A novice may not totally understand exactly what e&o insurance is, but property managers understand that they can greatly benefit by carrying errors and omissions insurance, or E&O for short, which works as a type of malpractice insurance coverage for property managers and real estate professionals.
This coverage helps to protect against financial losses from lawsuits filed as a result of work performed in the real estate profession. If a claim is filed, for whatever reason, having this coverage is essential, since the insurance company will defend the claim, as well as pay any settlement or judgment up to the limits of liability stated in the policy.
Even unwarranted claims can be an issue
Look, the fact is, no matter how seriously you take your job, or how well you perform your duties, you may be at risk, even from a lawsuit that may well be frivolous or without grounds. Unfortunately, legal expenses can mount, and must be paid regardless of who ends up winning in court, and those costs can have a devastating affect on your business and finances.
Standard E&O coverage pays claims that come about due to an error, omission, or negligence on your part, in the performance of your duties as a property manager and it will pay any claims made during the policy period. There may however be exclusions that you should be aware of. Some common E&O exclusions include the following:
- Claims resulting in dishonest or criminal acts by you
- Claims brought against you for causing bodily harm (or death to another person)
- Any claims associated with polluted property, or
- Any claims arising from damage you cause to someone else’s property
Document all transactions for added protection
Documenting as many facts as possible during any transactions could greatly help you later if a client is unsatisfied about some aspect of the property. It’s quite commonplace to ask the tenant to sign a statement regarding any specific action taken, or not taken. For example, a tenant who refused a home inspection at the time the rental agreement was signed may later have complaints that certain things don’t work, but by having a signed waiver in your files, this is no longer your problem. What is e&o insurance? Your best bet against frivolous lawsuits.