In the last issue of the Real Estate Bulletin, it was reported that the Real Estate Commission was considering whether to recommend to the N.C. General Assembly that legislation be enacted requiring real estate brokers and salesmen to obtain errors and omissions insurance as a condition for renewing their real estate licenses on active status.
The insurance would either be purchased by the licensee, or the licensee could participate in a group insurance program through a policy purchased by the Real Estate Commission (at a premium not to exceed 5100 per Rear). Fire other states hare enacted mandatory errors and omissions legislation for real estate agents. Their policies generally provide 5100,000 coverage against claims by real estate consumers alleging losses sustained because of the careless or negligent acts of real estate agents. Two major factors hare prompted this legislation:
First of all, real estate licensing agencies recognize that otherwise competent and conscientious real estate agents (like other professionals) are subject to human errors, carelessness and lapses in judgment, and that the very nature of real estate transactions lends itself to misunderstandings. As a result, innocent consumers sometimes suffer substantial financial loss only to find that the real estate agents who caused their misfortunes frequently are financially unable to offer any relief or compensation. Errors and omissions insurance is designed to afford that relief to worthy consumers.
Secondly, given their increasing vulnerability to lawsuits, real estate agents themselves may avoid or at least reduce the financial ill-effects of such lawsuits if they have errors and omissions insurance coverage, but the cost of procuring this insurance has to some agents been prohibitive Therefore, by purchasing a group policy to cover all active real state agents in the state, it may be possible to bring the premiums for this insurance within the reach (and the "pocketbooks") of all active brokers and salesmen. But it appears that these reduced premiums can only be achieved through a "mandatory"—not "voluntary"—policy.
Recognizing that many licensees are not actively engaged in the real estate business, the licensing agencies of those states which have mandatory errors and omissions insurance have exempted from the insurance requirement those brokers and salesmen who are on inactive status; however, they must purchase the insurance before their licenses are activated. Likewise, under the plan being considered by the North Carolina Real Estate Commission, real estate agents whose licenses are on inactive license status would not be required to purchase errors and omissions insurance
A questionnaire was included in The previous issue of the Real Estate Bulletin in an attempt to gather information concerning the number of licensees who are currency covered by E&O insurance, the cost for such insurance and the agendas from which the insurance was purchased. Based upon the responses, together with dam obtained from the Ingest provider of E&O insurance for North Carolina real estate agents, it appears that only a small percentage of agendas have errors and omissions coverage. Many agents who are covered pay an up-front fee (as much as 5400) and 525 to 535 per closing. Others pay premiums on a "per firm'' basis which decrease proportionately the larger the firm.
The questionnaire also revealed that there is mixed reaction to the prospect of mandatory errors and omissions insurance Those who oppose it are concerned that it might increase the likelihood of lawsuits or who are philosophically opposed to further governmental intervention in Their businesses. On the other hand, chose licensees who favor mandatory E&O insurance, do so because who feel it win lower Their current premiums or make it affordable to chose agents who currently find it too expensive to purchase.
Before making a final determination on whether to seek mandatory errors and omissions insurance legislation, the Commission wants to acquire as much information as possible and to afford proponents and opponents of This issue every opportunity to voice Their opinions. To accomplish This, a follow-up questionnaire is included below for you to state your position on this matter. In addition, a "Forum on Mandatory Errors and Omissions Insurance" has been scheduled for Tuesday, February 19, 1991 beginning at 2:00 p.m. at the North Raleigh Hilton and Convention Center, 3415 Wake Forest Road in Ra1elgh for the purpose of receiving comments from real estate licensees and other interested persons.
The Commission is sincerely interested in your thoughts on this subject and therefore encourages you to complete and return the following questionnaire and/or attend the upcoming Forum