Effect of Judgment Loss on E & O for R.E. Broker and Branch Owner

[Paul in SoCal]

Hi - I'm not an agent, but want to know how my actions impact people I interact with.

As a prospective home purchaser in CA (cash purchase), I was awarded a judgment claim against my r.e. broker and his sales branch owner (privately owned franchise, 10 agents) for negligence, I was awarded the full $400k loss, and the underwriter also expended approximately $150k defending the case.

If the office does $10 million in yearly sales, had the same E/O company for a decade, and suffered an E & O covered loss of $ .5 million this year;
would the E/O premium increase be unremarkable because the loss was relatively low compared to yearly premiums the carrier accumulated from the branch owner over the years?

I assume the rise in premium is related to the amount of loss in relation to the size the operation? In this case, not a big deal?

 

[adjusterjack]

would the E/O premium increase be unremarkable because the loss was relatively low compared to yearly premiums the carrier accumulated from the branch owner over the years?

Not necessarily.

That the insured was loss free for 9 years might account for discounts at the beginning of the current policy year but the loss this year is charged against the policy this year and it doesn't matter how much the insured paid in previous years.

In fact, there is no way to answer your question because the underwriters can charge whatever they like or can simply decide to non-renew the policy which is something many insurance companies do after a big loss.

 

[Paul in SoCal]

Thank you AdjusterJack.

After the verdict, the losing opposition offered $15k separate compensation if we successfully moved to have the judge finalize the trial as a settlement rather than a trial award, with the amount remaining the same. They said it was to save face. I suspect it was to offset the future spike in E/O premiums.
In the eyes of the next prospective E/O carrier, would the impact of a $400k settlement be any different than a trial award of $400k ?

 

[adjusterjack]

In the eyes of the next prospective E/O carrier, would the impact of a $400k settlement be any different than a trial award of $400k ?

No.

1 - The claim/loss/lawsuit/settlement would have to be disclosed, in detail, to any prospective insurance company regardless of whether or not it went to judgment. Concealing it from a prospective insurance company would be fraud and have serious consequences to the insured. Especially if the concealment was discovered when the next claim occurred. Coverage could be disclaimed and the policy rescinded, thus leaving the agent/broker paying lawyer fees and award out of his own pocket.

2 - The lawsuit is still on record with the court, with the complaint, pleadings and filings and, while the settlement agreement might not be filed, a dismissal document would certainly indicate that a settlement was reached and the parties stipulated to dismissal. All that is public record.

 

[Paul in SoCal]

I get it - Thank you !