Risk Management

Tips to Avoid E&O Claims

by Lisa Robinson, CIC

Loss prevention awareness is highly effective in reducing risk. The more you are aware of potential problems, the more you can take measures to avoid making mistakes.

Picture of stacked coins.

The reality of doing business today is that all professionals are held to the highest standards. And there is no apparent end to the trend in recent years towards resolving disputes by filing suits, regardless of the cost. Consequently, courts are clogged with allegations of misrepresentation and claims for monetary loss, which often take extended periods of time to resolve.

The real estate professional is not exempt from these developments. In fact, lawsuits against real estate agents and firms have increased substantially in recent years. Today, a REALTOR has a one-in-five chance of being sued. In some cases, these lawsuits have resulted in substantial defense costs, awards and settlements. Even if an alleged error or omission is minor and unintentional, it may result in thousands of dollars in defense costs alone.

Loss prevention awareness is highly effective in reducing risk. The more you are aware of potential problems, the more you can take measures to avoid making mistakes. The following are a few good techniques to consider:

  • Document all files.
  • Confirm conversations in writing.
  • Disclose all you know.
  • Recommend use of other experts when outside the scope of your expertise such as Inspectors, Contractors, etc.
  • If asked to recommend other professionals, recommend at least 3 qualified candidates and let the client make the choice and engage their services.
  • Maintain a good bedside manner to encourage good communication which can help in the future resolution of disputes.
  • Be proactive when you become aware of a problem to resolve early to control outcome and minimize costs.
  • Use standard forms and follow internal procedures to set a standard of care which proves your actions.
  • Notify your broker at the first hint of a problem.
  • Create a true picture in advertising-watch out for terms such as new, 100%, completely (remodeled, rewired), views, best buy in neighborhood, and expert (if profess to be expert then you should know all the risks of the area as well).