E&O Insurance for Flippers?

[Robert Horton]

Just joined the site and love it! Here's my first question......my wife lists and sells all of the properties we flip. Her broker just informed her his E&O insurance does not cover properties listed by an owner/agent. Yes, she is a partner in our LLC. We run all of our sales through her as the listing agent because it helps sell the property AND to have an added layer of protection with E&O insurance. Is this something new in the industry? Can anyone recommend a good E&O carrier that doesn't have this exclusion? Thanks in advance.

[Will Barnard]

Originally posted by @David Oldenburg:

@Robert Horton I know this is an old post, but just came across this in my business as well. I am a RE broker in Ca, but I do a lot of flipping and I am not covered with E&O Insurance on any of the deals where I have an ownership interest.

I have found the simple (not free) solution is to have a good business insurance (General Liability) because it covers legal defense and many other things about your business, including injury etc...  I would also recommend a good Umbrella policy that can cover you if your General Liability runs out.  

Remember, E&O Insurance is really covering the agent and not the flipper. As an example, let's say the agent discloses that the seller/flipper replaced the HVAC. They have done their duty in disclosing this fact. However, if the seller/flipper installed it themselves with no permits and it later caught fire, the liability between the agent and seller/flipper are very different.

It is for this reason, business insurance is a really good idea for house flippers!  In my state of CA, it is pretty easy to get sued!

Good advice David. The other option is to flip from an entity that your wife does not own, then simply disclose that “seller is related to agent” as required by CA disclosure laws. You still need the insurance though as David mentioned for your entity protection.