What are professional indemnity errors and omissions?

What’s the difference between cover for errors and omissions and a professional indemnity policy for letting agents and estate agents is a common question. The answer is simple – not a lot. Errors and omissions and professional indemnity are interchangeable terms for the same protection for a business. The first is the term more widely used in the US, while professional indemnity is the UK counterpart. The policies cover a wide range of claims that could arise for letting agents and estate agents.

Protecting a hard-won business reputation

As an expert, no property professional intends to give landlords, sellers or buyers wrong or misleading advice, but mistakes can happen. That’s where cover for errors and omissions becomes important.

The risk is an unhappy client can resort to legal action to claim compensation if something inadvertently goes wrong. And that claim can damage a hard-won good reputation and damage a business financially. Dealing with high-value property transactions is always a risk – examples include:

  • One seller settling for £200,000 compensation when their home was sold within a few months for double the price put on by an estate agent.
  • Another upset client sold a farm at auction, but later claimed selling the buildings and land as separate lots could have raised more money. The agent’s professional indemnity insurance covered a £45,000 settlement.

Defending against mistakes and dishonesty

Errors and omissions can also arise from within the business.

  • A letting agent who omitted to serve a notice within the legal time limit faced a claim that cost £75,000 to settle.
  • A managing agent told builders to reroof a property with concrete rather than clay tiles. As the property was listed, the agent should have asked for planning permission but failed to do so. The tiles had to be replaced on orders from the local council, triggering a £20,000 claim.

A professional indemnity policy also guards against dishonesty within the business. With large amounts of cash sometimes passing through an office, the temptation for someone to dip into the till is always present. Directors and staff have been known to tamper with cheques and steal money.

In these cases, recovering the money is often impossible and the business has to cover the loss, which can lead to cash-flow problems even in the most profitable letting or estate agency.

Sensible business precautions

Other standard cover includes loss of documents and data protection breaches should client details be lost, stolen or leaked. Taking out a professional indemnity policy to cover errors and omissions is a sensible business precaution that can repay the expense many times over should the unexpected happen.

As regulation and reputation become ever more important to property experts, professional bodies such as the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA) all demand their members have at least a minimum level of cover.

A good professional indemnity policy will offer comprehensive errors and omissions insurance that not only covers the cost of a claim, but legal expenses as well.

Premiums start from £18.67* a month

*Based on £100,000 worth of cover. Plus insurance premium tax (IPT) currently at 12%