Real Estate Malpractice Insurance Report

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2012 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 2012, 33 claims against real estate agents were closed. Of these, 21 resulted in payment. 

As with most lines of malpractice insurance, insurer expenses can rival claim payments. In 2012, claim payments averaged $8,204, while defense costs averaged $18,341. 

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 14 of 21 paid claims in 2012.  The only other identifiable reason was coded as “other,” which accounted for seven claims in 2012.  

Most real estate malpractice claims are settled prior to trial. Between 2003 and 2012, 21 percent of paid claims were settled without a suit being filed, and an additional 76 percent were settled prior to trial. 

This report was compiled using information submitted by the insurance companies. As a result, the accuracy of this report is dependent on the accuracy of each company’s data. Copies of this report will be made available in braille, large print or on audio cassette on request. Questions about this report should be directed to the Statistics Section, Department of Insurance, Financial Institutions & Professional Registration, P.O. Box 690, Jefferson City, MO 65102-0690.