Attorney Mark Carlson Discusses How Real Estate Agents Can Manage Liability and Risk With the Right Insurance Policy – Pt .2

Mark Carlson is one of the premier attorneys in California with a practice devoted to representing real estate professionals. In part one of our discussion, Mark discussed some of the basic legal issues realtors and real estate agents face.

Here in Part 2, Mark answers more of our questions, and counsels realtors and agents on  risk management tactics using low cost General Liability policies.

What kind of work does your firm practice with respect to real estate and matters that specifically involve agents and brokers? 

MC: We handle errors and omissions claims for two of the largest errors and omissions insurance programs in California.  We have about 200 active lawsuits against real estate agents, brokers and escrow officers.

What are some of the more common liability issues you encounter with realtors and agents? 

MC: Throughout my career, more than three fourths of lawsuits against real estate agents and brokers arise out of allegations that a problem with house was not disclosed to a buyer.

In the big picture of costs for realtors and agents, where does a $250 dollar (approximately) general liability policy fit in? 

MC: The cost of $250 is very inexpensive.  Premiums for Errors and Omissions insurance are based upon the size of a brokerage but are typically thousands of dollars even for small brokerages.  Most real estate agents likely pay more than $250 annually to be a member of their local Multiple Listing Service.

In your vast legal experience, have you had cases where agents have been hurt by the fact that they do not having a general liability policy? 

MC: The adage “when you need it – you really need it” comes to mind here.  I have had many cases where there was a gap in coverage between the broker’s general liability policy and the errors and omission coverage where neither provided protection to the agent.  The typical cost of defending a real estate agent in ligation is tens of thousands of dollars.

Can you tells us a few types of cases where realtors did not have general liability insurance? 

MC: In addition to asbestos, mold and slip and fall claims I mentioned earlier, I have also seen gaps in coverage for property management claims a tenant claims personal injuries from habitability and unlawful eviction lawsuits.  I would also think that there would be problems with coverage in an auto policy if an agent got into a car accident while driving a client to property showings.

California is one of the most active real estate markets in the world. Would you say California is less or more litigious than other states? 

MC: California is the number one “hot spot” for litigation against real estate brokers and agents.  In fact, many errors and omissions insurers will not write policies in California because of the frequency of litigation.

Are there additional things realtors and agents should know about general liability insurance and their own need to practice risk management?

MC: Agents should think about an inexpensive general liability policy like an umbrella policy or excess uninsured motorist coverage.  You hope that you will never have to use it, but you buy it in order to protect yourself in one more way.

If you were talking to real estate agents and realtors about protecting themselves, would you recommend that they look into general liability insurance? 

MC:  I give seminars to real estate agents about once per month.  I would say that in about half of those seminars, a question is asked about a scenario that would not be covered by errors and omissions insurance.  So, I know that the transactions where there is the possibility of an uncovered claim are occurring frequently.  I always recommend a general liability insurance when those questions are asked of me.

Mark Carlson is managing partner of the Carlson Law Group, Inc. He has more than 25 years experience representing realtors, agents, and brokers. He has tried case locally all the way up to the California Supreme Court. Their website is www.carlsonlawgroup.com.

Want to know more about low cost General Liability Insurance for Realtors and Real Estate Agents? Email Robert Feldman at robertfeldman@allstate.com.