New Insurance Exposures for Real Estate Agents, Property Managers, and Property Inspectors
The cost of professional liability insurance for real estate agents, brokers and property managers seems to be on the rise. Why now? Why this sector?
Insurance carriers have been taking a step back, and have been re-evaluating the real estate sector – as well as many others. This ‘re-analysis’ started before the onset of COVID-19. While the increased risks vary from real estate agents to property managers it’s important to have an understanding on why there’s concern and why the insurance carriers need to deploy rate increases now.
Risks for real estate agents seems to be in-line with normal conditions, but the change in the economy has increased insurance carriers concerns when it comes to failure to disclose, delay of sales, sales falling through, or misrepresentation.
With certain States putting restrictions in-place due to COVID-19, the ability for walk-through’s, inspections and showings to happen, have become more difficult. These limitations could affect the building or property inspection, resulting in something missing and/or not disclosed to the client. If something surfaces after the sale, the real estate agent could be liable.
Another concern for insurance carriers is the likelihood that more closings may fall through or could be pushed back. Because of COVID many people have lost jobs and/or their cash on hand may be tighter than planned. These sudden changes for parties may cause them to push back a closing or walk away from the deal all together. While often times situations like these are out of the real estate agents’ hands, depending on the situation they could still be named in a suit needing their insurance policy to be triggered for defense.
Another concern for real estate agents (due to restrictions with COVID-19) are misrepresentations. Since in-person viewings are becoming more restrictive, electronic and virtual tours are being utilized in place of. While virtual tours are a great way to show properties during the pandemic, they could be misleading to the client. If the virtual tour doesn’t portray the property’s exact current condition, the client could hold the real estate agent responsible.
As for property managers, their exposures have increased more than those of real estate agents – especially during the COVID-19 pandemic.
Property Managers are currently facing increased risks of wrongful eviction. Due to COVID-19 putting many people out of work, some States have implemented eviction restrictions on property owners and managers.
Insurance carriers are also concerned about claims for property managers due to their failure to perform routine maintenance or required inspections.
Restrictions due to COVID could also lead to alleged loss of rental income for failure to show properties.
This will all lead to more virtual tours and more property managers facing the risk of misrepresentation claims due to electronic showings – the same as real estate agents.
All these factors should be concerns for both residential and commercial property managers.
As we continue to navigate through the changes and find our ‘new normal’ it’s important to understand the increased risks that real estate agents and property managers are facing. These increased risks are causing insurance carriers to re-evaluate their rating factors for a class of business that was already entering a hardening insurance market.
About the Author
Jackie Jacobs, RPLU is based out of the Tampa, Florida office of Founders Professional. Jackie focuses her time on helping retail insurance agents across the Country find professional liability and management liability insurance solutions for their clients. Jackie can be reached at Jackie.Jacobs@founderspro.com.