Most real estate Errors and Omissions insurance policies are “Claims Made” policies. They provide coverage for claims made and reported during the policy period.
Claims Made policies cover your past activities from your “Retroactive Date” to the present — and will not cover any activities before the Retroactive Date.
Your Retroactive Date is the first date from which you had continuous real estate E&O coverage.
“Continuous” coverage means absolutely no gaps in coverage whatsoever.
Any gaps in your E&O coverage mean two things:
- Activities occurring during the gaps in coverage aren’t covered at all.
- Any gap “resets” your Retroactive Date to the last date for which your E&O coverage was continuous. That means you lose coverage for all activities that happened before the new Retroactive Date.
So, you can see why maintaining continuous E&O coverage is so critical to protecting you and your business from claims and lawsuits. And when you sign up for a new real estate errors and omissions policy, the Retroactive Date you specify is critical.
Prior Acts Type and Match Priors
Your real estate errors and omissions policy may show a column called “Prior Acts Type” with “Match Priors” indicated. Prior Acts Type means the type of coverage you have for prior transactions that happened before your current real estate E&O policy. See our walk-through of a real estate errors and omissions policy.
Match Priors means the new E&O policy will honor the expiring prior act date of the prior policy, so there are no gaps in coverage.
What if Your Company Changes?
If you change companies, your new company will not cover your past activities. But the E&O policy in effect at your prior real estate brokerage should still cover your past activities while you worked with them. In most cases, the broker will be named in any legal action, so your prior brokerage will rely on their current real estate errors and omissions policy to cover any damages and legal fees. If you do change companies, be sure there is absolutely no gap between the last day you were covered under the old firm’s E&O policy and your new brokerage’s E&O policy.
If your company is sold or goes out of business, they may purchase Tail coverage for you, but if they don’t, you will lose coverage to protect you from claims and lawsuits related to your past activities.
What if You Leave Real Estate – Even Temporarily
If you retire, move out of real estate, or stop working in real estate temporarily: if you have individual Errors and Omissions insurance, you can purchase a Tail policy (from the same insurance company that has your individual E&O policy) to protect you from claims and lawsuits from past transactions. Be sure to do this BEFORE you leave to ensure continuous coverage.
If you were covered under a company E&O policy and you leave the company or stop working temporarily, as an individual, you will not have coverage for prior transactions. However, typically, both your company and you as an individual will be named in any claim, so your company would have coverage for those claims.
CRES can help you choose an Individual or Company E&O Policy
As part of one of the largest insurance brokers in the world, we have access to more E&O options than just about anyone. Let us do the shopping for you and find you the best coverage for the best price.
See also our Ultimate Guide to Understanding Real Estate Errors and Omissions Insurance.
Get started online now by choosing either an individual or company E&O policy and your state.
