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The Big Picture: You May Owe More Than Just Your Deductible

Real Estate E & O covers attorney’s fees and damages, after you’ve paid your applicable retention (out-of-pocket claims expense).  However, there are many more expenses associated with a claim that are not classified as attorney’s fees or damages. Also, Disciplinary Hearings, volunteer work for a Board or other Not-For-Profit can result in legal expenses not considered a claim related to your professional services. If you do not have optional coverage to cover these added expenses, you will have to pay them in addition to your retention.

There is optional coverage available that it is an attachment to an existing policy that covers most of the gaps. It’s like extending your auto insurance to cover a rental car, towing, etc. in case of an accident. Many E&O companies call this Broad Form coverage.

But how does a Broad Form real estate service endorsement really work? Specifically, what does it cover and why do you need it? We have compiled a list of some of the coverage that may be included under a broad form real estate service endorsement.

Reimbursement of Expenses: Should you be taken to court for a claim, you will find yourself spending more time with lawyers and less time working for your clients. That adds up to a lot of lost wages. A broad form endorsement may include reimbursement for lost wages based on a standard daily rate that can help offset lost working time while you attended a trial, hearing, mediation or arbitration.

Disciplinary Proceedings: In the event of a claim, you will be reimbursed up to a certain amount for reasonable attorneys’ fees and other costs related to bringing or defending yourself against a claim or investigation.

Public Relations Advisory Services:  If the incident that is being investigated generates bad publicity, you may find yourself dealing with a public relations nightmare. Advertising, direct mail, and public relations services can cost tens of thousands of dollars.  A broad form endorsement will provide funds to help repair your reputation (up to a certain amount) for qualifying incidents.

Subpoena Assistance: If you are subpoenaed for any claim, be it against you or a colleague, you may find yourself dealing with lost wages, travel expenses, and attorney fees if applicable. The broad form endorsement will reimburse you up to a certain amount. However, some broad form endorsements exclude subpoena assistance if the insuring company isn’t notified of the subpoena date far enough in advance. Be sure to check your broad form endorsement carefully for this information.

First Party Cyber Liability Coverage: Cyber attacks happen to even the biggest and more secure companies. Should your company experience an attack, your confidential financial information as well as your client’s information could be stolen. First party cyber liability coverage allows for the hiring of a third-party consultant or advisors approved by the insuring company to help assess and manage the damage caused by a cyber attack. Some first party liability coverage will also provide funds for client notification costs.

Not-for-Profit Directors Coverage: As a broker/owner or the named insured, if the broker/owner is a director or officer of a not-for-profit organization that is involved with a claim, your broad form endorsement may provide funds to cover expenses related to the management of that claim.

Like all insurance policies, be sure to read your real estate Errors and Omissions insurance policy closely and carefully before a claim happens. Knowing you have this coverage and how to use it can mean the difference between recovering from a claim or suffering major financial loss.

See our Ultimate Guide to Understanding Real Estate Errors and Omissions Insurance


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