E&O Insurance Glossary

Definitions of terms that may be associated with real estate E&O insurance:

A-Rated
Admitted
Agent Pre-Paid Legal
Agent Owned Property
Broad Form Endorsement
Claims Expense Outside
Conformity Coverage
Contingent Liability
Conformity Coverage
Disciplinary Proceedings or Discipline Hearing Expense
Discrimination/Fair Housing
Escrow Disputes/Earnest Money Deposits
First Dollar Defense
Franchise Coverage
Lock Box Coverage
Megan’s Law
Policy Limits
Prior Acts/Retroactive Coverage
Retention
Risk Management Services
Seller’s E&O/Seller’s Protection Plan
Subpoena Coverage
Tail Coverage

A-Rated

The highest rating class from A.M. Best, an independent company that rates insurance companies on their financial stability and future claims-paying ability (see www.ambest.com).   CRES insurance policies are provided through A-rated carriers.
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Admitted Carrier

An insurance company authorized and licensed to transact business in a given state.  An Admitted company is monitored by the state for financial stability, and is covered by the state’s guarantee fund.  The Admitted carrier is also subject to the state’s regulations for licensed insurance companies.

“Surplus” or non-admitted carriers are less regulated by the state. If you have to pay a “state tax” or “stamping fee,” the company is probably non-admitted.

CRES insurance policies are provided through Admitted Carriers.
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Agent Pre-Paid Legal Services

A no- or reduced-cost suite of legal services designed to assist in the event of a dispute or issue. Usually distinct from an insurance policy. See also Risk Management Services.  All CRES E&O policies include legal advisory services.
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Agent Owned Property

Property where the real estate licensee holds a pecuniary interest. Some policies exclude transactions for agent-owned properties or only cover owner-occupied property, not rental properties. Others require special conditions precedent to coverage. Learn more
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Aggregate Limit

The overall policy limit of the amount of coverage during the annual policy period.  When E&O insurance provides $500,000/$500,000 coverage, for example, the second number indicates the maximum dollar amount that can be paid for all claims in total on your behalf during the policy period.  Also called “Policy Limit.”  (The first number is the “Per Claim Limit.”)

Broad Form Endorsement

This optional addition to your CRES E&O insurance policy (depending on your state) may include:

  • Subpoena coverage: $30,000 to cover your expenses per subpoena
  • Disciplinary Proceedings coverage: $20,000 per disciplinary proceeding, up to $50,000 per policy period, to cover your costs for reasonable attorneys’ fees and other necessary costs, expenses, or fees
  • Loss of Earnings coverage: $750/day or $10,000 per claim, up to $50,000 per policy period, to cover your actual loss of earnings for required attendance at trial, hearing, mediation, or arbitration involving a claim against you
  • Public Relations coverage: $25,000 per public relations event, up to $50,000 per policy period, for reasonable public relations advisory services
  • Non-Profit Directors/Officers coverage: $15,000 per claim, up to $30,000 per policy period. The broker/owner or the named insured are covered for damages and defense costs related to activities of the broker/owner as a director or officer of a non-profit organization
  • Data Breach Notification coverage: $50,000 to notify your clients due to a data breach

The Broad Form Endorsement is an option in some states, while the coverages above may be included in the base policy in other states. Use the “Finder Your Solution” search tool in the sidebar or on the Home Page to locate the base policy details and optional coverages in your state.
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Claims Expense Outside

This means that attorney’s fees and other defense expenses are covered separately from the “aggregate” or “policy limit” of liability coverage. There is a separate limit for these expenses.  Also called “Claims Expense Outside the Limit” or CEOL.  CRES E&O is on a Claims Expense Outside basis.
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Claims Expense Inside

This means legal fees, court and filing costs, and judgment amounts are all under one single policy limit amount.  Also called “Claims Expense Inside the Limit” or “CEIL”.

Conformity Coverage

If you are in a mandatory E&O state and hold a real estate license in a second state that requires E&O insurance, Conformity Coverage allows your E&O policy for your home or primary state to conform to the insurance requirements of the second state as well.
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Contingent Liability

This coverage extends injury and property damage coverage to your professional activities outside of the office, including items such as dog bites, falls, and broken property that may occur during Open Houses, showings or other selling activities.  Also called “Open House and Showings Coverage” in CRES E&O. Learn more
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Disciplinary Proceedings or Discipline Hearing Expense

Coverage that pays the expenses required to defend the insured in the event that a real estate commission or regulatory body takes disciplinary action against him or her. This coverage is usually optional. Some companies include it as part of the policy; some may include it with Risk Management.  See the CRES E&O coverage details for your state.
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Discrimination/Fair Housing

Coverage to protect you against discrimination claims or fair housing violations. Although not as prevalent, these claims still occur, especially if doing leasing. This coverage is usually optional. See the CRES E&O coverage specifics for your state Learn more
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Escrow Disputes/Earnest Money Deposits

Covers claims that arise from alleged failure to pay or refund escrow money, security deposits, taxes or commissions. This type of dispute is often included in E&O policies; however some carriers require an optional endorsement to provide coverage in this area.  See the details of your state’s CRES E&O policy
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Environmental/Pollution Coverage.

Coverage for claims stemming from unknown preexisting or new pollution conditions or environmental hazards such as lead, radon, mold, asbestos, etc. This coverage is usually optional. Review the CRES E&O policy details for your state Learn more
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First Dollar Defense

With First Dollar Defense, your Errors and Omissions insurance pays for attorney’s fees.  You’re only responsible for out-of-pocket claims expense (the “Retention”)  in the case of a settlement or liability judgment in which damages are awarded. Without First Dollar Defense, your out-of-pocket claims expense (Retention) is applied to the first costs incurred, which often are attorney fees.  CRES E&O policies include First Dollar Defense.
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Franchise Coverage

Adds a franchisor with which the insured is affiliated to the definition of real estate firm, to ensure coverage as part of the policy.
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Full Prior Acts Coverage

An endorsement to your E&O policy to cover claims resulting from transactions that may have occurred before the current E&O policy was in force.  Full Prior Acts Coverage, a CRES exclusive, can be especially useful if you’ve had gaps between past E&O coverage periods. See also Prior Acts.

Lock Box Coverage

Covers claims in the event someone improperly gains entry via the lockbox. Make sure you have this if you are doing listings. Some policies cover just Property Damage, not Bodily Injury. You want a policy that covers both.  See the specifics of a CRES E&O policy for your state.
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Megan’s Law

This coverage pays for diminished value of a property due to the undisclosed death or bodily injury of any person.
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Policy Limits

Limits are provided on a per-claim and an aggregate basis, representing the amount the policy will pay per claim and in total for the term of the policy.   With a CRES E&O policy that offers $500,000/$500,000 policy limits, that means each claim will be covered up to a total cost of $500,000 (the first number), and the total or aggregate amount of all claims during the policy period will be covered up to a total cost of $500,000 (the second number).  CRES E&O policies also include a separate $500,000 limit for legal fees. Learn more
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Prior Acts/Retroactive Coverage

Coverage for claims arising from acts that occurred before the beginning of the policy period. (Policies written on a claims made basis cover only claims reported during the policy period.) Prior acts coverage is necessary for covering a claim made during a current policy period for an event that happened before a policy was in force.
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Retention

The dollar amount you are responsible for paying in the case of a claim before the policy pays.  You would cover the costs up to your retention limit, and the insurer would pay the remainder, up to the policy limit. Retentions (out-of-pocket claims expense) usually range from $2,500-$100,000. The CRES E&O retention applies only when damages are to be paid.  If legal defense costs are the only expense, no retention is due.  CRES E&O policyholders can also reduce your E&O retention with a Qualified Home Warranty*. Learn more

*Seller’s E&O coverage and other benefits are feature based and warranty specific. Read each policy for a full comparison of coverage and benefits. All coverage is subject to Underwriting and other qualifications. The E&O Retention (Out-of-Pocket Claims Expense) Reduction applies to any real estate licensed Real Estate Agents Alliance Purchasing Group (REAAPG) member who personally pays for the Home Warranty Plan. These benefits are offered by, and intended for, the members of REAAPG. REAAPG membership is part of your CRES E&O policy. Other warranties may also qualify for an E&O Retention Reduction, but only those warranties listed here are guaranteed to qualify. Not available in all states. Certain restrictions apply.
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Risk Management Services

Provides access to legal support and services to help manage risks, resolve disputes and represent the insured in the event of a claim.
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Seller’s E&O/Seller’s Protection Plan

E&O coverage that is provided to the sellers of a residential real estate property to protect them in the event of a claim filed by the buyer after the sale of the property.
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Subpoena Coverage

Coverage for attorney’s fees to provide advice regarding the production of documents, prepare the insured for sworn testimony and represent the insured at the deposition.  See the CRES E&O specifics for your state.
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Tail Coverage

Coverage purchased to continue coverage after the end of a policy term, for claims that may occur during some period of time after the end of the term.
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