Cyber risks, public liability, management liability, strata and Director’s and Officers’ cover are just some of the insurances that any real estate business should likely be carrying, along with other covers like employment practices, motor vehicle cover, business travel insurance and workers’ compensation. Many agents have found, with increased risk around them, it really pays to talk to an experienced broker who can tailor insurance to your needs; and it is also way better safe than sorry.
There is no doubt that the business of real estate has its rewards, but also its challenges. From legislation to professional standards, regulations to duty of care, licensing to continuous education – there’s a lot for real estate professionals to take into account, even before they start selling and managing property.
Into this mix of considerations is protecting the business – and the agent’s livelihood – by selecting the most appropriate insurance. As part of their licence to operate agents may need to hold certain insurances, such as professional indemnity (PI), which is also sometimes referred to as Errors & Omissions cover.
PI is designed to protect agents against legal costs and any claims for damages from third parties which could arise from an act, omission or breach of professional duty in the course of their business – in other words, if the agent is accused of negligence or failing to adequately carry out their duties.
It’s a common misconception that agents only need to hold PI to cover their sales work, when in reality most PI claims stem from the property management side of their business, according to Sharon Fox-Slater, Managing Director of EBM’s RentCover.
“Every year we see at least one hundred PI claims that relate to property management, yet only a handful relating to sales,” said Ms Fox-Slater.
“Frequently those PI claims are the result of poor property management practices. We often see claims where the agent has done their job, but not well enough and tenants end up injured as a result.
We often see claims where the agent has done their job, but not well enough.
“And while liability often rests with the owner of the property, the agent is also held partially to blame for failing to act – and when the lawyers get involved you can pretty much guarantee that there will be apportioning of responsibility and ultimately compensation.”
Ms Fox-Slater pointed to one recent PI claim where the pergola at an investment property was riddled with white ants and was unsafe. The tenant told the agent, on numerous occasions, that they were concerned about the safety of the pergola and the agent advised the landlord. The landlord asked for quotes to repair or replace the pergola and there was a lot of back and forth between the agent and owner.
The tenant was so concerned about the safety of the pergola that they paid their full rent until the end of the lease but decided to vacate the property early. During the move, the tenant had to remove some items from the back yard and while doing so the pergola collapsed, breaking the tenant’s leg.
Although the agent did the right thing in notifying the landlord about the pergola’s condition, they failed to stress the seriousness and urgency of the matter strongly enough and, as a result, they shared in the blame for the tenant’s injury.
“Luckily the tenant’s injury was not more serious, but there are many incidents where tenants have suffered life-altering or fatal injuries as a result of urgent repairs not being made soon enough at their rental property,” said Ms Fox-Slater.
“These incidents are an important reminder to all agents about their legal responsibility when it comes to urgent and emergency repairs, but also about the impact that poor management practices can have on the people involved.”
Given the importance of having the right PI cover, Ms Fox-Slater recommends that agents seek out the services of insurance advisers with extensive experience in the industry.
“You can purchase the mandatory insurances through a wide range of insurers, but when you speak to a specialist broker you are dealing with someone who truly understands the risks associated with the real estate industry and can take a more holistic approach to risk mitigation,” she said.
Ms Fox-Slater notes that, depending on the individual operation of each agency, there are specific risks and covers often available to suit.
“Beyond the obligatory PI cover, agents should look at comprehensive cover that protects their physical property and their business. For example, our OfficeCover provides cover for property building and contents, business interruption, broadform liability, glass breakage, machinery breakdown, general property and statutory audit fees,” Ms Fox-Slater said.
“Residential and commercial landlord insurance is also needed to help protect the agent’s rent roll.
“In addition, agents may like to look into cyber risks, public liability, management liability, strata insurance and possibly even Director’s and Officers’ cover, statutory liability or employment practices liability. Then of course there are other covers that can help protect the business, like motor vehicle cover, business travel insurance and workers’ compensation.
“So it really pays to talk to a specialist broker that can tailor your insurance packages to your exact requirements – and make sure you have the protection you need at the best possible price.”
