Why Your REIX Policy May Not Be Enough: Understanding Third-Party Risks
Did you know your REIX professional liability policy doesn’t cover all the risks industry members face in day-to-day practice?
REIX coverage is designed to protect you from errors, omissions, or negligent acts related to conducting real estate trades. However, it does not extend to certain third-party risks, especially those that arise when you’re responsible for someone else’s property.
A Real-World Example
A precedent case in Alberta involved an industry member conducting an open house. As it was winter, he decided to light a fire in the fireplace to set the mood and add some warmth. Unfortunately, he did not check to ensure the flue was completely open. The result was tens of thousands of dollars in smoke damage.
The agent reported the claim to REIX. Coverage was denied for two reasons; one because the smoke damage was not a trade in real estate, and second, damage to and loss of use of a property is an exclusion in the REIX policy.
The homeowners then reported the fire to their insurer and were also denied coverage. So, the industry member tried to claim it against his own homeowner’s policy and was denied. The agent then sued his insurer for coverage and the matter ended up at trial.
The finding at the trial was not a good one for the industry member. The court concluded that as the owner of the home was not present at the time of the open house and the industry member had total care, custody and control of the property, he was liable. The judge ordered him to pay all of the damages himself.
Other Common Third-Party Risks
- Theft claims after an open house
- Slip and fall injuries on the property
- Damage to personal belongings during showings
These types of claims are not covered by REIX and can leave you financially exposed.
The Solution: CGL Coverage
A Comprehensive General Liability (CGL) policy is an affordable and essential safeguard for industry members. It covers third-party risks like property damage and bodily injury and gives you peace of mind when a home is in your care.
We strongly recommend securing a CGL policy. The modest premium is a small price to pay for protection against potentially significant financial liability.