Always Get It in Writing!
Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving negligence and verbal contracts to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a contract dispute.
Verbal Disclosure Doesn’t Hold Up in Court
A Real Estate agent listed and sold a piece of property that was fronted by a roadway which the local government was planning on widening.
Problem
The Real Estate agent knew that the road was to be widened and verbally disclosed this information to the purchasers prior to the close of escrow. The agent did maintain extemporaneous file notes to support his assertions of disclosure, but neglected to communicate it to the purchasers in writing.
Mistake
Because the agent failed to disclose the information in writing, the purchasers were able to make a strong argument that they did not know about the pending road project.
Result
Both the purchasers and the sellers filed suit against the agent and his broker alleging negligence and negligent supervision, respectively. The sellers specifically argued that they informed the agent of the pending road project—allegations that were indisputable. The purchasers claimed to have no knowledge, leaving the defense of the case hinging on a word versus word proposition.
Prevention
This is one of those cases where a claim could have been averted if the insured actually disclosed the issue in writing—and had the purchasers sign and acknowledge it. If the documents support your story of the transaction, odds are any claim made against you will be dropped. Attorneys don’t want to fight irrefutable evidence. When transaction files are complete and contain clear, concise, and accurate information, you are better protected from frivolous claims. Written disclosure of material defects or potential changes in properties should be standard operating procedure when conducting real estate transactions. You will inevitably minimize your exposure to errors and omissions claims and allow more time to grow a profitable business.
Do you have a similar story involving a lack of documentation to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!
If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!
You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.
