The short version: Real estate E&O policies are usually claims-made-and-reported, and under Texas law, notice after the policy period ends generally kills coverage. When something goes wrong, tell your broker immediately, don’t admit fault, don’t offer refunds or settlements on your own, don’t sign releases, and save everything.
Every agent eventually makes a mistake that could turn into a claim: a missed deadline, a disclosure that didn’t get delivered, an offhand comment in a text, a client who’s suddenly very unhappy. The instinct is to fix it quietly and hope it goes away. That instinct is exactly how a covered problem becomes an uncovered one.
Why waiting can cost you your coverage
Most real estate errors & omissions policies are claims-made-and-reported: the claim has to be made and reported to the insurer during the policy period (or its reporting window). The Texas Supreme Court has held that when notice comes late but still within the policy period, the insurer generally has to show it was harmed by the delay before denying coverage. But notice that comes after the policy period ends is generally fatal to coverage (Prodigy Communications v. Agricultural Excess & Surplus Insurance Co., 2009).
Translation: if you sit on a problem past your policy’s renewal, you may be on your own.
What to do, and what not to do
- Tell your broker right away, before you try to fix it yourself.
- Don’t admit fault to the client, the other agent, the title company, or a vendor. Be kind and responsive, but don’t assign blame, including to yourself.
- Don’t offer refunds, credits, or settlements on your own. Most policies don’t cover voluntary payments made without the insurer’s consent.
- Don’t sign anything, like a release, without the claims specialist.
- Save everything: texts, emails, notes, and the file.
- If you’re served with a lawsuit or a demand letter, accept it without arguing and get it to your broker that day.
What claims usually look like
Industry claims data consistently points the same direction: misrepresentation and failure to disclose make up the majority of real estate E&O claims, followed by negligence, breach of contract, breach of fiduciary duty, and fair housing. Most start small, with something that was said, or not said, about the property.
The best E&O habit
Report early, document everything, and let the people whose job it is handle the claim. Reporting a problem that turns out to be nothing costs you a phone call. Waiting on one that turns out to be something can cost you everything the policy would have paid.
Sources
General information, not legal advice. TREC says I can’t practice law, and I like my license. Run your specific situation past your broker or a real estate attorney.
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