comes to their duties. Real estate agents are also recognized as professionals under New York State law.
This makes NY real estate agents professional liability insurance an absolutely necessity to any practicing real estate agent or broker in the state of New York.
NY real estate brokers professional liability insurance deals with exposures related to the following:
- Real estate licensing requirements and regulations,
- Realtor association codes governing the practice of members, and
- State and municipal law governing the activities of real estate agents.
Real estate agents who rely solely on commercial general liability insurance for insurance coverage leave a huge gap for professional errors or omissions claims. General liability insurance policies provide coverage against 3rd party “bodily injury” and “property damage” claims. There is no coverage for a real estate agents professional liability under a general liability insurance policy.
NY Real Estate Agents Professional Liability Insurance Coverage
NY real estate agents professional liability insurance policies (similar to accounts professional and engineers professional) are not standardized policies, this makes it extremely important to review the program features of each policy for each specific insurance carrier. Typically, coverage applies to the individual, partner or organization named in the declarations. Executive officers and directors of corporations and other partners are automatically included as insureds. Employees and sales agents, and independent contractors or other non-employees, are also covered.
Very Important Note: Coverage for independent contractors working out of your office and/or placing business through you as broker are only covered while they are working for your business and acting within the scope of your firm’s professional activities. What they do outside of that will not be covered.
NY real estate agents professional liability insurance is written on a claims-made basis, which means that claims are brought against the policy in-force when the claim is filed as long as the claim event occurred after the listed policy retroactive date.
Exclusions on a NY Real Estate Agents Professional Liability Insurance Policy
As mentioned above real estate agents professional liability policies are unique based on the specific insurance carrier, however, the typical real estate agents policy excludes coverage for criminal or fraudulent acts; liability under the ERISA Act; violation of securities acts; pollution, contamination or cleanup; claims arising from purchase, sale or management of property developed, constructed or owned by the real estate agency; and claims arising from interest, operations or activities as a mortgage banker, escrow agent, construction manager, or property developer.
Does your real estate agency conduct any of these activities?
Another common exclusion is for bodily injury, property damage, personal injury, or advertising injury as these coverages are found in commercial general liability insurance.
NY Real Estate Agents Professional Liability Insurance Endorsements
These are common endorsements available to the basic Real Estate Agents Professional Liability Policy.
Civil rights violations
Real estate agents professional liability policies, in general, exclude claims for allegations of discrimination on the basis of age, sex, race, religion, national origin, or sexual preference. This is a particular problem area for those engaged in the sale and rental of residential property.
Legal defense costs
This coverage endorsement will increase the available defense costs limit by purchasing a separate limit to apply outside of the form’s policy limits. This is an important endorsement considering the high cost of legal expenses in today’s legal landscape.
Some policies include an exclusion for pollution similar to that associated with commercial general liability insurance. Others, addressing the particular risk of a real estate broker, exclude “any loss, cost or expense arising out of… failure to detect, report, test for, clean up, advise of… or in any way respond to … the existence of pollution,” and also exclude governmental claims or orders associated with pollution. Extended reporting period
Incidental Property Management Liability
Provides a modest, stated amount to cover a named insured’s management of residential or commercial property (rent collection, tenant-screening, property maintenance, etc.). However, it is intended for light exposures, not for operations that derive a significant percentage of their revenue from this activity.
This option pays for damage or injury to third parties because of acts or omissions related to lock boxes owned by the named insured.
Mortgage Broker Liability
This endorsement applies to claims related to the real estate agency’s activity as a mortgage broker (preparing loan documents, vetting prospective borrowers, providing loan cost information, consulting, etc). This policy applies to limited incidental exposures, NOT a major activity where a separate policy is more appropriate.
Prior Acts Coverage
Depending on the insurance carrier providing coverage there can be limitations on damages arising out of acts or errors that occurred before the initial policy effective date.
The Insurance Take-Away
NY real estate agents professional liability insurance is an absolute necessity for any firm in the real estate business. In most cases a real estate agency’s largest exposure to loss is the professional exposure not the more traditional general liability insurance exposures like slips and falls.
If you have questions about your current real estate agents professional liability policy or if you would like to receive a quote for real estate agents professional liability please call our professional lines insurance specialist, Ryan Murray at (518) 456-6688 or click here to begin the process by email.
Ryan Hanley, CIC