Property management companies know they need general liability insurance to cover common scenarios like personal injuries and property damage. But they should also carry errors and omissions insurance for the paid services they provide, says Mark Turner, Vice President of Sales and Marketing for CRES, a Gallagher Company. CRES is a Texas REALTORS® risk management partner.
E&O for property management is different from the coverage brokerages carry for real estate sales, Turner explains. It is intended to address specific situations, such as fair-housing discrimination, habitability, and property mismanagement.
Some common E&O claims against property management companies allege discrimination or failure to maintain the premises. Claims related to assistance animals are another major category.
Some jurisdictions are enacting additional tenant protections for tenants with criminal histories or those using housing-choice vouchers. Property managers and leasing agents need to know the laws and ordinances. “There are law firms out there fishing for these issues,” he notes. “They’ll call, email, or reach out to basically test you to see if you are complying with the law.” If not, you can expect a letter or even a lawsuit.
Don’t assume your broker’s E&O coverage protects you if you manage your own properties. Typically, brokerages won’t allow their agents to perform property management on their own properties. If named in an agent’s claim, a brokerage may defend itself by saying it did not authorize the independent contractor’s activities on properties owned and managed by the agent.
If you decide to manage your own properties, make sure you are appropriately insured. Many agents buy and own properties as investments. Only a few companies offer policies for them.
“Property management is seeing an increased number of claims,” Turner says. “Rents are going up, and tenants have higher expectations as to maintenance and service than they may have had in the past and more laws and ordinances are being enacted to protect tenants.”