2013 Real Estate Malpractice Report

Executive Summary

Real estate malpractice insurance protects real estate agents and brokers against liability for errors or omissions committed in the course of a business transaction.  Liability can arise for failure to make an appropriate disclosure, giving inappropriate advice to buyers and sellers, and failure to properly complete all necessary paperwork, among other reasons. 

In 2013, 59 claims against real estate agents were closed.  Of these, 29 resulted in payment. 

As with most lines of malpractice insurance, insurer expenses can rival claim payments.  In 2013, claim payments averaged $20,547, while defense costs averaged $24,171.

The most common source of real estate malpractice claims was a failure to disclose a material fact about the property or the transaction.  This reason alone accounted for 19 of 29 paid claims in 2013.  Two other identifiable reasons were coded as “other”, which accounted for six claims in 2013 and “failure to correctly complete forms”, which accounted for four claims in 2013.

Most real estate malpractice claims are settled prior to trial.  Between 2004 and 2013, 22 percent of paid claims were settled without a suit being filed, and an additional 75 percent were settled prior to trial.