Real Estate Errors & Omissions Insurance in Washington

Where Washington brokers actually get sued

Real estate E&O claims in this state are rarely about the paperwork being late. They are almost always about what the broker knew and when.

Washington law sets the duties directly. Under RCW 18.86.030, a broker owes every party to a transaction a duty to "exercise reasonable skill and care," to "deal honestly and in good faith," and to disclose "known material facts not readily apparent."

Then RCW 64.06.050(2) draws the line on the seller disclosure statement. Licensees "are not liable for inaccurate information provided by Seller, except to the extent that real estate licensees know of such inaccurate information."

Put those two provisions together and every Washington disclosure claim reduces to one question: what did the broker know? The seller's Form 17 is the seller's statement, not yours, right up until a plaintiff can show you knew something and said nothing.

That is why the claims that hurt tend to involve a broker who saw the water stain, heard about the neighbour dispute, or knew the roof had been patched, and treated it as the seller's problem to disclose.

The duties people forget

Beyond disclosure, three provisions generate more claims than brokers expect.

Advising outside your expertise. RCW 18.86.040 and 18.86.050 require a broker to advise a client to seek expert advice on matters beyond the broker's own expertise. Answering a structural, legal or tax question helpfully rather than referring it out is a common way to acquire a duty you did not intend.

Limited dual agency. Under RCW 18.86.060, a limited dual agent "may not advocate terms favorable to one principal to the detriment of the other." Dual agency claims often come from a party who felt the broker took a side.

The disclosure timeline. RCW 64.06.020 requires delivery of the seller disclosure statement within five business days of mutual acceptance unless otherwise agreed, and gives the buyer three business days to rescind. Mishandled timing turns a disclosure issue into a rescission fight.

What real estate E&O covers

• Defense costs, which is usually where the money goes
• Judgments and settlements
• Failure to disclose known material facts
• Misrepresentation of property condition, boundaries or square footage
• Breach of agency duties, including dual agency claims
• Errors in contracts, addenda and deadlines
• Fair housing and discrimination allegations, on many but not all forms

Coverage varies by form and carrier. Fair housing in particular is handled inconsistently across the market and is worth confirming on your own policy rather than assuming.

What it does not cover

• Bodily injury and property damage, including an injury at an open house. That is general liability.
• Commission disputes. Usually excluded.
• Intentional misrepresentation and fraud, once proven.
• Property management activities, which are frequently excluded from a standard real estate E&O form and often need to be scheduled separately. If your firm manages rentals, confirm this rather than assume it.
• Owned property. Selling your own real estate is commonly excluded or restricted.
• Cyber and wire fraud. Escrow wire fraud is a serious exposure in this market and is not an E&O claim. It needs a cyber policy.

Firm policies, licensees and independent contractors

Most Washington brokerages carry a firm policy that extends to their licensees for activity conducted on behalf of the firm. Two gaps come up repeatedly.

Independent contractor status does not create separate coverage. A broker operating as an independent contractor is usually covered under the firm's policy for firm business, and not covered for anything conducted outside it. Referral fees and side transactions are where this bites.

Departed licensees. A claim arising from a transaction closed two years ago is reported against the policy in force when the claim is made. A broker who has since left the firm depends on the firm's current policy and its retroactive date, not on the policy that was in place at closing.

Claims-made, and the dates that matter more than the limit

Real estate E&O is written claims-made. The policy responds to claims reported during its term, not to transactions closed during it.

Two dates decide whether it responds at all. The retroactive date sets the earliest transaction the policy will cover. The extended reporting period, or tail, keeps coverage available after the policy ends.

This matters more in real estate than in most professions because the claims are slow. A buyer discovers the drainage problem in the second winter. A boundary issue surfaces when the neighbour builds. Moving to a cheaper policy that resets the retroactive date can leave several years of closed transactions with nothing behind them.

If your brokerage is being marketed a lower premium, the first question is not the limit. It is the retroactive date.