What does Errors and Omissions Insurance cover for a broker?

Errors and Omissions Insurance, commonly referred to as E&O Insurance, is designed specifically for professionals, including real estate brokers, to protect against claims of negligence or inadequate performance in their professional duties. This type of coverage is critical in the real estate industry where mistakes can occur, often unintentionally, due to the complex nature of transactions and the various laws and regulations involved.

Unintentional misrepresentations are covered by this insurance because they pertain to honest mistakes that could lead to financial loss for the client. For example, if a broker inadvertently provides incorrect information about a property, leading a buyer to make a decision based on that misinformation, E&O Insurance would help cover claims from the affected party. This form of insurance is essential as it protects brokers from the financial repercussions that can result from these types of errors.

In contrast, intentional misrepresentation and fraudulent actions fall outside the scope of E&O Insurance because these involve deceitful practices where the broker deliberately misleads clients or engages in fraudulent activities. As for property damage claims, these typically would be addressed through different types of insurance, such as general liability insurance, not through Errors and Omissions coverage, which focuses specifically on professional liability.