Frequently Asked Questions (FAQ)



Note:  For further details on the insurance coverages please review the "Summary of Coverages" and the "Policy Wording" pages on this website

What is the Insurance Program (the "Program")?

Under the Real Estate and Business Brokers Act, 2002 (REBBA 2002) and associated regulations, RECO's Insurance Program (the "Program") consists of Errors & Omissions Insurance, Commission Protection Insurance (which provide protection for RECO Registrants) and Consumer Deposit Insurance (which provides protection for the public).

Participation in the Program is a condition of registration with RECO.

How can I find out whether or not I have coverage for a particular incident?

Contact the Program's claims adjuster, McLaren’s Canada, if you wish to discuss a particular situation they may be able to assist you.  For general questions relating to policy wording, please contact the broker Alternative Risk Services at  1-866-426-1666 or by email at info@reco-claims.ca

Can I apply for non-active status so I don't have to pay the insurance premiums or take the mandatory continuing education courses?

No. There is no provision in the Real Estate and Business Brokers Act, 2002 for someone to maintain "non-active" status with RECO. All active registrants who trade in real estate must participate in the Insurance Program.

Is the invoice payment date the same as my insurance policy term renewal date?

No. Insurance premiums are due in August of each year. The annual policy term is effective from September 1 to September 1 of the following year.

Can I get a refund on my insurance premium if I leave the business for any reason?

Your insurance premium is your minimum premium regardless of the term of your insurance. This ensures the most cost effective Insurance Program for all registrants, keeping individual premiums and administration costs as low as possible. Your Errors & Omissions insurance continues to cover you, at no additional cost, for a period of two years from your date of leaving the business for claims resulting from activities while you were registered.

Are brokers covered for the actions of their salespersons?

Yes, the program would cover the real estate broker, for whom the salesperson works, including any franchisee or franchisor.

Is my brokerage firm covered under my E&O insurance?

Yes.  An "Insured Firm" includes any real estate broker, partnership or company, and any franchisor, with which the broker is associated, as well as their respective subsidiaries or parent companies. Your firm is covered with respect to the rendering of professional services by a broker or salesperson.

Is an unregistered assistant trading in real estate covered under the RECO Errors and Omissions Insurance?

Unregistered Assistants are not covered by RECO’s errors and omissions insurance policy for claims that arise out of prohibited activities such as phone solicitations, showing properties, participating in presenting offers or being on site at open houses.

However, the insurance policy may provide coverage for claims against an unregistered assistant (and/or the registrant who may be liable for certain actions of the employee) for activities that are directly or indirectly related to a registrant’s real estate trading activities.

For example, if the unregistered assistant makes a typographical error in preparing an Agreement of Purchase and Sale and the error leads to a claim, the insurer may provide coverage directly to the unregistered assistant and/or the registrant, subject to the terms and conditions of the insurance policy.

For more information on the requirements under REBBA 2002 for assistants, refer to page 103 of the Guide to REBBA 2002 and the Summer 2007 issue of For The Record.   For a copy of RECO's errors and omissions insurance policy please refer to the Policy Wording which you can view and download on this website.

E&O insurance covers "negligence".  What happens if the claim results from fraudulent activities?

Fraudulent or dishonest acts are excluded. However, if such allegations are proven false, then the Insurance Program will pay for defense costs. Further, a lawsuit could name a salesperson and the real estate broker for whom the salesperson works. If the broker was neither the author nor the accomplice of the fraudulent or dishonest act, the Insurance Program would cover the broker.

Are all real estate services covered, including appraisal work?

The Insurance Program's coverage for appraisal services is limited to the following definition:

"Real Estate Appraisal Services" means the provision of a market value opinion by an Insured in the course of providing "Professional Services" provided that a Registrant is either the author of the said opinion or has reviewed and approved the opinion but does not include an opinion that is done for the purpose of financing, whether secured or unsecured, or an opinion that is done in the usual course of business by anyone with Accredited Appraiser Canadian Institute (AACI), Canadian Residential Appraiser (CRA), Professional Appraiser (P.App), Professional Valuator (P.Val), or Canadian National Association of Real Estate Appraisers (CNAREA) designations.

Note: Any registrant who provides market value opinions for the purpose of financing and who wishes to have coverage for this service must purchase a separate policy from their own insurance broker or from Alternative Risk Services

Are mortgage services covered by the policy?

Insureds acting as mortgage brokers are not covered. However, this exclusion does not apply to Insureds who direct a borrower to a source of funding for a fee.

Are property management services covered by the policy?

Claims arising from property management services are not covered where the revenue due to property management services of the Insured or Insured Firm exceeds 35% of the total gross revenue.    If total gross revenue for Property Management exceeds 35%, you may wish to purchase speciality insurance coverage to cover this exposure.    Please contact Alternative Risk Services for a quote. Click here for the Contacts page

What if there is a claim after I have retired or left the business?    Can I purchase additional “run-off” coverage in addition to the two year retirement provision already available under the RECO policy?

The RECO Insurance Policy provides automatic coverage for errors and omissions claims for two (2) years following the date of retirement or leaving the business for any reason, other than by reason of disciplinary action by RECO, at no additional cost to the registrant. 

The Program’s Insurer, Lloyd’s, provides an option to purchase an additional three years of coverage at a cost of 30% of your last annual premium.  To exercise this option to extend the coverage for the three additional years you must make this request in writing to Alternative Risk Services within the policy period or, for those registrants who retire after September 1, 2007,  during the first two years of your retirement.  The premium charge will be 30% of the last annual premium you were charged. (e.g. $230.00 X .30 = $69.00 plus applicable taxes).

Does the insurance cover out of Province services performed by RECO registrants?

You have insurance coverage for "Professional Services" as defined by the Insurance Policy for activities that are permissible under the REBBA 2002.  If “Professional Services” have been performed outside the province of Ontario then you likely do not have any coverage.   If “Professional Services” are performed in the province of Ontario subject to the terms and conditions of the policy you likely have coverage.   Each claim will be evaluated on its own facts.

Can I purchase additional insurance coverage such as excess insurance or to cover a situation not covered by the RECO Policy?

The Program offers policy limits of $1 Million per claim for Errors and Omissions claims.  While this may be sufficient for most registrants, higher limits are available if a registrant feels that additional protection is required.
 
Alternative Risk Services can assist registrants with obtaining optional excess insurance which is available to individual registrants or brokerages upon application.    An excess policy may “drop down” to become primary insurance in some situations to provide coverage for some activities that are excluded under the RECO Insurance Program [e.g. property management errors and omissions where a registrant’s percentage of revenue exceeds the permissible 35% or certain activities such as opinions of market value given for the purpose of financing (including those registrants who have the MVA-R designation)]. 

Premiums for this excess insurance start at $1,500 per policy and increase depending on the scope of services and size of the brokerage.

 To download an application for excess insurance click here   EXCESS INSURANCE APPLICATION

Alternative Risk Services can also assist registrants who wish to purchase an Office Contents policy.  Please call for more details.
 
What is a graduated deductible under the E&O coverage?

A deductible is an amount a registrant is responsible to pay towards a claim settlement. Effective September 1, 2009, the deductible amount will gradually increase with each claim settlement made on behalf of the same registrant over a three year period. This means registrants with more than one claim will contribute more towards the cost of each additional claim settled on their behalf.
Has the insurer changed the criteria used to determine when a deductible is payable by a registrant with the implementation of the graduated deductible under the E&O coverage?
No. The criteria used to determine when a deductible is required has not changed. What has changed is the method used to calculate the amount of the deductible when settlements are paid.

How does the graduated deductible under the E&O coverage for claims reported after September 1, 2009 work?

Under the graduated deductible, the first claim resulting in a settlement paid under the policy on behalf of an individual registrant will remain unchanged at $2,500. Each additional claim resulting in a settlement paid under the policy on behalf of the same registrant will result in an additional surcharge of $2,500. This means the deductible for a second claim will total $5,000, a third claim will total $7,500. There is no maximum deductible surcharge.

The insurer will establish a claims paid history for each registrant. When a claim is due to be settled, the insurer will review the total number of settlements paid under the policy on behalf of the same registrant during the previous three year period.

If, for example, a claim is due to be settled October 31, 2009, the insurer will review the registrant?s claim history back to September 1, 2009 - the implementation date of the graduated deductible to the insurance program. If a claim is due to be settled on January 10, 2013, the insurer will review the registrant?s claim history back to January 10, 2010.

A registrant will become eligible to return to the minimum deductible of $2,500 upon the third year anniversary of the last claim settlement paid under the policy on their behalf. This means that a registrant would need to be claims free for three years before their deductible was reduced to $2,500.

The claims history of a registrant remains part of the registrant?s profile with the insurer regardless of where the registrant is employed.
Under what circumstances would a brokerage be required to pay a deductible under the E&O coverage?

Brokerages are rarely responsible for payment of a deductible because individual registrants actually conduct the trades in real estate. In general, a single deductible is required by the insurer for each claim settlement. The payment of the deductible is usually the responsibility of the individual registrant that conducted the trade. This will not change with the implementation of the graduated deductible effective September 1, 2009.

In the unusual event where a brokerage?s act or error results in a settlement paid under the policy by the insurer on behalf of the brokerage, the application of a deductible or graduated deductible would be similar to that of an individual registrant.

If, for example, the brokerage entered into an agreement in connection with a trade that required the brokerage to deliver a deposit or documents, and the brokerage did not complete the action resulting in a settlement paid under the policy by the insurer on behalf of the brokerage, the brokerage would be responsible for paying a deductible.

In rare circumstances - such as an individual registrant not having coverage under the policy - the insurer may make a payment on behalf of the brokerage. A brokerage may be required to pay the deductible or a portion of the deductible resulting from the brokerage?s responsibility for the actions of their employee(s).

If, for example, a registered employee sells their own property and has not complied with Section 18 ?Disclosure of interest? of the Code of Ethics and the insurer denies coverage to the individual registrant, the insurer may be obligated to make a payment on behalf of the brokerage. A brokerage may be required to contribute a deductible or portion of a deductible resulting from the brokerage?s responsibility for the actions of their employee. The application of the graduated deductible would be similar to that of an individual registrant.

Brokerages do not automatically become responsible for a deductible simply because they are named in a law suit in addition to an individual registrant, or because they are responsible for the actions of their employee(s). The criteria used to determine when a deductible is required has not changed. What has changed is the method used to calculate the amount of the deductible when settlements are paid.

When was the graduated deductible implemented under the E&O coverage?

The graduated deductible was implemented effective September 1, 2009 under the Errors & Omissions insurance coverage. Every registrant will begin with a clear claims history effective September 1, 2009.
Does reporting a claim, incident or circumstance mean a Registrant automatically becomes responsible for a deductible under the E&O coverage?

No. Many incidents reported do not develop into claims. Many successfully defended claims do not result in settlements. Deductibles are only required from a registrant when a settlement is paid under the policy by the insurer on behalf of the registrant.
Does the Graduated Deductible apply to Commission Protection and Consumer Deposit insurance coverages?

No. The graduated deductible is only applicable to coverage under the Errors & Omissions insurance.
Is a deductible or graduated deductible applicable to defence costs?

No. A deductible is not applicable to defence costs. Defence costs will continue to be paid by the insurer.
Who should I contact for more information related to the Graduated Deductible?

Alternative Risk ServicesTel:416-408-5330
250 Yonge Street, Suite 2900Toll Free:1-866-426-1666
Toronto ON M5B 2L7Email:info@reco-claims.ca
Fax416-408-3721

 
Real Estate (RECO) Errors and Omissions Insurance Program
Underwritten by certain underwriters at Lloyd’s
Endorsed by the Real Estate Council of Ontario
Distributed by Alternative Risk Services, a division of 3303128 Canada Inc.
Managed by Dion, Durrell + Associates Inc.

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