Rice Insurance Services Center (RISC) E&O Policy

In response to a recent Broker Bulletin about E&O Insurance, one of you reached out to ask for specifics about what the Rice Insurance Services Center (RISC) E&O Policy Covers for those who use it, or, to compare to other providers that you may consider.

We asked Idaho Real Estate Commission (IREC) for details, who then reached out to RISC, who were kind enough to provide us with this comprehensive overview.

But before you read further, IREC asked that we remind those who use the RISC Group Policy to be sure to renew coverage no later than September 30, 2021, at 11:59 p.m. MT. Any specific questions about your policy, coverage, or the information contained below should be directed to IREC or RISC. Thank you!

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The National Association of REALTORS® (NAR) recently posted a video with some key areas related to Errors and Omissions Insurance to review due to the increasing number of claims due to the high volume of market activity. If you haven’t watched that, please do so first.

The Idaho Real Estate Commission’s Group Insurance Policy (the “Group Policy”) is administered by Rice Insurance Services Center (RISC), a division of AssuredPartners, and issued by Continental Casualty Company, a CNA insurance company.

We asked RISC to review the listed areas and let us know how the Group Policy may address the issues highlighted by NAR.

 

The first area involves the expanded services that many brokerages are offering in the current market. 

The Group Policy insures each enrolled Licensee[1] for Claims alleging a negligent act, error, or omission in the Licensee’s Professional Services, subject to the policy’s terms, conditions, and exclusions. Professional Services include:

1. services performed by the Licensee as a real estate broker or salesperson as defined in Idaho Real Estate License Law and for which the Licensee is required to have a real estate license, provided all necessary licenses are held by the Licensee at the time of the act, error, or omission giving rise to the Claim;
2. Leasing and Property Management Services performed by the Licensee;
3. Issuance of a broker price opinion, as defined in Idaho real estate law, by the Licensee, provided all necessary licenses are held by the Licensee when the broker price opinion is issued; and
4. services performed or advice given by the Licensee, including as a notary public, and as a real estate consultant or counselor in connection with the services as a Licensee in 1., above.

There are no exclusions for virtual showings, writing sight-unseen offers, or property management services that fall within the definition of Leasing and Property Management Services.

The Group Policy may not apply to relocation services that do not otherwise fall within the definition of Professional Services.  Measuring square footage and staging homes are examples of other services that may be outside of the Professional Services insured by the Group Policy.  If you provide these or other services that do not fall within Professional Services, you might want to investigate whether a different type of  insurance policy may apply to those activities or consider using a third party who carries the appropriate insurance for these activities.

 

The second area raised is the increase in discrimination claims recently.

The Group Policy’s basic limits of liability for each enrolled Licensee are $100,000 per Claim, up to an aggregate of $300,000.  The Group Policy includes sub-limits of liability for Discrimination Claims, Environmental Claims, Escrow Claims, and Lock Box Claims, even though they typically were not covered at all under most real estate E&O policies.  Under the Group Policy, defense costs are outside the limits and sub-limits, so there is no limit on the amount of defense costs the carrier will pay for a covered Claim.

• The Group Policy’s Discrimination Claim sub-limits of liability for each enrolled licensee are $25,000 per Discrimination Claim / $25,000 aggregate. A Discrimination Claim is a Claim alleging Discriminatory Conduct (acts, errors, or omissions in violation of Title VIII of the Civil Rights Act of 1968, the Fair Housing Amendment Act of 1988, or any similar state or local law or ordinance in the rendering of Professional Services).

 

The third area mentioned is cyber coverage. 

In today’s world, cybercrime poses a risk to all businesses, including real estate. The Group Policy provides limited security breach supplementary coverage for reimbursement of costs up to $5,000 incurred by the Licensee’s Real Estate Firm for required notification to clients of a security breach when Confidential Commercial Information or Non-Public Personal Information may have been disclosed or used in an unauthorized manner ($5,000 limit applies per Real Estate Firm, regardless of the number of Licensees or incidents involved).

Other than the limited security breach supplementary coverage, the Group Policy is unlikely to apply to cybercrime.  Cybercrime poses a risk to all businesses and is not isolated to individuals providing licensed real estate services.  Additionally, many E&O policies specifically exclude coverage for intentional or criminal acts, theft, and/or misappropriate.  For example, the Group Policy excludes coverage for Claims alleging, arising from, or related to the following[2]:

1. Fraudulent or Dishonest Acts – fraudulent, dishonest, criminal, or malicious acts committed by the Insured, at the Insured’s direction, with the Insured’s knowledge, or by anyone for whose acts the Insured is legally responsible;
2. Expected or Intended – injury or damage expected or intended by the Insured;
3. Conversion / Third Party Deception – any conversion, misappropriation, commingling, defalcation, embezzlement, theft, disappearance, or insufficiency in amount of any monies, funds, or other assets or other property or Third Party Deception, including, but not limited to, any failure to detect, identify, disclose, or prevent such conversion, misappropriation, commingling, defalcation, embezzlement, theft, disappearance, or insufficiency in amount or Third Party Deception, regardless of the identity of the person or entity actually or allegedly engaged in or responsible for the conduct or failure(s) in question.

You may want to contact your local insurance agent to investigate whether cybercrime coverage may be available under a general liability, commercial crime, or cyber-specific insurance policy.

 

The fourth area raised is the importance of reviewing policy exclusions and available endorsements.

Optional endorsements under the current Idaho group program to add coverages not included in the basic Group Policy (available to individual licensees only unless noted otherwise, subject to eligibility requirements, additional premium applies):

• Appraisal Endorsement – Adds insurance up to policy limits for services as a licensed appraiser. Eligibility Requirements:  Must have both an active real estate and an active appraiser license.
• Appraisal Trainee Endorsement – Available to supervising appraisers to add specific Appraiser Trainees listed in the endorsement as Insureds. Eligibility Requirements:  Must also purchase an appraisal endorsement and meet appraisal endorsement eligibility requirements.
• Conformity Endorsement – Available to individual and firm licensees with an active real estate license in another state that has a group program and requires the licensee to maintain real estate E&O insurance. This endorsement conforms the Licensee’s insurance under the Idaho group policy to meet the other state’s state-specific E&O requirements.  Eligibility Requirement:  Must be domiciled in Idaho or treated as domiciled in Idaho under the policy terms to.
• Developed/Constructed by Spouse Endorsement – $100,000 per claim / $300,000 aggregate sub-limits for claims involving the sale or listing for sale of residential property constructed or developed by the licensee’s spouse under certain conditions.
• Residential Personal Interest Endorsement – $100,000 per claim / $300,000 aggregate sub-limits for claims involving the sale or listing for sale of residential property owned by the licensee, the licensee’s spouse, or a company owned by the licensee under certain conditions. Note that the Group Policy automatically insures the sale or listing for sale of the insured licensee’s primary residence, under certain conditions.

The Group Policy, like most E&O insurance policies, is a claims-made-and-reported policy, so it only potentially applies to Claims that are both first made against an Insured and first reported in writing to the carrier during the enrolled Licensee’s Individual Policy Period.  You should immediately notify your insurance provider in writing if you become aware of a claim or potential claim.  Failure to do so could jeopardize any coverage that may have otherwise been available.

The most accurate representation of what a policy covers is the policy itself.  Regardless of your insurance provider, you should carefully review your insurance policy (including the exclusions section).  Real estate E&O policies were designed to insure negligent acts, errors, or omission in licensed real estate services.  Real estate E&O policies do not cover all types of risks faced by real estate licensees and firms.  It may be helpful to contact your local insurance agent to learn more about the types of coverages provided by general liability, commercial crime, and cyber-specific insurance policies.

For more information, including risk reduction articles, visit RISC’s website, www.risceo.com.  If you have any questions or concerns about the group program, feel free to reach out to RISC at 1-800-637-7319, Option 1 or info@risceo.com.

This information is for illustrative purposes only and is not a contract.  It is intended to provide a general overview of certain products, services, and situations encountered in the course of our business.  This information does not amend any E&O policy in any way.  Only the applicable policy can provide the actual terms, coverages, amounts, conditions, and exclusions, which may be subject to change without notice.  Neither RISC nor Continental can provide hypothetical coverage determinations.  In the event of a claim, the nature and extent of coverage is determined based upon the claim’s facts, circumstances, and allegations and application of the relevant policy’s terms, conditions, and exclusions.  The E&O program described herein is only available in Idaho.   The program referenced herein is underwritten by Continental Casualty Company, a CNA insurance company.  CNA is a registered trademark of CNA Financial Corporation.  Copyright © 2021 CNA.  All rights reserved. 

Prepared by Rice Insurance Services Center © 2021

[1] Bolded words are defined terms and may be found in the Group Policy, VIII. DEFINITIONS.

[2] Exclusions may be found in the Group Policy, VI. EXCLUSIONS.