What are Real Estate BI/PD E&O Claims?
Real Estate Contingent Bodily Injury & Property Damage coverage (BI/PD E&O Coverage) covers claims when a real estate professional is responsible for causing an injury through their actions, advice, an error, or omission.
In other words, it is liability resulting indirectly from your professional services as a real estate agent.
If a buyer or seller suffers bodily injury as a result of the advice or recommendations provided by the agent, the real estate agent may face legal action from the injured party.
First, let’s give some examples of bodily injury & property damage claims. Then we’ll discuss how most real estate brokers do not have adequate insurance coverage for these BI/PD E&O claims.
Real Estate Bodily Injury (BI) E&O Claims
Real estate agents often encounter BI E&O claims when clients get injured during home showings. These claims include incidents like dog bites or falls. However, these are not the only situations that can lead to such claims.
If an agent fails to disclose mold in a home, resulting in illness for the buyer’s child, the claim is classified as a bodily injury claim.
This article on Law.com tells the story of an Atlanta real estate photographer shot by a homeowner after the real estate agent did not let the seller know about the appointment as promised. The seller filed a lawsuit against the real estate agent. Without BI/PD E&O coverage, they would probably need to pay this out-of-pocket.
Injuries during an open house are contingent bodily injury claims.
Property management companies could face responsibility if a tenant gets injured due to an issue that the property management company should have fixed.
For example, we’ve seen claims where a tenant fell a couple of stories because a handrail was not properly installed by the property management company. These claims can be quite costly.
As we’ll see shortly, both BI and PD claims are excluded by many real estate E&O and general liability policies!
Real Estate Property Damage (PD) E&O Claims
Real estate agents also frequently encounter property damage (PD) claims.
If an agent fails to disclose mold in a listing, they are likely to face a lawsuit for the costs associated with mold remediation (property damage or PD).
Agents listing foreclosures would be responsible if the home floods after they forget to turn off the water.
Property damage coverage under real estate E&O typically includes payment for repairs or replacement of damaged property up to the limits of the policy. But now let’s discuss exactly why so many agents don’t have that BI/PD E&O coverage.
What Real Estate Insurance Covers BI/PD?
Do General Liability Policies Cover BI/PD Claims?
Real estate agencies’ general liability policies typically exclude coverage for contingent bodily injury and property damage (BI/PD) claims. Although real estate brokerages need general liability insurance, it often excludes bodily injury or property damage claims from professional services.
Many brokers naturally assume they have BI/PD coverage under their professional liability or E&O policy. However, many real estate brokers may find themselves with a costly insurance gap.
This insightful article in the Insurance Journal explains that across industries, general liability coverage is often not enough to cover bodily injury claims. In many cases, E&O coverage is the type of coverage that would provide the necessary protection for BI/PD E&O claims.
Do E&O Insurance Policies Cover BI/PD Claims?
Many real estate professional liability (E&O) policies also contain a clause excluding bodily injury and property damage claims.
If both general liability and E&O policies deny a BI/PD claim, the real estate agent will often have to pay the claim themselves.
Some real estate E&O policies do cover this gap with a coverage endorsement. But let’s dig into the all important details here.
A number of real estate E&O policies have limited coverage for Open House claims, lock box claims, and/or drone claims. But both the covered claim definitions and the total policy limits available for those claims are usually very limited. These sublimits for BI/PD can be as low as only $10,000 of coverage. And we can’t forget that they only apply to narrowly defined BI/PD claims.
Furthermore, an insurance company might advertise BI/PD E&O coverage, but not include the coverage in your specific quote. This is because many real estate E & O policies operate on a ‘buffet-style’ system. If you don’t request or pay extra for an endorsement, you may not have the coverage.
Some insurance companies include BI/PD coverage, but exclude BI/PD coverage arising from property management activities. This is an issue since contingent bodily injury & property damage liability is one of the primary exposures for property managers. This seemingly insignificant gap has left many property managers paying thousands out of pocket.
Finally, just remember that the E&O policies that do cover bodily injury and property damage generally require that you have a general liability policy in place.
Make Sure Your E&O has BI/PD Coverage
How do you prevent these gaps? The strongest E&O policies will encompass BI/PD coverage, including property management, up to the full policy limit (preferably at least $1,000,000).
BI/PD E&O coverages can be hard to find, and that is why our team at FirmSecured has worked hard to locate and build relationships with the insurance carriers who are providing the most comprehensive E&O coverage.
Always remember, every very paragraph in your E&O policy is important, and each insurance company providing real estate E&O is different. One paragraph of wording in your policy could be the difference between you paying hundreds of thousands out of pocket in a lawsuit, or letting your insurance company handle the bill.
To understand where your policy fits in in this landscape, or to get an option for a policy that does include BI/PD E&O coverage, complete our quick form, or feel free to book time on Google Meet.
We look forward to working with you on your E & O insurance needs!