Top Ten Most Frequent Real Estate E and O Claims Part Four

By Lana Schroeder Esq of Rice Insurance Services Company LLC

This article continues with the seventh and eight most common real estate E&O insurance claims: consumer protection act and money dispute.

Consumer Protection Act

Most jurisdictions have enacted consumer protection laws that challenge any “unfair methods of competition… and unfair or deceptive acts or practices in or affecting commerce.” Some courts have held consumer protection laws applicable to real estate transactions. Therefore, it is feasible for a plaintiff to invoke his/her jurisdiction’s applicable consumer protection laws in regard to a lawsuit concerning a real estate transaction. Multiple damages, e.g. treble damages, may also be awarded if the plaintiff can successfully prove the defendant violated the consumer protection law. An award of treble damages is a tripling of the plaintiff’s actual damages. Treble damages are allowed by certain statutes, which vary jurisdiction to jurisdiction. Like punitive damages, insurance carriers do not typically consider treble damages a covered damage. Therefore, it is possible the defendant would be personally responsible for an award of treble damages.

Earnest / Escrow Money Dispute

Another commonly made claim stems from the alleged failure of the real estate agent to pay, collect or return insurance premiums, escrow monies, earnest money deposits, security deposits, tax money or commissions. For example, a seller may allege the real estate agent failed to collect the earnest money deposit from the purported buyer. In the alternative, a buyer may allege the real estate agent erroneously disbursed the earnest money deposit to the seller. Earnest money disputes may not be covered by your E & O policy. However, some insurers do allow the licensee to supplement his/her basic coverage to include an optional endorsement, sometimes referred to as a rider, which provides additional coverage in this area.

(Editor’s note: We’ll cover the remaining real estate E&O insurance claim type in Part Five of this series.)
Reprinted with permission of Rice Insurance Services Company, LLC

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