It is important for Realtors® to understand the fundamentals of Errors and Omissions Insurance coverage. Errors and omissions coverage, commonly known as E&O insurance, affords licensees and real estate brokerage firms protection against claims or lawsuits initiated by clients who feel that his or her agent failed to provide adequate services. Although most licensees have heard of E&O insurance, and in most instances have E&O coverage, very few actually review the specific terms of the policy to ensure that they are fully protected.
The Potential for a Lawsuit
In every real estate transaction there is the potential for a lawsuit. In an article authored by Barbara Nichols entitled “Don’t Get Sued by Uncle Joe!” (published on www.Realtor.org on August 1, 2006) several cases were highlighted explaining the pitfalls and risks that are inherent in the agent-client relationship. One case involved the representation of relatives (a nephew and his new wife) by a real estate agent, where the agent was not familiar with a specific residential neighborhood. The agent decided to represent the client anyway. The agent located a “wonderful” townhouse which the client ultimately purchased. Within a few months, the agent received a subpoena and was eventually sued, along with the seller and listing agent.
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