Property Managers Errors & Omissions (E&O) Insurance: A Guide

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.

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.

3 Real-Life Claims Scenarios

To help illustrate how this coverage works, let’s look at three examples of how an E&O claim can play out in the real world:

1. Wrongful Eviction

Anna, a long-time tenant in an apartment complex, lost her job and couldn’t pay rent for a few months. Although she informed the property management company of her situation, they quickly moved to evict her, but didn’t follow the proper legal procedures.

After her eviction, Anna realized that the property manager did not serve the required notice or allow the legally mandated grace period for her to catch up on rent. Also, she wasn't given a chance for a court hearing, where she could have presented her case. Because of these missteps, Anna hired a lawyer and filed a claim against the property management company for wrongful eviction.

The property management company didn’t have E&O coverage. As a result, it had to pay substantial legal fees and a settlement amount, and also suffered from a tarnished reputation that could affect future business.

2. Negligent Leasing

A large condo community had a vacancy. The property management company did not do a thorough background check and leased an apartment to an individual who had been convicted of assault. Just a few weeks into the new lease, this tenant got into a physical altercation with a neighboring tenant over noise.

The victimized tenant sued the property managers, alleging that they failed in their duty to ensure a safe living environment. The plaintiff stated that a simple background check would have revealed the new tenant's history of violence.

Without E&O coverage, this negligence claim cost the property management company in legal defense fees and a settlement amount. It also made vacant condos harder to fill because word-of-mouth spread that the company welcomed convicted criminals as renters.

3. Improper or Insufficient Documentation

A small community apartment complex had a history of being lax with documentation. Many agreements were made verbally with renters and upheld by mutual trust between the renters and manager.

When a tenant named Derek moved in, he was verbally promised certain amenities like free parking and gym access. Yet a few months into his tenancy, the complex was sold and the new property managers were not informed of the verbal commitments made to tenants like Derek. As a result, Derek was suddenly charged for parking and denied gym access.

Frustrated by the unexpected charges, Derek decided to break his lease early. The property management tried to penalize him for breaking the lease, but since there was no written documentation of the amenities promised or the terms of the lease, Derek took legal action.

The property managers found themselves embroiled in a lawsuit, bearing the brunt of the legal fees and potential penalties for not having proper documentation.

Best Insurance Companies For Property Managers

Based on our decades of experience in the industry, these are the insurance companies that offer the most comprehensive E&O coverage at the best price. If you’d like to price out E&O coverage for your company, we’ll get a quote from all of these providers so you can compare costs.

Berkley Management Protection

Berkley Management Protection is one of the go-to insurance carriers for our property management clients. They are easy to work with, have very competitive premiums, offer the core coverage property managers need, and have team members that specialize in E&O claims. They can provide quotes of up to a $5M limit, usually within the same day, and can add in additional coverages (such as cyber and tenant discrimination) for a competitive rate.

RLI

RLI has been a long-time player in this space and writes a considerable amount of E&O coverage for property managers. They offer coverage limits of up to $5M and provide most of the coverage that a property manager would need on a single policy.

Arch Insurance

Arch is another long-term and stable player offering quality property manager E&O coverage. This provider is a great option for any property manager looking to comprehensively insure their business, especially for those who need more than a $5M limit as Arch can go up to a $10M limit on their professional liability product. Many of our clients have had a great experience getting claims paid by Arch.

How To Get A Property Managers Errors And Omissions Quote

Our goal is to make it easy to get a quote for any coverage you need. You don’t need to spend hours on paperwork or back-and-forth conversations—we can price things out for you and present you with your options, very quickly. Here’s how:

Get A Quote Online

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.

Give Us A Call

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.