In British Columbia, we enjoy living in a peaceful, prosperous, lawful society that is generally well run to avoid the worst of risks. We are able by planning and good business practice to mitigate the remaining risks, including through insurance.

An overview

For real estate licensees, particularly those running brokerages, some basic advice may help orient you as to the kinds of insurance that you should consider. For the detailed planning of insurance you should consult an experienced insurance broker.

Here is a table of the protection offered by Real Estate Errors and Omissions Insurance Corporation (E&O), the Real Estate Special Compensation Fund, and commercial insurance policies.

	Risks	Real Estate Errors and Omissions Indemnity Plan	Real Estate Special Compensation Fund	Commercial policies
Negligence	Negligence in acting as a real estate licensee	Covered	Not covered	Excess extends the Indemnity Plan limits.
Fraud	Criminal, dishonest, fraudulent or malicious acts unrelated to theft of trust funds or property	No insurance for your own such acts	Not covered	Excess may insure you for defence costs.
		The Indemnity Plan covers innocent parties who are liable as a result.	Not covered	Excess extends the Indemnity Plan limits.
	Loss of trust funds as a result of fraud (not by a licensee), such as social engineering fraud	Coverage questionable	Not covered	Social Engineering and Funds Transfer Frauds – part of Crime (Fidelity coverage) and Cyber
Theft	Stealing trust funds or property by licensee, brokerage employee or independent contractor	Not covered	Covered	Crime (Fidelity) coverage extends limits of coverage.
Data breach	A data breach that leads to the misuse of information by a third party or a malware transmission	Not covered	Not covered	Cyber applies.
	A data breach that gives rise to an error in providing real estate services	Covered in some circumstances	Not covered	Excess and Cyber may apply.
Damage	Bodily injury to third parties arising from your real estate operations and premises	Not covered	Not covered	Commercial General Liability (CGL) applies.
	Property damage to third parties arising from your real estate operations and premises	Covered subject to $100,000 sub-limit	Not covered	Commercial General Liability (CGL) applies.
	Loss of office property and assets and business interruption due to fire, theft, vandalism, flood, earthquake or other perils	Not covered	Not covered	Property applies.
Employer and director (usually sold together)	Claims against you for wrongful dismissal, breach of contract, sexual harassment and other wrongful employment practices	Not covered	Not covered	Employment Practices Liability (EPL) policy applies as may some Excess insurance.
	Claims against you as a director or officer of a real estate brokerage for mismanagement, conflicts of interests and other allegations	Not covered	Not covered	Directors and officers liability (D&O) applies.

Insurance policies for real estate brokerages

Excess insurance

This sort of coverage typically increases the limits of coverage above the limits provided by the E&O Indemnity Plan. Instead of $1 million in limits per error, an excess policy might provide, for example, an additional $1 million or $2 million in coverage in excess of the Indemnity Plan.

Depending on the Excess carrier, there may be additional coverages that are offered as part of an Excess policy. This could be a limited form of Cyber coverage, or a limited protection against the legal defence costs of disciplinary proceedings.

The nature of the work done by a brokerage should guide whether to buy excess insurance and how much. The increase in values of BC real property to historic levels justifies close consideration of this issue. Also, if the brokerage is engaged in marketing multiple-unit housing, brokerages should note that multiple claims from the same project may be related claims and subject to one limit of coverage under the Indemnity Plan.

Crime (Fidelity) insurance (which may include Social Engineering and Funds Transfer Frauds)

Crime or Fidelity insurance provides coverage for a brokerage against employee dishonesty. It would be additional to the protection given by the Real Estate Special Compensation Fund, which protects against such dishonesty up to $100,000 per claimant.

Such a policy may or may not protect against Social Engineering Fraud which would protect a brokerage against loss where a fraudster tricks an employee into divulging information or paying funds to someone not entitled to them. It may also include Funds Transfer Fraud that will respond if your bank is defrauded.

Cyber insurance

A Cyber policy covers against risks of computer hacking or malware transmission. It insures against your own losses in the event of a hack or virus, such as notification costs if personal information is stolen, cyber extortion (ransomware), the costs of IT forensics, and the costs of restoring your computer systems.

It may insure you for third party claims as a result of stolen data or confidential information and may include the provision of immediate technical assistance in the event of a data breach.

Commercial General Liability (CGL) insurance

This coverage is essential. It provides coverage for bodily injury and property damage to third parties including risks arising from your premises. It may include coverage for advertising liability, tenants’ liability, defamation (libel and slander) and other personal injury claims.

Property insurance

A Property policy may be part of an office package policy with commercial general liability coverage. It covers the physical assets of the brokerage including office contents, equipment, and business interruption arising from perils such as fire, theft, vandalism, flood and earthquake. The amount of the coverage will depend on the extent of the assets.

Directors and Officers Insurance and Employment Practices Liability

These coverages are typically sold together. Directors and Officers Insurance coverage provides coverage against management-related risks, i.e. claims by shareholders or others that the brokerage has been mismanaged. Employment Practices Liability protects against claims from a wide range of allegations related to wrongful employment practices, including claims of wrongful dismissal, sexual harassment and discrimination.

Real Estate Errors and Omissions Indemnity Plan

A more detailed summary of coverage under the Indemnity Plan is set out below for your guidance only. The application of coverage is determined by the wording of the Indemnity Plan.

See also the FAQs re: coverage under the Indemnity Plan. This table appears to contain a lot of “Nos” and fewer “Yeses” as to coverage, but this is misleading. In practice, the coverage under the Indemnity Plan is quite broad, and it has protected real estate licensees well since the inception of the compulsory insurance program in 1988.

Coverage under the Indemnity Plan is limited in part because other kinds of insurance are better able to provide the coverage (e.g. bodily injury.)  Some kinds of risk are excluded because it would be a bad thing to insure them, and it would increase the costs of the insurance program unduly. (e.g. insuring conduct which results in punitive damages.)

	Risks	Covered?
What claims
	Negligence, including negligent breach of fiduciary duty	Yes
	Business or personal interest claims, i.e. claims by a company controlled by an insured party, etc.	No
	Data breaches that lead to the misuse of information by a third party or a malware transmission	No
	Libel or slander	No
	Discrimination, restraint of trade, wrongful entry or eviction or invasion of rights of private property	No
	Dishonest, criminal, fraudulent or malicious acts	No. Innocent parties are covered who are liable as a result of such conduct.
	Contractual claims (unless they would be covered apart from contract)	No
	Bodily injury, mental injury, death	No
	Property damage related to an error in real estate services	Yes, but limited to $100,000 including costs of defence
	Commission claims, or any claims precipitated by commission claims	No
	Punitive and other damages, sanctions, special costs	No
	Costs or sanctions relating to disciplinary proceedings such as the Real Estate Council	No
	Thefts, trust shortages caused by frauds, and losses caused by dishonest employees	No
What activities
	Providing real estate services to the public	Yes
	Acting as a director or officer of a company	No
	Activities as an insurance agent or insurance broker, builder, property developer, mortgagee, notary public, property appraiser	No
	Giving a guarantee of future value or income of a property	No
	Obtaining a profit or benefit to which you are not entitled, e.g. secret flips	No
	Failing to insure property	No
	Transactions where you or your spouse have greater than a 10% direct or indirect interest in the property (although the brokerage may be covered in such transactions)	No
When
	Mistakes made while a real estate licensee, even if not discovered until after you cease being a licensee	Yes
Who
	You, employees you supervise and the brokerage which is vicariously liable for your mistakes	Yes

Caveat

The terms of the Indemnity Plan may be amended to some extent from one year to the next and so it is necessary to rely on up to date information as to the  current terms of the Indemnity Plan and as to the terms of various additional kinds of insurance available in the marketplace. The advice in this article is current as at July 2020.

Acknowledgements

I am indebted to Margrett George, of the Lawyers Insurance Fund, for the idea of providing a summary of this kind, and to Rob McLeod of Metrix Professional Insurance Brokers for advice on the current commercial insurance market.