Real estate agents list, advertise, promote or arrange the sale of real property or land for the seller or locate properties for a buyer. Real estate agents traditionally work on a commission basis, but fee arrangements are becoming more common. A real estate agent enters into a contractual relationship either with a buyer seeking to purchase property or with a property owner seeking to sell or lease a property. There may be other arrangements such as transaction agents and listing agencies which do not have the same relationships, expertise, or legal obligations. Real estate agents may offer other services including insurance sales, mortgages, or valuations. In most states, real estate agents need to pass an exam and be licensed.
Minimum recommended coverage:
Business Personal Property, Business Income with Extra Expense, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Professional Liability, Umbrella Liability, Hired and Nonownership Auto Liability, Workers Compensation
Other coverages to consider:
Building, Computer Fraud, Forgery, Employment-related Practices Liability, Business Auto Liability and Physical Damage
Property exposure is generally limited to that of an office, although there may be some incidental storage or an area for meetings. Hazards arise from the considerable storage of customers’ records, which significantly adds to a fire load. Fire sources include wiring, wear, and overheating of equipment.
Crime exposure comes from employee dishonesty, including risks to theft of customers’ property. There must be methods and procedures in place to prevent employees from gaining access to customers’ property and taking it. Realtors have access to customers’ financial information, which can be used by employees. Hazards increase in the absence of proper monitoring of the insured’s workers who may have such access. It is important to keep billing and disbursement as separate duties. Regular audits are also important.
Inland marine exposures consist of accounts receivable, computers and valuable papers and records. Clients’ records and approvals are typically originals that are difficult to recreate. A morale hazard may be indicated if the insured does not keep valuable papers and disks in fireproof file cabinets to protect them from smoke, water and fire. Power failure and power surges are potentially severe hazards. Duplicates should be kept off site to allow for re-creation following a loss.
Premises liability exposure is often minimal at the office location due to lack of public access and since most of the client contact is electronic or by mail. If clients visit the premises, they must be kept in customer waiting areas and designated conference areas. All areas must be well maintained with floor covering in good condition.
An important consideration is the status of employees vs. subcontractors. The relationships and contracts vary by agency. Contracts should be clear as to which services are provided by the agency to the subcontractors and the expectations the agency has of the subcontractor.
Off-premises exposures are extensive, and arise from sales visits, inspections, open houses, and similar work at customers’ premises. Since both buyer and seller are often represented by different realtors, any damage that occurs during open house showings may result in disputes with customers, prospective buyers or sellers, or other realty firms as to who is responsible for damage. Hazards increase in the absence of controls, especially regarding monitoring keys, the use of lockboxes or other devices that permit easy entry, and record keeping regarding access and visits by agents from other realty firms.
Professional liability exposure is extensive. Risk factors to review include the services the applicant provides, the firm’s credentials and experience, and the ratio of professional versus clerical employees. Failure to conduct thorough background checks to verify credentials and education poses a significant risk. Hazards increase if clerical workers are allowed to do tasks that only the professionals should handle, or if error checking procedures are ignored or are inadequate. Very serious losses may result from failure to document decisions and actions or to secure client approval. For certain services, such as property management, the insured will have fiduciary responsibility—that is, he or she will have a legal obligation to act in the client’s best interests.
Automobile exposure may be limited to hired and non-owned or the employees may be furnished with vehicles. If vehicles are supplied to employees, there should be clear procedures in place regarding personal use by employees and their family members. The age, training, experience, and records of each driver, as well as age, condition, and maintenance of the vehicles, are all important items to consider.
Workers compensation exposures include both office operations and significant off-site work for sales work, property showings, and similar activities. Ergonomic concerns include eyestrain, neck strain, carpal tunnel syndrome, and similar cumulative trauma injuries that can be addressed through ergonomically designed workstations. Travel may be extensive. The frequency and distance traveled are all items to consider. Agents may show properties at unusual hours to prospective customers whom they may not know personally, posing a potentially serious risk from assault.