Protecting Your Colorado Real Estate Business with E&O Insurance

Colorado real estate agents and brokers are required to carry Errors and Omissions (E&O) insurance to protect themselves and their clients from potential lawsuits.

In Colorado, the Colorado Real Estate Commission (CREC) requires all licensed real estate professionals to have at least $100,000 in E&O coverage.

This insurance is a vital safety net for real estate professionals, as it can help cover the costs associated with defending against a lawsuit or paying a settlement.

Colorado Real Estate E&O Insurance is a must-have for professionals in the field. It provides coverage for costs associated with defending against errors and omissions lawsuits, including disciplinary hearings and loss of earnings.

In Colorado, having your own E&O insurance is required to maintain your real estate license if your state requires it. This means you must have your own policy to stay compliant.

E&O insurance policies do not cover criminal prosecution or certain liabilities not listed in the policy, such as intentional wrongdoing or bodily injury inflicted by your business. This is typically covered by general liability insurance instead.

It's crucial to have a limit of liability in your E&O policy that's large enough to cover the total cost of a property you're selling. If you're selling homes worth $500,000, for example, your coverage limit should be at least that amount, or higher if you're selling more expensive properties.

Midsize businesses in Colorado, like those across the country, face full-size risks. A common concern among them is the rise in exceptionally high jury awards.

You can't afford to make mistakes in your real estate transactions. Making a mistake in the documentation or marketing a property incorrectly can cost your client money or even cause the deal to fall through.

The National Association of REALTORS recommends avoiding the use of AI to draft contracts, modify standard forms, or provide legal advice to clients. Instead, seek advice from actual professionals.

If you provide a professional service, give advice to clients, or are obligated by a contractual agreement, you should consider having errors and omission coverage.

Here are some states where real estate professionals are legally required to carry a real estate E&O policy:

Even if you operate outside of these states, it's recommended that all real estate agents and brokers carry some form of E&O insurance.

Choosing the right coverage for your Colorado real estate business is crucial. Exclusions in an E&O insurance policy aren't necessarily bad, they're just part of what keeps insurance affordable.

You may need to line up other insurance coverage to plug any risks that fall under your E&O carrier's exclusions. This can help ensure you're fully protected in case of an incident.

Most E&O insurance policies cover the business owner, salaried and hourly employees, and subcontractors working on behalf of your business. This is a standard feature that you should expect from any reputable insurance provider.

Insurance companies are typically ranked A to E, with A being the top rating. The higher the rating, the more financially stable the carrier, so it's essential to choose a carrier rated A or better.

Here's a rough guide to insurance company ratings:

Keep in mind that while exclusions can be a necessary part of keeping insurance affordable, it's still essential to carefully review your policy to ensure you're not leaving yourself vulnerable to costly risks.

E&O insurance provides coverage for real estate professionals against losses and damages resulting from negligence or errors and omissions in the performance of professional services.

In Colorado, real estate agents are not required to carry E&O insurance, but it's highly recommended to protect yourself, your business, and your livelihood.

A retroactive date on an E&O insurance policy means it can cover claims filed after coverage begins for incidents that occurred before the policy was active, as long as the occurrence causing the claim took place during the retroactive coverage period.

Here are some common E&O insurance claims that might be covered:

E&O insurance covers against losses and/or damages resulting from negligence or errors and omissions in the performance of professional services.

It provides reimbursement for lawyer fees, court costs, administrative fees, and settlement costs as a result of the legal action taken against you.

E&O insurance can cover claims that are filed after coverage begins for incidents that occurred before the policy was active, thanks to retroactive dates.

With full prior-acts coverage, you'll have coverage for all services provided before the policy period.

A retroactive date means your E&O insurance can cover claims that are filed after coverage begins for incidents that occurred before the policy was active.

For example, if your E&O policy began on June 30, with a retroactive date of January 1, and a former client claims you made a mistake on their taxes in March, you'll likely be covered.

Mistakes can happen, and when they do, E&O insurance will cover you for any legal defense costs you may have to pay.

Examples of mistakes that can lead to costly errors include making a mistake in the documentation or marketing a property incorrectly.

Other negligence claims covered by real estate errors and omissions insurance include dual agency, breach of fiduciary duty, and RESPA violations.

Negligence occurs when you fail to use proper care when performing an important task, such as failing to advise a client about important coverage.

To avoid costly mistakes, it's crucial to have E&O insurance coverage in place, and there are other things you can do to ensure you don't make costly errors that could lead to a lawsuit.

Some of these things include investing in transaction management software designed to protect your business, such as Paperless Pipeline, which helps you manage your property transactions to ensure you don’t make any errors.

With Paperless Pipeline, you can create powerful checklists, make document reviews simple, easy, and quick, and stay on top of document compliance with easy reviews.

Here are some examples of negligence claims covered by real estate errors and omissions insurance:

Insurance requirements for real estate agents differ from state to state, but it's recommended that all real estate agents and Brokers carry some form of E&O insurance.

Agent dishonesty can have severe consequences on your E&O insurance claim. If you're found to have committed fraud or been dishonest about a property, your policy won't cover you.

Deliberate omissions of information can lead to claim rejection, no matter how small the detail. For instance, failing to disclose a crack in the plaster of a wall can result in costly repairs and a rejected insurance claim.

Your errors and omissions policy is not a safeguard against intentional wrongdoing. It's designed to protect you from unforeseen errors, not deliberate acts of dishonesty.

If you need to file a claim, start by reviewing your insurance policy and gathering necessary information such as the name of your business, policy number, and a brief description of the incident.

To make a claim, you'll need to contact your insurance agent and inform them of what's happening. This is also a good opportunity to ask questions about your coverage and deductibles.

When documenting interactions with the insurance company, be sure to include all conversations and correspondence.

Here's a list of information to gather when making a claim:

Filing a claim can be a daunting task, especially if you've never done it before. To start, review your insurance policy and gather the necessary information, including your business name, policy number, and current contact details.

You'll also need to provide a brief description of the incident, including when you first became aware of the issue. This information will help your insurance agent understand the situation and guide you through the claims process.

It's essential to contact your insurance agent as soon as possible to inform them of the incident. During this conversation, you can ask questions about your coverage, deductibles, and options as a policyholder if the issue goes to court.

To keep track of all interactions with the insurance company, be sure to document everything, including phone calls, emails, and meetings. This will help you stay organized and ensure that all necessary steps are taken.

Here are the key pieces of information you'll need to gather before filing a claim:

Exclusions are a crucial aspect of errors and omissions insurance policies, and it's essential to understand what's not covered. Typical exclusions for these policies include events and costs not covered by your policy.

Exclusions are not always immediately apparent, so it's vital to review your policy carefully. In fact, exclusions are listed in your policy documents, so take the time to review them.

Some common exclusions include intentional acts, such as fraud or dishonesty. These are not covered by your policy, and you may be liable for damages resulting from such actions.

Intentional acts are not the only exclusions, however. Other exclusions may include costs associated with regulatory fines or penalties. These can be significant, and it's essential to understand what's not covered.

Exclusions can also include costs related to business interruption or loss of use. If your business is forced to shut down due to an error or omission, you may not be able to recover these costs through your insurance policy.

A claims history can significantly impact your insurance costs. If you have a history of lawsuits against you, insurers will see you as a major risk.

This typically means that your Errors and Omissions (E&O) insurance will be much more expensive. You could even be denied coverage altogether.

Having a clean claims history is essential for maintaining affordable insurance premiums.

You can save up to 20% on errors and omissions coverage by choosing biBERK over other providers.

To save even more, consider purchasing the right amount of coverage for your business. Higher coverage limits cost more, so aim for the minimum amount you need to stay protected.

A higher deductible can also lower your premiums. Just be sure to assess your needs and budget carefully before making a decision.

Exclusions in your E&O policy aren't necessarily bad – they're just a way to keep premiums affordable. You may need to purchase other insurance coverage to plug any risks that fall under your E&O carrier's exclusions.

Errors and omissions insurance policies typically cover the business owner, salaried and hourly employees, and subcontractors working on behalf of your business.

If you're a real estate agent or broker in Colorado, it's essential to have E&O insurance coverage in place to protect yourself from costly mistakes.

To avoid mistakes, use transaction management software like Paperless Pipeline. This can help you create powerful checklists, make document reviews simple, and stay on top of deadlines.

Here are some features of Paperless Pipeline that can help you avoid mistakes:

• Customizable and automatic checklists

• Setting critical due dates automatically

• Staying on top of document compliance with easy reviews