Errors and Omissions (E&O) Insurance

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Claims Spotlight


Real Estate Broker liability pierces corporate shell
Real Estate Broker personally liable for actions of its brokerage

March 26, 2006

In one California case, the ninth district court of appeals held that a broker was liabile for the actions of its agents who alledgedly discriminated against and idividual in a real estate transaction. Under general corporate law, typically officers and employees are not held personnaly liable for the actions of their employees in the conduct of their general business duties. The California ninth circut court of appeals found in the case Holley v. Crank that a real estate agency is an exception to this rule, since California Businesss and Professions code will allow a corporation to hold a real estate license, but only if the corporation designates an officer who is an broker to servers as the officer/broker of the corporation. According to the the California code that person "shall be responsible for the supervision and control of the activitites conducted on behalf of the corporation by its officers and employees..." Although this decision was in California, the same provisions apply to most states. The common logic of disbanding a corporation in the case of a lawsuit, does not relieve liability for the real estate broker in the event of a lawsuit. Please contact one of our licensed agents or brokers to disucss your real estate errors and omissions insurance needs at 201-847-9175
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