2024 Indemnity Plan offers increased coverage at no additional cost

March 2024

Indemnity Plan RE0424 comes into effect April 1, 2024 and will provide every licensee with an additional $1 million in coverage, with no increase in annual fees. The changes in limits mean your:

• liability limit for each claim will increase from $1 million to $2 million;
• annual aggregate limit of coverage for all claims in a given policy year will also increase from $1 million to $2 million; and
• sub-limit of liability for tangible property damage will increase from $100,000 to $250,000 per claim.

These changes are reflected in Indemnity Plan RE0424 at Declarations, s 3(a) to (c), Part III: Exclusions s. 5 (re $250,000 sublimit), Part IV: Conditions, s. 1.1 Limit of Liability – Each Error, s. 1.1.1 and 1.2 Limit of Liability – Annual Aggregate.

Part II: Insuring Agreements, s. 3.5 Scope of Coverage limits coverage to $100,000 (for property damage sub-limit) or $1 million if you had knowledge of the error prior to April 1, 2024.

The Indemnity Plan limits have not been increased since they went from $100,000 per claim to $1 million per claim in 2003, although exposure to larger claims have increased. In addition to the annual fee not increasing, the deductibles are also not increasing (except for social engineering fraud claims, see below).

The care taken by all licensees in carrying out their work carefully every day provides the basis to keep insurance costs low.

Introducing a social engineering fraud sub-limit

Along with these increased limits, we’re also introducing a new sub-limit of $500,000 for social engineering fraud claims, where fraudsters intentionally mislead a person into sending or paying money based on false information provided to that person. Real estate brokerages, particularly strata and property managers, have been the target of this type of fraud recently as electronic fund transfers have become a regular part of doing business. As a result, brokerages have faced claims from their clients for transferring money to the wrong party.

To encourage licensees to take appropriate steps to protect themselves from becoming the victim of this type of fraud, the deductible for these claims will be 25 per cent of the amount of damages UNLESS the insured has taken steps to independently verify the instructions through secondary verification.

Secondary verification is defined as “action by an Insured, having received initial or amended payment instructions by means other than in person, to subsequently contact the person who purportedly gave such instructions, by telephone at a trusted number or in-person, and confirm that the instructions are genuine and accurate.”

These changes are reflected in Indemnity Plan RE0424 at Declarations, s 3(d) and 4(c), Part I: Definitions for “secondary verification” and “social engineering fraud”, Part III: Exclusions s. 17, and Part IV: Conditions, s. 1.1 Limit of Liability – Each Error, s 1.1.1 (iii).

For information on how to avoid cyber fraud see:

• Cyber-fraud can happen to you! How to prevent it and what to do when it happens and
• Battling funds and title transfer scams

Complaints to BCFSA or Real Estate Boards remain not covered

The Indemnity Plan has never provided coverage for complaints made against a licensee to disciplinary or regulatory bodies. This is because the definition of “damages” in the Indemnity Plan excludes “any fine, sanction, penalty or disciplinary hearing costs.” To further clarify this, Indemnity Plan RE0424 adds a specific exclusion for “any proceeding brought by the BCFSA or any real estate board.”

Make sure to review your other insurance needs regularly

With this increase in coverage, some licensees and organizations might be inclined to reduce or cancel their excess insurance coverage. Although the increased limits will provide additional protection and comfort, we’d strongly advise all licensees to do a proper, up-to-date risk evaluation, preferably after consultation with an insurance broker, before making that decision.

Some licensees will continue to face a higher risk of claims that may exceed the new policy limit because, for example, they:

• provide real estate services involving multiple similar properties such as project marketing or land assemblies
• sell commercial, development or waterfront properties
• work in areas where real estate prices are extremely high.

Remember that any legal fees incurred in defending a claim are paid first against the limits of coverage, which can result in there being significantly less than the $2 million coverage limit (as at April 1, 2024) available to pay damages in a complicated or hard-fought claim.

We continue to recommend licensees at higher risk consider purchasing excess insurance and we offer further information on excess insurance on our Excess Insurance page.

Comprehensive general liability (CGL) insurance is another essential for every brokerage and agent, providing coverage for bodily injury and physical property damage to third parties, including risks arising from your premises as well as any showings or listings. 

Excess and CGL insurance are usually purchased by the brokerage. Ensure that the brokerage CGL policy extends coverage to independent contractors and not just brokerage employees.

The following articles are also excellent resources:

• Risks and insurance for the real estate licensee
• You and your professional liability Indemnity Plan.

The present article is for informational purposes only. For purposes of issues of coverage, the Indemnity Plan wording is binding and determinative.