Mistakes can happen. At work and at home, they are a part of life. In the work context, while actively discouraged, sometimes there is nothing you (the Registrant) could have done to have prevented an error from occurring. Regardless, you have Errors & Omissions (E&O) Insurance in place for just this reason. Whether at fault or not, you should not be afraid to submit a claim to the Insurance Program after discovering an error. The following provides something of a road map for Registrants when faced with an error.
What do I do if I make a mistake – while acting as real estate professional – that I think might give rise to a claim against me?
What do I do if I notice something has gone sideways in a deal, even if I’ve done everything right, which I think might put me at risk of being claimed against?
What do I do if I receive a Demand Letter or a Statement of Claim with regard to my involvement in a real-estate transaction?
Submit a Claim – and make sure to forward a copy of the Demand Letter or Statement of Claim to the Insurance Program.
DO NOT sit on your concern, or on a Demand Letter or Statement of Claim, with the hope that it might disappear. This could make matters worse and possibly void your Insurance coverage.
DO NOT respond to a Demand Letter or a Statement of Claim verbally or in writing before you have obtained feedback from the Insurer. Again, this could make matters worse and possibly void your Insurance coverage.
DO – Submit a claim immediately.
How do I submit a claim?
Simply fill out a Notice of Claim form and send it in.
If I submit a claim, won’t my premium and/or deductible increase?
No. Your premium will not increase as a result as it is not tied to the reporting of claims.
Your deductible is only triggered when the Insurer pays out damages on a claim by way of settlement or after judgment in court.
An increased deductible – a further $2,500 for each additional payment for settlement or judgment – will only be triggered if another claim has been reported within the current or prior three Policy Periods and has resulted in a payment for damages.
What happens after I submit a claim?
The Program Adjuster will acknowledge your claim and open a file for it. At this point you will be deemed to have reported the potential claim – the first step (and sometimes the last) in the process.
If you have reported an error or an issue in a deal you were involved in, that you think might give rise to a claim against you, the Program Adjuster may simply monitor the situation by checking in with you every few months to inquire as to whether or not you have heard anything, or anything further, insofar as legal action. After a period of inactivity, the Program Adjuster may close the claim file. Don’t worry, the claim can be re-opened down the road in the event a claim materializes.
Should a claim at any point materialize (through monitoring or after receipt of a Demand Letter), the Program Adjuster may choose to assign defence counsel. It is more likely that the Program Adjuster will assign defence counsel to your claim file once a Statement of Claim has been received, so long as your RECO E&O Policy of Insurance is engaged by its contents. The facts and circumstances of the claim made against you will determine if the claim is covered by your Policy, partially covered or not covered at all. Should your claim be only partially covered, you will receive a Reservation of Rights letter setting out exactly what your Policy excludes.
Whether covered or partially covered, time will pass as information is gathered and while the claim makes its way through the court process. This can often take years. That said, your assigned defence counsel will deal with the day to day and will only call upon you when needed to obtain information and for prep and attendance at various proceedings, which are few and often far between. Please note, any travel or time spent at meetings with counsel or at attendances such as Examinations for Discovery, Mediation, Pre-trial and Trial, will be at your own expense.
Depending on the dynamics of the claim and the parties involved, settlement can occur at any point outside of court. The claim may even settle at Pre-trial, the last stage prior to Trial. In the event the claim makes it to Trial (which is uncommon), a judge will make a ruling as to liability and damages.
The Bottom Line
At the end of the day, the bottom line is this: WHEN IN DOUBT, SUBMIT A CLAIM
There is no downside to submitting a claim:
-It doesn’t cost you anything (except a little time);
-Your premium won’t go up;
-You won’t pay a deductible unless a claim materializes;
-You will ensure that you don’t compromise your coverage; and
-You will get advice from a sophisticated team trained to defend you under your Policy.