Prime Real Estate Thought They Were Fully Insured... The Policy Ambiguity Proved Otherwise.
Most Professional Liability (E&O) policyholders never realize how specific policy language can affect their policies — until they learn how it can affect a claim. My Policy Advocate™ helps you understand your coverage before you need it.
Prime Real Estate’s Intentional Act Denial*
A real estate agent assured a buyer “no water issues” despite the seller flagging dampness. When the buyer endured $40,000 in flood damage, a claim was filed against the agent’s E&O policy. The insurer denied the claim on grounds of “intentional misrepresentation,” stating the policy only defends unintentional acts.
Potential Denial (The Ambiguity):
E&O policies only defend and indemnify for unintentional acts. The insurer can argue that "bad judgment" or negligence crosses the line into "bad faith" or "dishonest intent," voiding coverage.
Risk Identified by My Policy Advocate:
“Intentional act/dishonesty” exclusion standard in US E&O policies.
Policy Language:
“This insurance does not apply to any claim based upon dishonest, fraudulent, or intentionally wrongful act or omission.”
Discovery by Clara, our Ai Assistant:
Clara flags the “dishonest, fraudulent, or criminal act” exclusion, stressing the importance of documenting all disclosures and advice in writing.
Questions to Ask Your Agent:
- Will my policy defend me if there’s a dispute over error vs. intentional misstatement?
- Should agents document all disclosures and advice in writing?
* This scenario described is fictious and is solely for illustrative or educational purposes so the insured has the opportunity to discuss these issues with their licensed insurance producer.
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