Louisiana Real Estate Commission

Inactivating Your License? Retiring?

IMPORTANT REASONS TO CONSIDER AN EXTENDED REPORTING PERIOD

Rice Insurance Services Company, LLC (RISC) administers real estate licensee errors and omissions (E&O) insurance policies issued by Continental Casualty Company in the vast majority of states that require licensees to maintain such coverage. While the policies vary from state to state, it is uniformly important to maintain continuous coverage and to have coverage in place when a claim is made, which may be years after the transaction occurred.  

As discussed further below, for there to be coverage for a claim, the policy or an extended reporting period (ERP, often called “tail coverage”) must be in effect when the claim is made, even if you had insurance in place when the subject professional services were performed.  If you do not renew your RISC policy for any reason, including inactivating or retiring your license, you may want to consider purchasing an ERP endorsement, because claims often arise years after a transaction occurred.  RISC offers ERP endorsements of one, two, three, and five years (may vary by state).  These endorsements extend the policy’s reporting date, so the policy applies to claims first made during the ERP.

RISC’s policies, like most E&O policies, are claims-made-and-reported policies.  Under a claims-made-and-reported policy, four dates impact whether or not the policy will apply to or provide any coverage for a claim: 

  1. The date the claim is first made against the insured. Coverage is considered under the policy or ERP in effect when the claim is first made against the insured.  If no policy or ERP was in effect when the claim arose, then there is no applicable policy to potentially provide coverage for the claim.  

Example:  Laura Licensee reports a claim to RISC in writing.  The claim was first made against Laura on February 1, 2019 when she received an email from a seller she represented in 2017.  The email alleged Laura acted negligently in representing the seller and demanded damages from Laura.  If Laura had a policy or ERP in effect on February 1, 2019, then coverage would be reviewed under that insurance.  If Laura did not have a policy or ERP in effect on February 1, 2019, then no policy would be available to potentially provide coverage for the claim, even if Laura had insurance when she provided the professional services in 2017. 

  • The policy’s retroactive date.  Under RISC’s policies, the retroactive date is established separately for each insured licensee.  This is the date from which the licensee has continuously maintained uninterrupted E&O coverage.  Any gap in coverage (break between the end of one policy period and the beginning of the next) terminates the previously-established retroactive date. The new retroactive date will be the date the licensee reestablishes coverage.

Example:  Laura first obtained her real estate license on June 15, 2010, at which time she purchased real estate E&O insurance.  She timely renewed her insurance every year and never had a gap between policy periods.  In that case, Laura’s retroactive date would be June 15, 2010.  On the other hand, if Laura forgot to renew her insurance for January 1, 2018 and did not purchase coverage until March 1, 2018, then her retroactive date would be March 1, 2018.

  • The date of the professional services giving rise to the claim.  The professional services giving rise to the claim must have occurred after the retroactive date for the policy to apply.  

Example:  The claim against Laura involves professional services she provided in 2017.  Laura’s retroactive date must be before the date of the professional services for Laura’s insurance to apply. 

  • The date the insured reports the claim to the insurance company in writing.  The insured must report the claim in writing during the same policy period in which the claim first arose for the policy to apply.  Insureds should immediately report any claim they receive to their insurance carrier in writing.

Example:  As noted above, if Laura had a policy or ERP in effect on February 1, 2019 (when the claim was first made), then coverage would be considered under that policy. For that policy or ERP to apply to the claim, it must be reported to RISC in writing before that policy or ERP expires.

For a claim to be covered, the insured must have a policy or ERP in effect on the date the claim is first made, have had a policy in effect on the date of the professional services, and have continuously maintained insurance during that time.  Further, the claim must be timely reported to the insurance company.  

For purposes of the following examples, assume the claim would otherwise be covered under the policy:  

Changing Careers. From March 12, 2002 to December 31, 2018, Ms. Salesperson worked in real estate and maintained continuous E&O coverage through RISC during that time.  Her last E&O policy was a 2018 policy with effective dates of January 1, 2018 to January 1, 2019.  For several years, Ms. Salesperson made extra money selling pottery at art fairs.  By 2019, Ms. Salesperson’s pottery was so popular she decided to do that full time, so she did not renew her real estate license in 2019.  

  1. Ms. Salesperson was so busy with her pottery that she did not consider her E&O coverage.  Her last E&O policy expired January 1, 2019. On April 1, 2019, Ms. Salesperson was served with a lawsuit filed by a seller she worked with in 2016.  Ms. Salesperson submitted the lawsuit to RISC and asked that a lawyer be hired to represent her.  Ms. Salesperson was disappointed to learn there is no coverage for the claim, because it arose after her policy’s expiration date of January 1, 2019.
  2. Instead of not considering her E&O coverage as in the previous example, Ms. Salesperson purchased a three-year ERP endorsement within ninety days after the expiration of her 2018 policy.  The ERP endorsement extends the reporting period of her 2018 policy by three years to January 1, 2022.  When Ms. Salesperson was served with the lawsuit on April 1, 2019, she timely submitted it to RISC.  The claim was covered under Ms. Salesperson’s 2018 policy, because it arose within the ERP. 

Retirement.  Mr. Broker worked in real estate from January 1, 1998 to December 31, 2018, during which time he maintained continuous E&O coverage through several carriers.  Mr. Broker’s last policy was a 2018 RISC policy with effective dates of January 1, 2018 to January 1, 2019.  Mr. Broker retired on December 31, 2018 and deactivated his license.    

  1. Mr. Broker thought there was no reason to worry about E&O coverage, since he retired from real estate. On June 1, 2019, Mr. Broker was served with a lawsuit filed by a client he worked with in November 2017.  Mr. Broker submitted the lawsuit to RISC. Unfortunately, there was no coverage for this claim, because Mr. Broker’s policy expired on January 1, 2019, before the claim arose.  
  2. Instead of not worrying about E&O as in the previous example, Mr. Broker purchased a three-year ERP endorsement within ninety days of the expiration of his 2018 policy. This endorsement extends the reporting period of Mr. Broker’s 2018 policy to January 1, 2022, an additional three years after the policy’s expiration date.  Mr. Broker is then served with the lawsuit on June 1, 2019 and timely reports it to RISC.  Because the claim arose within the ERP, it is covered under Mr. Broker’s 2018 RISC policy. 

Protect Your Heirs.  Mr. Licensee worked in real estate from January 1, 1990 to December 1, 2018, during which time he maintained continuous E&O coverage through several carriers.  Mr. Licensee’s last policy was a 2018 RISC policy with effective dates of January 1, 2018 to January 1, 2019.  Mr. Licensee retired due to illness on December 1, 2018 and deactivated his license.  Mr. Licensee passed away on February 1, 2019. 

  1. Mr. Licensee thought there was no reason to worry about E&O coverage for him or his heirs, since he retired from real estate.  On May 1, 2019, after Mr. Licensee passed away, his estate was served with a lawsuit filed by a client he worked with in November 2016.  Mr. Licensee’s estate submitted the lawsuit to RISC. Unfortunately, there was no coverage, because Mr. Broker’s policy expired on January 1, 2019, before the claim arose.  
  2. Instead of not worrying about E&O as in the previous example, Mr. Licensee purchased a three-year ERP endorsement for his 2018 policy after he retired.  This endorsement extends the reporting period of Mr. Licensee’s 2018 policy to January 1, 2022, an additional three years after the policy’s expiration date.  Mr. Licensee’s estate is then served with the lawsuit on May 1, 2019 and timely reports it to RISC.  The policy’s definition of insured includes “the heirs, executors, administrators or assigns of the Licensee in the event of the Licensee’sdeath, incapacity, or bankruptcy but only to the extent that such Licenseewould have been provided coverage under this policy.”  Since the ERP was in place when the claim arose, Mr. Licensee’s 2018 provided coverage for his heirs.    

Many E&O claims do not arise until years after the subject transaction.  Accordingly, if you are inactivating your license for any reason, including retirement, you may be interested in purchasing an ERP endorsement.  Your insurance coverage is important.  Please take the time to read and understand your policy’s coverage provisions, conditions, and exclusions.  To obtain sample copies of RISC’s policies, visit www.risceo.comor call RISC at (800) 637-7319, extension 1. 


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