As a real estate agent, being fit and healthy is very much a requirement to keep up with the competition. What happens when an unexpected injury or illness occurs that impacts your ability to do your job?
Whether it’s an injury obtained on the job — like slips or falls or a car accident — or totally unrelated health issues like cancer or a heart attack, how will you manage? What happens if your injury or illness comes at a crucial time in your business? What happens if you drop the ball on something important? What happens if your client sues you due to lack of performance or breach of contract?
Facing an illness or injury is enough to deal with, without adding a lawsuit to your list of issues. Before we delve into protecting your business, it’s important to understand the situations in which a claim could happen.
How a Claim Could Arise
Lawsuits or claims can happen if you fail to do something you’re legally obliged to do based on your contract with your client. In addition to general obligations, such as marketing the property and such, you have certain fiduciary obligations to your client. This legal relationship means your client’s interests must come above your own.
When you’re faced with injury or illness, you may not be able to fulfill your contractual obligations to a satisfactory level. For example, you may miss crucial communications regarding disclosures or property condition. You may not be able to commit the time to marketing and selling the home. Ultimately, your failure to carry out your duties may result in your seller receiving a lower price than expected.
There are substantial penalties for breach of contract. You can find yourself facing a lawsuit, being denied commissions for the transaction, and even being forced to compensate your client with damages payments.
How To Avoid A Real Estate E&O Claim
Have a contingency plan in place in case of emergency
Contingency planning and managing your risks are an essential part of being a business owner. It’s all about foreseeing what could go wrong, and then identifying strategies to mitigate any risks that exist. In the context of a real estate agency, this means creating systems in your business so that if you are out of action, things can still run. Strategies such as keeping staff in the loop of what’s happening with clients, keeping adequate client records, backing up your data and information so other staff can access it, and training staff to do what you do are useful.
If you can identify a backup person within your company in case of emergency, or if you work alone, make a plan with another trusted real estate agent.
(It’s just a good idea to have a backup person to handle many issues, including coverage during vacations.)
Communicate with your clients before it becomes an issue.
Communication is key, and honesty is definitely the best policy. If you know your injury or illness is going to impact your ability to fulfill your contractual obligations with your clients, be upfront about the situation with them. Be clear about what your contingency plan is for the time you will be away — tell them who their new point of contact will be, go over key deliverables and dates, and provide an estimated timeframe of when you’ll be back on board.
Ensure you have adequate workers’ compensation coverage to cover personal injury
Depending on your state, your employer may be required to provide workers compensation. But requirements vary depending on the type of employer and your status with that employer.
For example, brokers in California are required to provide workers’ compensation for real estate agents, independent contractors, and 1099 employees. So as an agent covered under an employer’s workers’ compensation policy, your medical costs, and even a portion of lost wages, can be recouped if you have a workplace injury.
Check to make sure your insurance will cover lawsuits for breach of contract
Check your insurance to ensure you’re covered for lawsuits if a client sues you for breach of contract. With CRES Real Estate Errors & Omissions (E&O) Insurance, you can customize your policy to help you manage this and other everyday risks in your real estate business. CRES E&O + ClaimPrevent® policies also include legal advice 7 days a week, so you can get help whenever you need it.
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.
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