California Case Could Trigger Domino Effect for Professional Liability Coverage in Real Estate |
|
|
|
Written by U.S. Insurance News
|
|
Friday, 22 February 2008 |
You’ve seen this scenario before—trouble hits the real estate market, and property values plummet. Lawsuits follow, and then underwriters start to tighten policy restrictions.
You’ve seen this scenario before—trouble hits the real estate market, and property values plummet. Lawsuits follow, and then underwriters start to tighten policy restrictions and raise the premiums for professional liability coverage in the real estate industry.
“The professional lines are 99.99% litigation-sensitive,” said Alexandra S. Glickman, managing director and practice leader for broker Arthur J. Gallagher’s worldwide real estate operations. If insurers start to see a trend in one industry, she explained, they do what they can to lessen or contain their exposure.
“Unfortunately, insurance sometimes is a knee-jerk-response industry,” she added.
A recent story in BestWeek explains that a unique court case in California could affect professional liability coverage in the real estate industry.
A married couple in San Diego County sued their real estate agent and his agency because they claimed that they paid too much for their home. That suit, which they filed in July 2006, is still in the courts. If the couple wins, industry officials believe it could have a significant impact on professional liability coverage.
In fact, Glickman predicts, prepare to watch the dominoes fall—in the form of lawsuits.
“If they win, then everybody and their mother will look at the decreasing values of the homes that they bought in the last 18 months and will be saying, ‘Clearly, I have been the victim of some great conspiracy,’ and they’re going to start suing,” she said.
Should lawsuits follow in rapidity, then Glickman said the cost of E&O will rise, as well as the defense costs. “You have yet another cottage industry, and lawyers are suing because someone has to be responsible,” she concluded.
|
