E&O update
Despite the busy real estate market, claims have remained stable year over year. Claims reported in the 2017 calendar year are expected to total approximately 355, almost no change from the 359 claims reported in 2016. There are currently 546 open claim files, only 3.4% more than at the same time last year.
71% of open claim files are in litigation. 24% of these litigation files are in Small Claims Court and are handled almost exclusively by our in-house staff lawyers.
Supreme Court files account for the remaining 76% of litigation files and 44% of those are defended by our in-house lawyers. In total, to save costs, our four staff lawyers are currently handling approximately 57% of the litigation matters in house. Our 2017 claims surveys, completed by our insureds upon closing a file, continue to show a high regard for our in-house lawyers’ services, with an average rating of 97.55%.
The types of claims reported continue to be a mixed bag. In this past year, the categories with the most claims were breach of fiduciary duty (16), misrepresentation/non-disclosure respecting drainage/water ingress (27), oil tanks/contamination (14), parking/storage (13), no permits (13) and, finally, negligent drafting respecting subject clauses (16).
Subject clauses are the “subject” of two articles in this issue of the Risk Report. Scott Cordell discusses good faith obligations in removing subject clauses and Ryan Dix writes about the risks in presenting offers with subject clauses in foreclosure proceedings. The types of claims reported to E&O about subject clauses include:
- Late removal of subject clauses;
- Removing subject clauses without client’s permission/instructions;
- Failing to ensure your client has fulfilled the terms in the subject clause (e.g. that the buyer has financing in place before removing a subject-to-financing clause);
- Failing to advise on risks of removing/not removing subject clauses;
- Failing to recommend an appropriate subject clause;
- Advising clients that they could get out of a subject deal for any reason, even if it was not the reason contemplated by the subject condition (e.g. refusing to remove a subject-to-inspection clause because they didn’t get a good mortgage rate).
Finally, this is the time of year when licensees make “calendar” related mistakes. Be careful that the year you write in your contract is the correct one! Every year E&O has claims reported that involve licensees who fail to change the year on the completion date on counter offers. For example, if the offer calls for completion in February 2018 and the seller wants to counter-offer with an earlier date in December 2017, make sure you change both the month to December AND the year to 2017!
2017’s five most expensive claims
- Negligence – A buyer’s agent was alleged to have been negligent in failing to draft contract terms to protect the buyer from oil tanks/contamination.
Total cost, including legal fees: $442,700
- Negligence – A property manager was alleged to have been negligent for failing to charge and collect the correct amounts from tenants over a period of years.
Total cost, including legal fees: $329,700
- Negligence – A seller alleged that the seller’s agent was negligent in undervaluing the property for sale.
Total cost, including legal fees: $287,700
- Negligence – A buyer’s agent was alleged to have been negligent in failing to properly advise the buyers on their obligations under the contract, including not recommending legal advice when the buyers wanted to breach the contract.
Total cost, including legal fees: $192,900
- Negligent misrepresentation – Claims were made against a seller’s agent for allegedly misrepresenting the views from a home being built.
Total cost, including legal fees: $173,000
