A Gretna, Louisiana Realtor is being sued after pulling out of a sales contract for her own property. Kimberly Wright Burbank offered her property for sale and entered into an agreement to sell to an interested party. She later pulled out of this first contract and entered a second contract that was more lucrative. The lawsuit is based around the understanding of whether the contract was in force or if was still an “offer” when Ms. Burbank pulled out.
The plaintiff, Jason Shackelford, alleged that the contract was executed and they were negotiating a few minor points. The Realtor explains that it was simply an offer at that point and she decided to refuse the offer when another offer came in. The plaintiff has also sued the real estate firm claiming that the Realtor relied on the firm’s incorrect opinion that the contract was not executed. Commissions, attorney’s fees and 10% of the sales price is being sought as damages.
While this case has yet to be determined, it raises an important aspect of Realtor’s professional liability insurance that each firm and broker should be aware of. Specifically, this issue is whether coverage is afforded for real estate agents selling their own properties.
Since no professional liability insurance policy is the same, many policies exclude coverage when agents sell their own property. In the facts noted above, the agent may be without defense or indemnity if such a policy was purchased by the firm. It is important for firms to be proactive in understanding exactly what their policies cover and do not cover.
A firm can protect itself one of two ways. The first is to have a company policy that disallows agents to act as the listing agent for their own properties. Another agent within the office can act as the listing agent – even if there is an understanding in-house that a commission will not be paid to that in-house broker. This will avoid the transaction being without insurance coverage. The second option is to purchase an insurance policy from a carrier that does NOT exclude agents from selling their own property. This is beginning to be more readily available, but not every insurance company offers it.
It is important to engage with an insurance broker that is knowledgeable about the differences between insurance policies. Buying on price alone may leave your firm with large gaps in coverage. Contact us today to discuss what may be best for your firm.