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Insurance IQ: Reading Your Policy

by David Brauner, Senior Broker at OREP

Why is reviewing your E&O insurance policy important? Isn’t that my job as your agent?

Yes, it’s OREP’s job to review your policy and Declarations Page for accuracy as your insurance agent, and we do, but you can help yourself too. Let me give you a couple of real-life reasons why reviewing your policy is important, no matter who your agent is.

Retro Date
At the very least, make sure your retroactive date is correct. This concerns how many years back your coverage goes, which is important for an inspector because claims can happen a year or two after the date of the report.

About three years after opening OREP I was renewing my own E&O policy, which I need to operate my business just like many of you. Without it, I can’t do business. At that time, I had three years of continuous coverage, meaning my Retroactive Date (retro date), also referred to as a Prior Acts date, should have gone back three years, meaning my coverage should have gone back three years for all the work I did over that time. When I reviewed my own Declarations Page that year after receiving my policy, I noticed the retro date was gone! Meaning that to the carrier, I had no back coverage. I remember verifying at the time that I had filled out my application correctly, including my Prior Acts date. The agent made the error. I had to resend (fax in those days) the previous Declarations Page to prove my case. If I had missed their error and a claim had arisen from those prior years, it would have been a mess for me to prove I had coverage without an accurate Declarations Page. This is one reason why it pays to check your retro date when you receive your policy.

We have gotten questions from inspectors switching to us from other Agents that go something like this: They say, “I’ve been with (the other agency) for ten years; I have prior acts going back that far.” But when we review their Declarations Page it may go back only three or four years. What? Somewhere along the line, these inspectors let their policy lapse/didn’t renew in time and they lost their prior acts. When they “renewed” late (after letting their policy lapse) maybe the previous agent didn’t catch it or chose not to poke a hornet’s nest.

At OREP, we take your prior acts coverage very seriously, issuing many reminders via email and phone as your insurance expiration date approaches, to the point of annoyance for some of our insureds, I’m afraid to say (sorry). We remind our insureds frequently to renew on time, if they intend to continue inspecting or risk losing their prior acts. This is job one at OREP. You can switch to another agent/program and keep your prior acts as long as 1) you bind your new policy before the policy expiration date and 2) the new policy includes prior acts for free, like at OREP.

Overcommunicate
With insurance, if not in life, it’s best to overcommunicate (right?). Many of us renew our E&O without ever speaking to our agent. Many times, there is no reason to.

Here is another real-life scenario that happened with a real estate appraiser: the insured completed an application intending to get combination coverage for appraising and real estate sales. This is like two policies for the price of one—a money- saving option for OREP insureds. Inspectors can get combination coverage for inspecting and mortgage field service work, for example. Anyway, because this applicant indicated no previous or estimated future sales revenue, they got no coverage for sales. This particular application (created by the carrier) has a glitch in my view, because it had no checkbox to clearly indicate a desire for sales coverage along with the appraising coverage.

One of our agents caught the mistake at renewal. When I called the insured to follow up, they indicated they had wanted coverage for both appraising and sales, just in case they did one or two sales transactions during the year. They thought they had coverage for sales but a year later we realized they did not. They filled the sales revenue column with zeros and had failed to communicate their wishes to the agent. And, of course, the application was deficient because it lacked a clear “yes” or “no.” Luckily for our client, they had done no sales that year so there was nothing to worry about. We fixed the application. But this underlines why it’s a good idea to over communicate with any agent you transact with.

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Though the OREP home inspector’s policy is broad, not all policies are. If you want a specific coverage, like for pest or rodent, don’t assume you have it. Ask your agent which coverages are included and which you won’t get unless you pay extra for them.

Reading Your Policy
Getting back to our example above of the appraiser/agent who wanted coverage for both: The Exclusion Portion of the policy he received—what is excluded or not covered, reads as follows (bold is mine): Services performed for others in the Insured’s capacity as a(n): Real estate agent or broker; Leasing agent or Property manager; Auctioneer of real property; Real estate consultant or counselor; Short term escrow agent, or referral agent.

So there it is in black and white. If the insured had read the “Exclusions” portion of the policy (what’s not covered) he would have realized right away that it wasn’t the coverage they wanted. Agents can ask the right questions; we can anticipate your needs, but we can’t read your mind.

This is not a complete list of everything to review in your policy of course. If your name/company name is wrong, or if your coverage amount (“Limit”) or deductible is not correct, that’s important too. Getting insurance at OREP can take as little as five or 10 minutes, so you have time! Review your policy when you get it, especially the Exclusions section, and verify your Retroactive Date at a minimum. If you have a special coverage request, let it be known up front. Thanks for reading and don’t forget that OREP provides comprehensive E&O and General Liability/Off-Premises Coverage for home inspectors. Give us a look at OREP.org.

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 25 years. Contact him at dbrauner@orep.org or (888) 347-5273. OREP–Organization of Real Estate Lock-down selfie Professionals Insurance, LLC. Calif. Lic. #0K99465.

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