As a real estate broker managing a team, you need to be aware of the risks and liabilities of your business. Vehicles are used frequently in the real estate business, and they are a risk factor. It’s important to be aware of where you stand if one of your team is involved in a vehicle accident, or property damage to a vehicle is sustained when a team member is working in an official capacity for your real estate business.
So, this month’s topic of conversation for your monthly staff meeting is vehicles — specifically what is covered and what isn’t with regards to your team. We’ll also explore the issue of “non-owned autos”.
Your Insurance Coverage
It’s important to clarify with your insurer exactly what you’re insured for, so you and your real estate brokerage are adequately protected. Be sure you’re covered for vehicle-related risks, so you don’t find yourself facing a lawsuit or significant out of pocket expenses due to lack of coverage.
Personal vehicle insurance covers “insurable events” such as injury to the insured, a passenger, or a person in another car. And it covers repairs as a result of collision, theft and property damage. But most personal auto policies aren’t designed to protect business-related assets, and they likely won’t cover you (or your agents) in the course of your work. Motor vehicle liability is also not included in E&O policies. If you regularly use your vehicle in your real estate business- to travel between properties ordrive clients to home showings for example — these activities are generally not covered by a personal auto insurance policy. In rare instances where a vehicle is being used for work or business purposes is covered under a personal policy, insurers often impose restrictions on the amount of commercial use considered reasonable.
Instead, it’s recommended you obtain a commercial auto insurance policy to cover vehicles you own and/or use regularly in your business. That policy should either be a part of your business owners policy or a separate policy if you’re using your own car.
Insurance Coverage for Your Team — The Issue of Non-Owned Auto
You may be managing employees or independent contractors as part of your team. Your risk and potential liabilities will differ according to each relationship and the structure of your arrangement.
For example, plumbers or builders doing work on your premises are considered independent contractors; they can’t create a liability for you if they’re in a vehicle accident. If they accidentally back into another vehicle in your parking lot, this is 100% their liability and not yours.
However, in the case of real estate agent/broker relationships, your agents may be independent contractors , BUT they’re acting under your supervision, which is the defining factor. These circumstances have the potential to pull you into a lawsuit, and it’s especially problematic if agentsy are driving clients to home showings.
This is not to say you should necessarily stop your agents from using their own vehicles or ban them from taking clients to home showings. You simply need to take steps to minimize your risk. You can do this by requiring your agents to add your firm as an “Additional Insured” on their vehicle insurance policy.
The real estate broker/employee relationship is a little easier to manage via your insurance. Your business many have business-owned cars, but in the real estate industry, it’s more common that real estate agents use their own personally-owned vehicles and claim expenses. If this is the case, simply ask CRES about Non-Owned Auto coverage. This type of insurance covers liability for employees driving their own vehicles while performing work for your real estate brokerage.
For example, an agent is on the road for work and is involved in a car accident. The accident is the agent’s fault. Other parties to the accident know the agent works for you, and your business is named in a lawsuit. What do you do? If you have Non-Owned Auto coverage, you’re covered and need not worry about these types of liabilities.
How to Protect Yourself and Your Business
To minimize your risks around vehicle use in your business — by you, your employees, or your real estate agents acting as independent contractors, adequate insurance is key. To be sure you have the right protection, contact CRES for a review of your real estate office’s needs.
CRES can help with Business Owners’ Policies (covering Liability and Property insurance),