On April 12, 2021, we presented a webinar on how to lose-or not-an errors and omissions insurance claim resulting from a lawsuit. Since 1 in 4 agents will be sued in their careers, and a lawsuit averages a year or more to resolve, there are many reasons to try and avoid a lawsuit in the first place. Here are the ten most common issues that get agents in trouble, and some tips on minimizing the risk.

1. Disclosure (or lack thereof) – Disclosure issues account for about half of all lawsuits, examples including property defects, unpermitted improvements, square footage errors and more. Since Massachusetts is a ‘Non-Disclosure” state, there is even more burden on the agent to represent the property as best as possible. Provide factual, verifiable information, not opinion; recommend in writing home inspections and home warranties.
2. Claims Made & Reporting E&O Policies – The policy responds when a claim is made. Report any (potential) Claim to the insurer immediately. A delay might be a cause for declination of coverage. Avoid any lapse in coverage to protect the Prior Acts date of coverage, but changing insurers at the renewal date should not result in a loss of Prior Acts coverage.
3. Agents are responsible to the Broker/Owner. They must act on, and with the authority of, the Named Insured, otherwise E&O coverage can be denied. Firms should develop a Policy & Procedure manual that addresses acceptable and sanctioned services. Policy holders should become familiar with what is covered, or not, in the insurance plan.
4. Subpoena Response - Receipt of a subpoena requires a legal response and cannot be ignored. An ineffective response to a subpoena can result in additional legal headaches. Most E&O policies provide coverage and assistance in the event of a subpoena.
5. WISPs and cyber security -MA G.L. 93H requires every business to have a written information security plan (WISP). This should be only a part of a firm’s cyber security plan. Failure to develop and implement such a plan can result in expensive lawsuits, cyber breaches and civil penalties.
6. The Hot Market & Escalation Clauses – Both buyer and seller representatives need to tread cautiously in this sellers’ market. Liability issues related to “bidding wars” include disclosure, awareness and representation of: mortgage qualification, appraisal, PMI, appearance of self-dealing and discrimination. Firms should have written guidelines and attorney-vetted contract language and liability clauses in sales agreements. Avoid dual agency.
7. Your Errors & Omissions Insurance -Know your coverage. Who and what is covered? What is not covered? Be aware of coverage and limits (or lack thereof), for Fair Housing, Open Houses, Agent-Owned property sales, Lockbox protection and all the rest. Not all policies provide the same or equal coverage.
8. Property Management – Significant increase in liability: Fair Housing, improper evictions, bodily injury and property damage, contractual liability. Do not assume an E&O or general liability policy covers property management or any of the above issues. Additional concerns and coverage limitations include commercial properties, agent-owned properties and physical repairs.
9. Unauthorized Professional Services – Foreclosures, REO properties, bidding wars, evictions and other circumstances can be a trap for agents trying to be too helpful. Avoid giving any advice that even resembles tax or legal advice. Refer the buyer/seller to their qualified representative. Regarding property condition, repairs, costs, etc., also refer the buyer/seller to a qualified builder, engineer or inspector. Disclose, do not diagnose.
10. Document Everything – your defense relies on documented conversations, messages and texts. Provide your defense attorney the tools needed to win your case.

The above represents many of the common issues that result in lawsuits, and the success of defending one, for agents and brokers. Always consult qualified representatives in the insurance, legal and tax industries to obtain the proper advice to best protect your practice.