How bad weather could lead to an E&O claim against you
03/28/2017 | Author: Barney Schwartz
A hailstorm can do more than just damage property. In fact, bad weather can cause a headache for your buyers and lead to a potential lawsuit for you.
How? Let’s say your buyers do a final walkthrough in advance of their closing. The next day, a hailstorm sweeps through town. The closing happens two days later, and it’s only after your buyers finish signing the paperwork that they discover their new home has a recently hail-damaged roof.
If your buyers file a claim with their own insurance company, it will be denied, since their policy took effect two days after the hailstorm.
At best, your buyers may ask if you’ll contact the seller to file a claim, and the seller agrees to do so. Since most insurance companies won’t assign claims proceeds to the buyer, you’d get caught in the middle assisting with collecting the initial claims proceeds, deductible, and a check for recoverable depreciation once repairs are completed.
At worst, your buyers will file a lawsuit against you. More insurance companies are inspecting homes when they bind a new policy. If the buyers’ home has a damaged roof, their insurance company will cancel their policy, and it’s unlikely they’ll be able to find a decent policy to insure their home.
One way to avoid these complications and other potential problems is to delay closing until the roof is replaced.
Barney Schwartz is CEO of Preferred Guardian Group, a TAR risk-management errors and omissions insurance partner. Read more useful articles like this in the current issue of Texas REALTOR® magazine.
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