Don’t Let Your Coverage Lapse: The Importance of Maintaining Continuous E&O Coverage
While the policies RISC administers vary from state to state, it is uniformly important to maintain continuous coverage. That means having no gaps, not even one day, between when one policy period ends and the next begins. Having a gap in coverage has multiple ramifications, including:
1. violating the law in states that require real estate licensees to carry E&O insurance, which can result in regulatory penalties and fines and
2. loss of your retroactive date, which may lead to loss of prior acts coverage (loss of coverage for professional services performed before the new policy’s effective date).
RISC’s policies, like most E&O policies, are claims-made-and-reported policies. Four dates are important in determining whether a claim will be covered under a claims-made-and-reported policy:
1. the insured’s retroactive date, which is the date from which the insured has maintained continuous E&O insurance with no gaps;
2. the date of the professional services giving rise to the claim;
3. the date the claim is made; and
4. the date the insured reports the claim to the insurance company.
RISC’s policies’ retroactive dates are established separately for each insured licensee. The retroactive date is the date the licensee first obtained and from which has continuously maintained uninterrupted E&O coverage. Any gap in coverage will terminate the previously-established retroactive date and the new retroactive date will be the date the licensee reestablishes coverage.
Coverage is considered under the policy in effect the date the claim is first made. RISC’s policies only cover claims that relate to professional services provided on or after the retroactive date. That means for a claim to be covered, the insured must have coverage on the date the claim is made, have had coverage on the date of the professional services giving rise to the claim, and have continuously maintained coverage between the date of the professional services and the date of the claim. If there is even one day break in coverage during that time, then the policy’s retroactive date would not go back to the date of the professional services, so there would be no coverage for the claim. Further, the claim must be timely reported to the insurance company.
Ms. Agent first purchased E&O coverage when she obtained her real estate license on May 1, 2015. The effective dates of her 2015 policy were May 1, 2015 to January 1, 2016. Ms. Agent timely renewed coverage in 2016 and 2017, which policies had effective dates of January 1, 2016 to January 1, 2017 and January 1, 2017 to January 1, 2018, respectively. The retroactive date of her 2016 and 2017 policies was May 1, 2015, because that was the first date Ms. Agent obtained E&O coverage and she had maintained it continuously from that time.
Ms. Agent forgot to timely renew her coverage in 2018 and did not pay her premium until April 1, 2018. Therefore, her 2018 policy’s effective dates were April 1, 2018 to January 1, 2019. Due to the gap in coverage from January 1, 2018 to April 1, 2018, Ms. Agent’s new retroactive date was April 1, 2018. Ms. Agent did purchase coverage timely in 2019. Because she renewed coverage timely, there have been no gaps since April 1, 2018. Her retroactive date under the 2019 policy is April 1, 2018 (the date from which she has maintained continuous coverage).
Summary of Ms. Agent’s coverage dates:
Policy Period Retroactive Date
May 1, 2015 – January 1, 2016 May 1, 2015
January 1, 2016 – January 1, 2017 May 1, 2015
January 1, 2017 – January 1, 2018 May 1, 2009
**Gap in coverage from January 1, 2018 to April 1, 2018 –> Loss of previously established retroactive date**
April 1, 2018 – January 1, 2019 April 1, 2018
January 1, 2019 – January 1, 2020 April 1, 2018
Shortly after obtaining her license, Ms. Agent represented a buyer in a real estate transaction that closed August 1, 2015. On February 1, 2019, the client sued Ms. Agent alleging that Ms. Agent’s professional services in the 2015 transaction were negligent and damaged the client. Ms. Agent timely submitted the complaint to her insurance company and asked the company to hire an attorney to represent her in the lawsuit. Ms. Agent was upset to learn the claim is not covered, because the professional services took place before her 2019 policy’s April 1, 2018 retroactive date. For purposes of this example, assume the lawsuit would otherwise be covered under the policy.
In this example, the claim arose on February 1, 2019, so coverage is considered under Ms. Agent’s 2019 policy, which has an individual policy period of January 1, 2019 to January 1, 2020 and a retroactive date of April 1, 2018, because that is the date from which Ms. Agent continuously maintained coverage. The transaction closed on August 1, 2015, which is before the retroactive date. Even though Ms. Agent had E&O coverage when the transaction closed and when the claim arose, the claim is not covered, because the applicable policy does not cover conduct that occurred before its retroactive date. Ms. Agent’s failure to timely renew coverage in 2018 caused her to lose coverage for claims relating to any services provided before April 1, 2018.
In the example above, Ms. Agent had a three-month gap in coverage. However, the result would be the same if the gap was one day. Thus, it is important to timely renew your coverage each year.
In light of the serious consequences of even a one-day gap, the carrier may approve requests to backdate the inception date for licensees who fail to timely renew in certain situations. The carrier is not obligated to backdate coverage and reserves the right to deny requests to backdate, so do not rely on it. The best way to protect yourself from situations like Ms. Agent’s is to always renew your coverage and pay your premium on time.
Further, real estate commissions in states that require E&O coverage may issue fines and penalties for a licensee’s failure to timely renew even if coverage is backdated, because backdating does not change the fact that the licensee was without coverage for a period of time.
Your insurance coverage is important. Please take the time to read and understand your policy’s coverage provisions, conditions, and exclusions.
This information is for illustrative purposes only and is not a contract. Nothing herein should be construed as legal advice or advice regarding any applicable standard of care. Rather, this information is intended to provide a general overview of certain products, services, and situations encountered in the course of our business. This information does not amend any E&O policy in any way. Only the policy can provide actual terms, coverages, amounts, conditions, and exclusions. The program referenced herein is underwritten by Continental Casualty Company, a CNA insurance company. This information is for illustrative purposes only and is not a contract. It is intended to provide a general overview of the products and services offered. Only the applicable policy can provide the actual terms, coverages, amounts, conditions, and exclusions, which may be subject to change without notice. In the event of a claim, the nature and extent of coverage is determined based upon the claim’s facts, circumstances, and allegations and application of the relevant policy’s terms, conditions, and exclusions. The E&O program described herein is only available in certain states. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2019 CNA. All rights reserved.
Prepared by Rice Insurance Services Company, LLC © 2019
We put the Experience and Options in E&O programs
502-897-1876 / 1-800-637-7319
4211 Norbourne Blvd., Louisville, KY 40207-4048
P.O. Box 6709, Louisville, KY 40206-0709
LREC is Moving Into the Digital Age
The continuing evolution and use of technology in our real estate industry has produced dramatic changes in how consumers get their information when considering listing or selling property and how our Louisiana licensees interact with all stakeholders in real estate transactions. Social media has replaced traditional print and other media as the predominant means of consumers and real estate practitioners communicating and getting their “news.”
Regulatory bodies across the country have been playing catch up in this digital age and your LREC is no exception. However, LREC is now on the digital move with current and future mobile-friendly upgrades to help us better serve all of our stakeholders! Some of these efforts include:
A comprehensive social media plan for LREC to communicate important alerts and news you can use was recently launched. Join us on Facebook to stay in touch!
A brand new LREC website is now live! This mobile-friendly tool includes a unique “My LREC” portal which will enable you to search license and fee history and education records with ease.
LREC has partnered with Statereporting.com to streamline and improve vendor course approval and class attendance records. With an account, you will be able to access a complete list of all scheduled live CE courses as well as online courses available. Each licensee who creates an account will get monthly email reminders of remaining CE hours they may need for compliance prior to renewal of their license.
LREC will be moving toward 100% online capability in the coming months! Whether you need to change your license status, change broker sponsorship, become a new licensee, or complete any of the myriad registrations or transactions available to our licensees you will be able to complete and pay any required fee right from your phone or tablet!
Of course, for any consumer or licensee who still wants to submit paper forms and applications, our LREC staff remains ready and willing to assist!
Steven Hebert, Chairman
Auto-forward Your LREC Email
The Commission’s primary way to communicate with you is through your LREC-assigned email account. To make it convenient for you to stay up-to-date with our latest news and information, we have a simple auto-forward function that takes just a minute to set up.
Follow these 5 steps to set up your auto-forward function:
- Login to your LREC-assigned email account through your MyLREC portal
- Click on “Options” on the sidebar
- Click on “Auto Forwarding”
- Add email(s) to Forward Address dialog box
- Check the box for “After forward save a copy to local mailbox” – this will keep a copy of the email in your LREC-assigned email inbox
- Click “Save”
You should always login into your LREC assigned email account periodically and ensure your auto-forwarding email(s) is valid and the option “After forward save a copy to local mailbox” is checked.
Note: Due to various email provider’s security/spam policies always check your spam folder for any LREC emails. Move, Mark and or add all LREC emails to your email safe list.
Audited? Don’t Panic!
Have you received an audit notice? Below are some helpful tips to get you through the process.
1. Read the notice thoroughly
The notice that you received gives instructions on what you must do as a result of being audited. Being audited does not necessarily mean you did something wrong. Our system pulls an audit list based on the date renewed and the date and number of continuing education hours on file. The audit program also looks to make sure the four-hour mandatory course was completed on time.
2. Know your education requirements
Licensees are required to complete 12 hours each year—at least four of which must be the mandatory course. New licensees are subject to the post-licensing education requirement, which will fulfill a portion of the 12-hour requirement, but you must still complete all mandatory course(s) necessary for your license type.
In 2017 brokers were required to take an additional four-hour mandatory course. Brokers who did not complete the four-hour mandatory, the four-hour broker mandatory, and an additional four hours of elective CE will be included in the audit.
Nobody’s perfect. We all make mistakes. You should check your files to see which courses you completed for the year and what dates are on the education certificates. Make sure the license number on your education certificate matches the number on your license.
3. Verify your certificates using the MyLREC Portal
If you verify that you have the necessary hours with your certificates, check the Commission website using the MyLREC Portal to ensure your records match ours. To do this, visit our website and click “Current Licensees” and select your license type from the sidebar. Once logged in to your MyLREC portal, you will be able to view the information that has been reported to the Commission. If your records don’t match the Commission’s records, you will need to contact the vendor who taught the education course to see why your completed education was not reported.
If all of the hours on your education certificates are reflected in your MyLREC’s “View Education Records” page, make sure the year applied does not show a previous year and that the hours show the correct number and not zero. You may have been required to complete education as part of a previous year’s audit or the hours could have been used as part of a transfer to active status.
If you renewed delinquently and completed your hours prior to renewing, you may need to provide copies of the certificates to our office. Education completed online is reported to the Commission with a completion date of the end of the month. If you completed your online education on January 15, 2018, then renewed January 16, 2018, your education in the MyLREC Portal will show a completion date of January 31, 2018. This may be why you are captured in the audit but are not actually in violation.
4. Don’t panic
There may be a perfectly good reason why you were audited; we just need to get it figured out. If that reason is because you didn’t complete the required number of hours in a timely manner, don’t panic. Gather and review all your records so you have a clear understanding of what you have and what you are missing. Then, make sure you respond to the audit notice. Failure to respond to a Commission request could lead to more serious charges and possible revocation of your license.