Why are most real estate brokers, agents, and property managers missing contingent bodily injury & property damage (BI/PD) coverage? Why is it important? And what is BI/PD anyway?
Contingent BI/PD is bodily injury or property damage liability that arises indirectly from your work as a real estate agent.
So what are some examples of these claims?
A client trips on the stairs after the agent forgot to warn them about needed repairs.
A dog in the yard bites a homebuyer as they walk up to the door of a home on the market
A tenant falls while holding on to a broken handrail a property manager was responsible for.
The list could go on…
These claims are generally not covered under your agency’s general liability policies. General liability policies usually have an exclusion for bodily injury or property damage claims arising from professional services: like real estate.
If it is arising from your professional services, wouldn’t it be covered under your professional liability or E&O policy? The answer reveals a potentially expensive insurance gap for real estate brokers…
Most real estate professional liability (E&O) policies also exclude BI/PD. If both their general liability and E&O policies deny a BI/PD claim, the agents are left paying for these often expensive claims out of pocket.
Some real estate E&O policies do cover this gap with a coverage endorsement. But watch out here. Even if an insurance company advertises this as part of their real estate E&O program, the coverage may not be included in the quote you were given, or your policy. Some policies are “buffet-style,” meaning if you don’t request to add an endorsement, or buy it for an additional cost in some cases, you probably don’t have the coverage.
While many real estate E&O policies have limited “Open House” coverage, or “lockbox” coverage, these definitions are limited. You probably don’t have full policy limits either. These sublimits for BI/PD can be as low as only $10,000 of coverage.
Also be aware that lockbox coverage may only cover property damage arising from the use or operation of a lock box, not bodily injury.
Last but not least: there are other insurance companies that include this coverage, but exclude BI/PD coverage arising from property management activities. One of the primary risks for property managers is precisely contingent bodily injury & property damage liability. This seemingly insignificant gap has left property managers paying thousands out of pocket.
How do you prevent these gaps? The strongest of E&O policies will include BI/PD coverage, including for property management, at the full policy limit (hopefully $1,000,000).
Every paragraph in your E&O policy is important, as the wording could be the difference between you paying hundreds of thousands out of pocket in a lawsuit, or letting your insurance company handle the bill.
As you can see, each insurance company providing real estate E&O is different. To understand where your policy fits in in this landscape, or to get an option for a policy that does include BI/PD coverage, feel free to book time on Google Meet.
We will gladly hear your concerns, and hopefully shed some light on what brokers are usually concerned about in their real estate E&O policies.
