When you manage assets or investments on behalf of others—whether it’s physical property or even stocks—you run the risk of financially harming the clients you work with.
For property managers, real estate is one of the largest investments an individual or business might have. Making a mistake that causes a loss for your client could easily result in legal action against you.
That is why property management errors and omissions (or professional indemnity) insurance exists: to protect property managers from liability arising out of managing property of others.
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What is covered under property managers E&O?
Property managers errors and omissions, or E&O, covers a wide variety of claims scenarios. Like a standard E&O policy, it addresses the unique concerns of a property manager when their mistake causes financial harm to their client.
Here are some mistakes that the property managers E&O policy can cover:
Tenant Discrimination
Many property managers E&O insurance policies cover claims or allegations of discrimination based on an individual's race, creed, color, age, gender, national origin, religion, disability, marital status, or sexual preference.
This claim could arise from the initial tenant screening, the eviction of a tenant, and anywhere in between.
Many policies make this coverage an optional purchase. It can also be requested in small and large amounts, depending on your preference.
Wrongful Eviction
Evictions are never easy. For a property manager, they can often lead to allegations of wrongfully evicting a tenant. If you find yourself in this situation, your E&O policy will often cover this type of claim.
Data Breach
As a property manager, you have access to a lot of sensitive information that could harm your tenants or clients if leaked online. This is why many property management E&O insurance policies will give you the option to include data breach liability.
This covers you if private data like Social Security numbers and/or banking, medical, and credit information are released to the public.
Many property managers enter this information online in a third-party software platform, thinking these third parties will carry all the liability arising from a data breach. Over time, this is becoming less and less true.
The laws are shifting to place liability on the "owner" of the data, which is the entity that initially collected the information. Additionally, these software platforms are placing limitations of liability in their contracts to ensure that a data breach does not bankrupt the company. A cyber policy would cover your liability in this scenario.
Property Maintenance
If you are tasked with maintaining the property for a client and overlooked maintenance results in significant harm to the building, a property management policy could help you cover the liability that arises.
These claims not only result in liability for additional damage to the building, but also the loss of rents if there is a delay in a project or if the tenant must be removed for a period of time as a result.
Contractor Management
Many property management companies are responsible for hiring contractors to complete projects. They also ensure those projects are executed on time.
As with any construction project, there is always a risk of something not going as planned. Maybe the contractor takes your client's money and never completes the project, or you hire an unqualified contractor to perform work on a building. An E&O policy helps cover these types of mistakes, which can happen while overseeing renovations and maintenance construction.
Misrepresentations
As a property manager, you make a lot of professional predictions and assertions to both clients and tenants. These assertions could include how well a property might serve the tenant's business needs.
For example, if a company hired a property management firm to lease a floor in a building, and the property management firm failed to disclose that road construction would start a month later and restrict the ability of customers and vendors to visit the office, then that could be grounds for legal action. Certain property management E&O policies will cover this type of claim.
What is not covered under property managers e&o?
Property Owned By You
Most standard property management E&O policies do not cover claims arising from property you own. That being said, there are options out there that provide this type of coverage, but to get them you’ll need to have a conversation with your insurance broker.
Property Syndication
If you’re operating a property syndication or real estate investment trust, you should know that this is usually not covered under the usual property management insurance programs. There are policies that do include these types of activities, but you will need one more specialized than a standard property management E&O policy.
Promises Made By You On The Future Value Of A Property
Incorrect predictions or guarantees in future sales prices or values of a property are not covered.
Property Damage
Damaging someone's property is not covered under this E&O policy unless it occurs during an open house. Property damage and bodily injury is a coverage provided under a general liability policy. We always suggest purchasing general liability in addition to E&O insurance for this reason.
What does property managers e&o cost?
Basic policies for small property management firms usually start at around $500, depending on which state you operate in. As you add employees, increase revenue, and scale your operations, the premium will increase proportionally from there.
How To Get A Property Managers Errors And Omissions Quote
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If you are looking for a way to get an easy and fast quote for your property management business and just want a basic policy, you can get a quote instantly online.
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If you are looking for specific coverage, have unique operations, or want our team to find the best policy available, you can either request a call or call our office to speak with a risk advisor immediately.
