FAQs

The FAQs are organized by topic below, or you can search for related FAQs:

Why You Need E&O Insurance (by Industry, and Individual)

Are you covered under your firm’s real estate E&O policy?  If you’re not, your family’s personal assets and your livelihood could be at risk should you be named in a real estate lawsuit, even a frivolous one.  The average E&O lawsuit costs more than $40,000 — are you prepared to pay that out of your own pocket?

Even if you are covered under your firm’s policy, there can still be gaps, limitations, and exclusions — based on exactly what your firm’s particular E&O policy covers and doesn’t cover.  Your firm’s policy was likely designed to benefit the firm, and you may find it doesn’t really adequately protect you.

Especially if you’ve changed real estate companies, your firm has been sold, or may have been remiss in making its E&O payments regularly, you may find yourself at risk.

Learn more about why you should have an individual real estate E&O policy

Lawsuits are filed every day in every part of the country. With the complexities involved in real estate 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 ten most common claims made for real estate:

  1. Fraud
  2. Breach of Duty
  3. Breach of Contract
  4. Negligence
  5. Bodily Injury / Property Damage
  6. Misrepresentation regarding the Condition of the Property
  7. Consumer Protection Act
  8. Earnest / Escrow Money Dispute;
  9. Misrepresentation regarding Flooding or Leaks
  10. Misrepresentation regarding the Value of the Property

Even if you’re named in a frivolous lawsuit where you did everything right, you can still incur substantial legal fees to defend yourself if you’re not covered by E&O insurance.

Appraisers run the risk of incorrectly appraising the value of certain properties. Typical Appraising claims filed in court seek damages in connection with an alleged error in an appraisal.

Even if you’re named in a frivolous lawsuit, you can still incur significant legal fees that would be covered by Appraiser E&O.

Any financial duty placed on an insured, specifically Mortgage Brokers, can lead to a few specific types of claims. Most typical for mortgage brokers involve:

  1. Failure to properly qualify applicant who subsequently was delinquent
  2. Failure to properly advise client of risks
  3. Failure to properly review loan documents

Even if you’ve done everything right, you can still be named in a frivolous lawsuit.  Having Mortgage Broker E&O will help you avoid paying those defense costs yourself.

Typical claims issues that we see with property management are:

  1. Complaints of substantial property damage which involve diminished value of the residence.
  2. Failure to inspect property conditions and comply with safety regulations.
  3. Complaints of discrimination against potential tenants for not getting placed in a particular residence.

Even if someone brings a frivolous lawsuit against you, you may still incur significant legal fees if you don’t have E&O coverage.

Learn more about how to choose the right tenants and avoid lawsuits.

E&O Policy Details

Policies on a “claims made” basis cover claims reported during the policy term, regardless of the date of occurrence of the original transaction. CRES E&O insurance, for example, is a “claims made” policy; coverage is triggered by the date of the claim, rather than date of the original transaction.

In contrast, “occurrence” policies cover claims which occur as a result of actions during the policy term (like auto insurance), regardless of when reported.

E&O stands for Errors & Omissions, and is often referred to as professional liability. Any mistake made in the process of conducting your business activity carries liability. If someone finds that you breached your duty or failed to disclose aspects of a real estate transaction, Errors & Omissions insurance is designed to cover the costs of defending yourself against any legal action, and paying any settlements or judgments that may be issued against you.

Errors and Omissions coverage can also protect you from frivolous lawsuits.  Even if you did everything right, you can still incur significant legal fees defending yourself if you don’t have E&O coverage.

Everyone should have coverage when transacting Real Estate Sales, Appraisal, Property Management, or Mortgage business. The following is a breakdown of who and what is covered under each entity form:

Firm: Firm, Broker, Agent and all employees
Broker: Broker, Agent
Agent: Agent

All professional services listed on the Declarations Page of your policy are covered.

CRES Errors and Omissions insurance can cover you for:

  • Residential real estate sales
  • Residential property management and leasing
  • Residential appraisal
  • Residential mortgage brokering
  • Commercial real estate sales
  • Commercial property management and leasing
  • Escrow (broker-held or third-party)

Through our online system, you can select all of the activities for which you need coverage to be included in your quote.  Choose your state and activities for which you need coverage to get your CRES E&O + ClaimPrevent® policy quote.  When you’ve customized your policy to cover your particular risks, you can buy most policies online in minutes.

Under the policy of a Corporation, S-Corp, or LLC, the firm as an entity is covered as a named insured. Under the firm, the principal broker and any agents “hanging” their license under the firm’s license are covered for any E&O claim.

Many agents choose to purchase their own policy to cover activities not covered by their Firm’s policy, to reduce their retention (out-of-pocket claims expense), to ensure you’re protected should your Firm’s coverage lapse, or to offer CRES warranties, Seller’s Protection Plan, and other benefits to clients.

An agent policy also covers past sales, as long as you can show you’ve had continuous coverage through your Firm or your own policy. This is important when moving offices, since the E&O coverage does not normally follow you when you move, and your new Firm will not cover your previous transactions.

Learn more about why you may want an individual real estate E&O policy

Tail coverage or Extended Reporting Period Terms provide 1, 2, or 3 years of continuous E&O coverage after your Retroactive or Prior Acts date. This is not renewal coverage, but an extension of the currently bound E&O coverage.

Tail coverage is frequently used 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.

Prior Acts coverage refers to how far back in time your professional liability insurance policy covers you for services you rendered to clients.

The Prior Acts date is the inception date of coverage. As long as a policyholder has maintained continuous coverage from that date, the E&O policy in place at the time the incident is reported would be responsible for paying any covered claims.

If an Errors and Omissions policy is not renewed on the annual date of coverage, it is considered lapsed. As stated under Prior Acts coverage, E&O coverage must remain constant for claims to be reported and covered. If the effective date is missed on purpose or by accident, it is considered a lapsed policy. On rare occasions with underwriting approval, lapsed policies can be reinstated to retain Prior Acts coverage.

If a policy is lapsed because of accounting issues, our accounting department does have the discretion to reinstate policies by charging an amount to make the policy current with a late fee.

If you have a lapse in E&O coverage, you can add the Full Prior Acts endorsement to cover all transactions since your original license date, whether you had E&O coverage at the time or not.

Contingent liability is also known as CRES Open House and Showings coverage.  It’s an additional endorsement that broadens coverage, to include any claim or suit that is brought against you for damages because of bodily injury (to someone other than you) or property damage.  If a client gets hurt at a showing or something is stolen at an open house, the agent may be liable.

This coverage is usually excluded from a general liability policy for real estate professionals.  CRES E&O policies are customized for real estate professionals and can include Open House and Showings coverage.

The Agent-­Owned Property (AOP) endorsement adds coverage when you want to be the listing agent
on the sale of your own, or a direct relative’s residential one to four­ unit property,

There are specific rules which must be met in order for the carrier to insure the sale of AOP:

  • A written home inspection report is issued by an ASHI, CREIA, NACHI, or NAHI member inspector
  • An approved home warranty is in place
  • All state required property transfer disclosure statements are properly completed, signed and delivered
  • The property in which the insured holds an interest consists of 1-4 residential units.

The coverage is a broadened coverage to the standard E&O policy coverage. Coverage is intended for selling your own properties.  Unlike other E&O companies that only offer coverage for your primary residence, CRES will cover other residential property where you hold an ownership interest.

CRES Innovations with E&O

Seller’s Protection Plan (SPP), also known as Seller’s E&O, gives your clients their own E&O policy for 180 days (and it can be extended an additional 180 days).

This is available on most CRES E&O policies, and with CRES Qualified Home Warranties in certain states, and will cover homes where you are the listing agent. The standard protection is $25,000, but the benefits can be combined, so in many states, coverage can reach $50,000. For example, as a CRES E&O client, you can give your seller $25,000 in Seller’s E&O coverage.  When you purchase a CRES Qualified Home Warranty for that seller, it comes with an additional $25,000 in Seller’s E&O.

There is a $2,500 retention (out-of-pocket claims expense limit) for the seller, and coverage is restricted to primary residences.  More about Seller’s E&O.

When you purchase a CRES Qualified Home Warranty for a client and there is a claim on that property while you are insured with CRES, your retention (out-of-pocket claims expense) will be reduced $2,500-$5,000, depending on the warranty used. CRES Qualified Warranties that have a 12-month term qualify for a $2,500 reduction, while CRES Qualified Warranties for a 13-month term receive a $5,000 reduction. So if you have a $2,500 retention, your out-of-pocket claims expense will be $0.*

When you provide a CRES Building Permit History Report to a home buyer before closing, you reduce your out-of-pocket claims expense by up to $2,500.

* 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. Seller’s E&O coverage and other benefits are feature based and warranty specific. These benefits are offered by, and intended for, the members of REAAPG. Not available in all states. Certain restrictions apply.

As a CRES E&O policyholder, your E&O works for you DAILY.  When you have a question, need a letter or contract reviewed, need a letter written, or have a situation in which you need guidance, the CRES ClaimPrevent® Legal team is on call 7 days a week to help.

Our nationwide team of local real estate expert litigators brings a wealth of experience to help you prevent claims before they happen.

Unlike other E&O that only helps you AFTER you have a claim, CRES E&O + ClaimPrevent® actually helps you resolve situations and PREVENT claims!

Apply to CRES: We are the Underwriter

The application requests information regarding the number of agents, license numbers, previous coverage, professional services offered, and physical location of the office.

All application questions provide the information we need for underwriting.  We want to ensure that we write coverage specific to your location and business structure.

GCI refers to Gross Commission Income. This is based on the revenue generated by commissions or fees of any real estate service. This is not total revenues.

Depending on the product, there may be a discount due to membership in an Association, etc. The code, if any, can only be provided by the Association, not CRES.

Premium Payments

Minimum premium options vary by state, depending on policy limits, and whether you want an individual E&O policy or a policy to cover you and your company.

Company policies can have coverage limits up to $3,000,000.

Individual policies in CA, CO, ID, IA, LA, MS, NE, NM, RI, SD, TN, WY have standard limits of:

  • $500,000/$500,000

Individual policies in FL, ND, TX, and other states where E&O is not required by the state have standard limits of:

  • $1,000,000/$1,000,000

Individual policies in KY have $100,000 / $1,000,000 limits.

Your policy’s rating can be affected by Average Sales Price, Number of Agents, Location of office, Gross Commissions reported, Claims reported, Years insured, and Professional Services rendered. There are additional rating factors that can cause an increase or decrease in premium.

In many cases, CRES Real Estate E&O + ClaimPrevent® policies offer 2 to 5 times the per-claim coverage of other policies.  And CRES coverage is broader and much more extensive — you’re covered for a wider range of specific-to-real-estate situations.

Every CRES policy includes Legal Advisory Services 7 days a week, with expert real estate defense attorneys on call to help you resolve situations.

Compare any other real estate E&O policy to a CRES E&O + ClaimPrevent® policy.  You’ll usually discover that CRES gives you far superior coverage for the price — and is a tremendous value.

CRES established the Real Estate Agents Alliance Purchasing Group (REAAPG) under the Risk Retention Act of 1996, to allow us to offer comprehensive prepaid legal services as a part of your real estate errors and omissions insurance.

Under the REAAPG, CRES offers a one-stop shop for coverage through Admitted insurance carriers at wholesale pricing. Because we only work with Admitted carriers, you won’t pay any additional taxes for coverage.

Under the REAAPG, coverage is required to include Risk Management (legal advisory services), which we offer to all companies and individuals on all of our quotes. REAAPG Membership is required by our carriers.

Our ClaimPrevent® Risk Management fees help pay for our Legal Advisory Services, available for all insureds to call for advice, document review and more. Much more than typical hotlines staffed by junior attorneys, the CRES ClaimPrevent® Legal Advisory Services are delivered by experienced real estate defense attorneys.  We have 52 attorneys on-call, so you’ll always work with a legal professional who is local and knows your state laws and real estate regulations.

We have attorneys available 7 days a week to get involved early on in a dispute and help resolve the issue before it becomes a claim.  CRES was the first real estate Errors and Omissions company to focus on actually preventing claims — and giving you a legal services benefit for your E&O investment without having an E&O claim.

Rate increases can be a result of multiple changes in your underwriting specifications. Changes such as increases or decreases in Average Sales Price, Number of agents (if you’re covering you and your company), Years insured, Insured services, Claims reported can all effect the rating.

A claim can result in an increase in premium. Our claims analysts will offer insight into the frequency and severity. Depending on the information provided, the underwriter will account or discount for the claims reported on a policy.

Your CRES E&O Policy

For your convenience there are several methods for submitting your monthly ledger. These options include:

  • Entering your monthly transaction information to the online ledger provided once logged in to your account on CRESinsurance.com. Once the ledger is completed and saved, payment can be submitted online.
  • Emailing your completed ledger to Ledgers@CRESinsurance.com. Please be sure to specify the payment method you would like to use to process your payment. If it is not a payment method that we already have on file, we will need to receive a completed payment authorization form in order to process your payment.
  • Faxing your completed ledger to 1-858-618-1655. Please be sure to specify the payment method you would like to use to process your payment. If it is not a payment method that we already have on file, we will need to receive a completed payment authorization form in order to process your payment.
  • Mailing a printed copy of your completed ledger with payment to:

CRES Insurance Services, LLC
PO Box 847125
Los Angeles, CA 90084-7125

Our renewal process differs depending on your payment plan.

Fixed Policies: A renewal notice will be sent out 60-days and 45-days prior to the renewal. The notice will include a short-form application. Once the application is sent in to the assigned Account Executive team, the underwriting portion will begin.

Per Transaction Policies: A renewal notice will be sent out 60-days and 45-days prior to the renewal. The notice will include a short-form application. Indication terms (quotes with certain “subject to” conditions) are quoted and presented based on the ledger information reported 30-days out. You’re then able to bind the indication terms if you confirm that your activity is valid and current.

Coverage can be added at any time during the policy period. If you have a pending deal that involves a service not covered under the policy, a request can be emailed in to add the coverage to the policy immediately. We strive to make sure that we are able to cover your professional service needs as best as possible.

To request a coverage modification, a simple email request to your Account Executive or Account Specialist will suffice to begin the process of modifying coverage as needed.

Our Account Executives focus on helping you obtain CRES insurance customized to fit your particular business needs.

You’ll then work with an Account Specialist who is an expert in handling existing policy services, including your renewal process. (Your Account Specialist will continue to work with your AE and keep him or her updated on your account.)

About CRES

CRES was founded in 1996 to protect real estate professionals nationwide with superior insurance solutions and proactive risk management.

Our founder, was Jim Allison, a real estate attorney who defended agents and brokers. He realized that a lot of little things could have been done upfront in real estate transactions to prevent problems. He started a prepaid legal program in California, and conducted seminars for real estate professionals. He was available by phone to answer questions, and advised clients about things they could do to reduce their risk.

He called his company Comprehensive Real Estate Services.

Another entrepreneur, Doug Campbell, had created a real estate Errors and Omissions insurance program.  Campbell and Allison got together to create a new category of Errors and Omissions insurance for real estate professionals nationwide — customized E&O insurance that includes legal services.

Comprehensive Real Estate Services was shortened to “CRES” and became CRES Insurance Services.  Their breakthrough product became CRES real estate E&O + ClaimPrevent®.

Campbell and Allison also created the industry’s first per-transaction payment plan More than 20+ years later, CRES innovations in real estate E&O continue to lead the industry.

Read more about CRES in our About section.

An MGA is a Managing General Agent, meaning a specialized type of insurance agent/broker that, unlike traditional agents/brokers, is vested with underwriting authority from an insurer. Accordingly, MGAs perform certain functions ordinarily handled only by insurers, such as binding coverage, underwriting and pricing, and appointing retail agents.

CRES is a specialist in the risks that real estate firms, brokers, and agents face daily.  When you insure with CRES, you work directly with a company that has more than 2 decades of protecting professionals like you from the very specific potential risks you face daily.  We review and approve your application, and we are here to help you prevent claims DAILY with our Legal Hotline.

We are headquartered in sunny San Diego, CA. If you are in town, feel free to stop by and see us!

We also have a Sales and Marketing office in Las Vegas, NV, and Territory Managers in Los Angeles, San Francisco Bay Area, and San Antonio.

CRES Insurance operates as a Managing General Agent for various carriers. That means we are the underwriter for your errors and omissions insurance policy. We specialize at bringing in and managing real estate errors and omissions accounts on behalf of larger Insurance organizations.

We’ve worked with about eight carriers in our 20+ year history.  As better programs come along, we move from one carrier to another.  That’s why there are sometimes changes in carriers.   We want to give you the best coverage at the best price, so we negotiate with carriers for you.

Insurance companies operate in two general modes: Admitted and non-admitted. Admitted companies must file their rates, rules, and forms with each state insurance commissioner and either receive express or implied approval. Many states are very particular in the approval process, to make sure you receive adequate protection and are not subject to excessive or unfairly discriminatory rules.  With Admitted insurance, you are also protected from insolvency by a guarantee fund.

Non-admitted companies do not file their rates, rules and forms with each state.  Beware of non-admitted companies trying to sell E&O in your state — you are at the mercy of the insurance company and their broker.  They can change rates or coverage whenever they want. Even though most states (including California) have laws that establish a preference for Admitted insurance, some unscrupulous insurance brokers will ignore these laws.

if you have to pay a “State Tax” or “Stamp Fee”, the company is probably non-Admitted.

 

Claim and Pre-Claim Services

Those that fall within and meet the terms of the grant of coverage.

Those that don’t meet the definition of “made and reported” or are specifically excluded by the policy.

Contact CRES ClaimPrevent® Hotline at 877-273-7467.  Our local expert real estate attorneys will work with you to help prevent the claim or reduce its size where possible.

Once you’ve contacted our ClaimPrevent® risk management department about an issue or potential claim, it’s counted as incident reporting.

Whenever you think there may be a claim against you, or you’ve been given notice there is a claim, contact us right away. All claims should be immediately reported.

 

Call the Risk Management hotline at 877.273.7467 or claims at the number or email provided with your policy. You can get help 7 days a week.  Your attorney can answer your questions, write letters, review contracts and addenda, or guide you through a situation to help avoid an E&O claim or lawsuit.

Our risk management hotline is available seven days a week, 8:00 AM -5:00 PM Pacific Standard Time.  We’ll gather information on your situation and then have an experienced real estate defense attorney from your state contact you within four hours Monday through Friday.

In certain states, we also have attorneys on call on weekends.  If we don’t have an attorney who can help you on weekends, you’ll be contacted on Monday morning.

Should you receive a written demand for money or services, you have an actual E&O claim.  Immediately contact claims at the number or email address provided with your policy.

When you are threatened with a claim, don’t panic — and don’t immediately reply.  Start gathering documents about the situation.  Discuss the situation only with your broker.

For CRES Real Estate E&O customers, every incident that is a potential claim should be reported to us, to help ensure that potential claim will be covered. See our related post, Report a Potential Real Estate E&O Incident Real-time to Reduce Risk of Coverage Denial.

Learn more about what to do and not do when an E&O claim hits.

Call or submit the demand letter or lawsuit to the email address provided.

The claim will be fully investigated and settlement will be entered into, if warranted, with consent of the broker, per the policy terms.

 

If you didn’t get your question answered, please Email us your question.