the real estate e&o puzzle: how do we evaluate exposures?

2010 PLUS International Conference

THE REAL ESTATE E&O PUZZLE:HOW DO WE EVALUATE EXPOSURES?

2010 PLUS International Conference

The Round-Up…

MODERATOR:• Fredric W. Trester, Esq., Partner, Manning & Kass, Ellrod,

Ramirez, Trester LLP

PANELISTS:• Inga Goddijn, Managing Director, Markel• Matthew Nangle, President, ProGroup International• Amanda Whitted Sedliak, CIC, Senior Vice President, Capitol

Special Risks, Inc.• Richard Sheridan, Vice President, ACE USA Claims

2010 PLUS International Conference

What’s On Tap…

• Real Estate Market Trends and Emerging Exposures• Underwriting Considerations and Available Coverages• Insurance Coverage• Risk Management• Claims Handling• Take-aways• Questions & Answers

2010 PLUS International Conference

Real Estate Market Trends and Emerging Exposures

What is different about the real estate market today?

• The Housing Market

• Short Sales & REO Sales

• Loan Modifications

2010 PLUS International Conference

Real Estate Market Trends and Emerging Exposures

What are the specific exposures?

• Real Estate Brokers (Commercial and Residential)

• Property Managers

• Mergers & Acquisitions

2010 PLUS International Conference

Real Estate Market Trends and Emerging Exposures

What are the specific exposures for each category?

• Appraisers

• Mortgage Brokers

• Title Agents

2010 PLUS International Conference

Underwriting Considerationsand Available Coverages

What is the impact on the underwriting process?

In prior years, key questions included:• Length of time in business / licensed?• Are home warranties included?• Are home inspections done prior to closing?• Are standard contracts & seller disclosure statements

used?• Does the agency engage in dual agency transactions?

2010 PLUS International Conference

Coverage Questions on a Real Estate Professional Supplemental App:

What should underwriters look for today?• Percentage of sales involving foreclosed homes• Percentage of sales that are short sales• Percentage of sales from agent owned property• Do any brokers or agents have an ownership

interest in a construction or development company?

• Is any broker or agent actively engaged in “fix & flip” activities?

2010 PLUS International Conference

Coverage Questions on a Real Estate Professional Supplemental App:

What is important to know regarding short sales?• Of the total number of short sale deals, how many

have closed in the past 12 months? • What specific training is provided to staff regarding

short sale transactions?• What specific procedures or policies are in place for

the handling of short sale transactions?• Do you recommend, in writing, that all short sales

be reviewed by an attorney & CPA for potential legal and tax implications?

2010 PLUS International Conference

Underwriting Considerationsand Available Coverages

What is a reasonable expectation of coverage?

• SIRs / Deductibles

• Choice of Counsel

• Retro Dates and Prior Acts Coverage

• Agent-Owned Property

• Pending and Prior Litigation Endorsement

2010 PLUS International Conference

Underwriting Considerationsand Available Coverages

What is a reasonable expectation of coverage?

• BI/PD

• Business Brokerage

• Pollution and Environmental

• Third Party Discrimination

• Syndicators and Promoters

2010 PLUS International Conference

Underwriting Considerationsand Available Coverages

What is a reasonable expectation of coverage, based on the definition of Professional Services?

• Restrictive: Residential Real Estate Sales for others for a fee

• Broad: A comprehensive listing of activities including sales, consultation, title, escrow, leasing, property management, tenant representation, appraisal, auctioneering, business brokerage, relocation assistance, expert witness, notary public, industry related committee participation, management consulting and internet-related activities.

2010 PLUS International Conference

Insurance Coverage

What are the coverage issues arising out of the changing market?

• The implications of undisclosed services

• Independent (Cumis) Counsel

• Fraud and Deceit

2010 PLUS International Conference

Risk Management

What’s the role of risk management in this new environment?

• Training

• Coverage Discounts

• Hotlines

2010 PLUS International Conference

Claims Handling

What is the impact on claims handling practices today?

• Early Resolution

• Mediation

• Managing Counsel

2010 PLUS International Conference

Take-aways

• Better Communications Between Brokers and Underwriters Regarding Coverages

• Brokers and Agents Must Know Which Carriers Offer What Coverages to Avoid Surprises to Their Clients

• The Spirit of the Coverage Remains the Same for Real Estate Malpractice Insurance

2010 PLUS International Conference

Questions&

Answers

2010 PLUS International Conference

Many Thanks to …

• Fredric Trester

• Inga Goddijn

• Matthew Nangle

• Amanda Sedliak

• Richard Sheridan