Some Changes Can Be Good
Reviewing the current economic conditions, the universal underwriters for E&O / Risk Reduction policies have discovered a trend in claim settlements that needs to be addressed to prevent the negative impacts on real estate agents and real estate companies that could arise.
E&O and/or Risk Reduction policies have deductibles that range normally from $2,500.00 to $10,000.00. Clients First Realty, LLC for the past three years have maintained there agents E&O / Risk Reduction deductibles at $2,500.00 per incident.
According to Clients First Realty, LLC’s Independent Contractor Agreements and the company’s Policy and Procedure Manual, page 21, the following is and has been the company’s position regarding E&O / Risk Reduction.
Clients First Realty, LLC carries comprehensive Errors and Omissions insurance coverage. This coverage provides varying degrees of protection against claims for professional services. Agents agree to defend, indemnify and hold harmless Clients First Realty, LLC, its owners, and Brokers, against all claims that may arise from an agent practicing real estate. In the event an agent is served with a lawsuit, threat of a lawsuit or a complaint before the Department of Real Estate or Professional Standards, the agent shall notify the Broker immediately. All deductibles and judgments not paid by the E & O carrier shall be the sole responsibility of the agent. The deductible is due and payable by the agent at the time a claim is received. If two or more Company agents were involved in the transaction (not necessarily named in the lawsuit), the deductible is to be divided proportionately between the agents.
Agents acknowledge that there is NO E & O insurance coverage for certain types of transactions including, but not limited to, Business Opportunities, Property Management, Dual Agency (Land Transactions) and Auctions. Terms and conditions of the coverage are subject to change.
A “Risk Reduction Fee” is due and payable by the agent on each transaction SIDE, even if there is no commission involved. In the event there is no commission paid at close of escrow, the agent will be responsible to pay the risk reduction fee to Clients First Realty, LLC. Should the agent fail to pay the fee, their account with Clients First Realty, LLC will be charged the appropriate fees.
If the Company is notified that there may be pending litigation or arbitration regarding a transaction, Clients First Realty, LLC has the right to hold all of the commissions due the agent until such time as the litigation or arbitration is settled or dismissed. Each agent further understands that the agent is liable for all expenses and any award assessed against Clients First Realty, LLC or its owners or broker due to the agent’s actions.
Where agents file suits for commissions, it is not uncommon for a counter suit to be filed against the Company and the agent involved. The Agent agrees to defend, indemnify, and hold harmless Clients First Realty, LLC, its owners and Broker, from any costs or liabilities precipitated by the filing of the commission claim. The company reserves the right to demand a $5000.00 deposit prior to allowing a commission suit to be filed.
After studying the national statistics and interviewing over half of the producing agents of Clients First Realty, LLC it was discovered that paying any type of large deductible caused by a legal claim or lawsuit would currently be very hard and in some cases impossible.
We can handle this problem in two ways, pro-actively or re-actively. Re-actively we do nothing, hoping nothing happens or pro-actively, we create a plan where the agents and the company will not be crippled financially if the event does transpire.
Effective 4-10-2009, the following collective effort is being implemented to benefit both the active writing agents and the company regarding possible legal expenses that may arise from an agent practicing real estate.
In accordance with your Independent Contractor Agreement a 5 day notice in writing via e-mail is being given regarding a minor change in all existing pay plans. The maximum expense created by this change for any one agent will be $200.00 per year.
If you are an agent that has your license with Clients First Realty, LLC and you have NO closed transactions during the calendar year then you WILL NOT be charged the $200.00.
Agents that have one or more closed transactions during the calendar year will have a single annual charge of $200.00 for the year the transaction(s) closed. The contributing fee will be charged against the first available closed transaction of the calendar year being addressed. These funds will go to a legal affairs and E&O / Risk Reduction deductible account.
In addition, the Company will contribute annually $2,500.00 to the legal fund plus corporate has instructed accounting that any agent fine revenue will be applied to the legal fund instead of being booked as miscellaneous income for the Company.
The benefits created for the agents with closed transaction(s) in a given year are the elimination of the E&O / Risk Reduction deductible for that calendar year and to increase the Company’s ability to protect the agents in legal matters that arise from conducting real estate activities and transactions.
As in the past and continuing in the future, Clients First Realty, LLC will make every effort possible to protect it most valuable assets: It’s AGENTS. The Company’s philosophy and financial structure is designed so the agents receive 90%+ of the annual gross revenue generated by the Company. The Company does not make changes without careful consideration. The above change will benefit and strengthen the entire organization and all its members.
Sincerely Wishing You a Great 2009,
William M. Slaughter, P.C.
President / CEO / Designated Broker
Clients First Realty, LLC … 03/27/2009 Official Transmission Date