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Insurance IQ: Insuring Agreement

by David Brauner, Senior Broker OREP

At a recent event, Working RE Editor Isaac Peck and I participated in a presentation for real estate appraisers on a new type of real estate valuation product called a “hybrid appraisal.” We were asked because OREP is also a leading provider of E&O insurance for appraisers. The question was simple: are these new hybrid appraisals covered? While each situation is unique, I explained that since there is no exclusion for hybrid appraisals in any appraiser policy that OREP handles, they are not excluded from coverage, so the policy should respond to a covered claim.

In order to fully explain this, I had to wander off into a little “insurance IQ,” which I share here. Because many of you may already know this, I’ll keep it brief.

Your OREP policy, or one from another E&O insurance provider, works the same way. The Insuring Agreement in your insurance policy summarizes the major promises of the insurance company, as well as stating what is covered. In the Insuring Agreement, the insurer agrees to do certain things, such as paying losses for covered perils, providing certain services or agreeing to defend the insured in a liability lawsuit. This is the section of the policy contract that specifies the hazards the insured is covered against (like an error or omission), the people covered (like the Named Insured) and the length of the contract (usually one year).

For inspector policies (and other professionals), the insurance policy usually starts with a definition of Professional Services, i.e. what is covered. Here is an example from a policy OREP offers: Professional home inspection services means “the non-invasive visual examination of the readily accessible installed systems and components of a building, as identified and agreed to in writing by the client and insured prior to the inspection process, performed for others for a fee, and for which a written home inspection report is generated.”

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This provides inspectors with broad coverage for the variety inspection-related issues, whether or not you provide particular service or perform a specific test. Other specific coverages are spelled out elsewhere.

What is specifically excluded from the insurance coverage can be found in the Exclusions Section of the policy. An Exclusion is a provision within an insurance policy that eliminates coverage for certain acts, property, types of damage or locations; such as this one excluding fraud, which is found in most inspector policies: Alleging, based on, arising out of, or attributable to any dishonest, fraudulent, criminal or malicious act or omission, or any intentional or knowing violation of the law by an “insured.”

Accordingly, in the example with appraiser insurance, there should be coverage for hybrid appraisals because they are not excluded in the appraisers’ policies: not yet anyway. As a side note, the way insurance policies are set up—a definition of covered services and exclusions, explains why agents are trained to avoid saying that something is “covered” if it is not specifically mentioned. Rather than say there is (or isn’t) coverage for something that has no reference in the policy, it is more common to say it is not excluded…so there should be coverage, but every claim is handled case-by-case.

For home inspection professionals, the OREP home inspector policy provides very broad coverage at very competitive rates, which should provide you peace of mind. I have been helping inspectors secure coverage for nearly 25 years and today OREP is a leading provider of home inspector E&O/GL insurance. Call or visit OREP.org to see what we have to offer you—we’re always happy to help and we answer the phone!

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Presenter: David Brauner, Senior Insurance Broker OREP
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About the Author
David Brauner is Senior Broker at OREP, a leading provider of E&O Insurance for home inspectors and other real estate professionals in 50 states (OREP.org). He has provided E&O insurance to home inspectors for over 20 years. Contact him at dbrauner@orep.org or (888) 347-5273. OREP–Organization of Real Estate Professionals Insurance, LLC. Calif. Lic. #0K99465.

Note: The Summer 2018 issue of Working RE Inspector mailed to over 20,000 home inspectors nationwide. OREP Insureds enjoy guaranteed delivery of each print magazine and many more benefits.