Property managers and community association managers make decisions that affect other people’s money and property every day. They collect rent, hire vendors, enforce rules, oversee repairs, and keep records. When something goes wrong, owners, tenants, or associations may look to the manager for answers. Errors and omissions insurance, a type of professional liability coverage, is designed to help with claims that allege mistakes in professional services.
Why Managers Face Professional Liability Exposure
Management is a service business. Clients depend on managers for judgment, accuracy, and follow-through. A missed deadline, an overlooked repair, or a misapplied rule can lead to financial loss, and a client who feels wronged may seek compensation. Even a claim that lacks merit can be expensive to defend.
Common Claim Scenarios
Claims against managers often fall into recognizable patterns. An owner may allege that a manager failed to screen tenants properly or to enforce lease terms. An association may claim that a manager did not collect assessments, failed to follow governing documents, or mishandled a vendor contract. Disputes may arise from missed insurance renewals, delayed maintenance, inaccurate financial reporting, or failures to carry out a board’s instructions.
Discrimination and fair housing complaints are another sensitive area, and a manager can be named alongside the owner. Whether a policy covers a particular type of claim depends on its wording, since some policies exclude or sublimit certain allegations.
What E&O May Cover
A professional liability policy for managers typically responds to claims that allege negligent acts, errors, or omissions in the professional services you provide. It may help pay legal defense costs and, subject to the policy terms, damages or settlements. Many policies are written on a claims-made basis, meaning that the policy generally must be in force when the claim is made, and sometimes also when the incident occurred, depending on the retroactive date.
What It Usually Does Not Cover
E&O is not a catch-all. Bodily injury and property damage claims typically fall under general liability. Dishonest acts by employees, such as embezzlement of owner funds, are generally addressed by crime or fidelity coverage rather than E&O. Fines or penalties, and claims arising from intentional wrongdoing, are often excluded. Because managers often hold client funds, many owners and associations require fidelity or crime coverage as well.
Contract Requirements to Watch
Management agreements often include insurance requirements. Clients may ask for specific limits, additional insured status, or certificates of insurance, and associations may require a fidelity bond or crime policy covering funds held. Read these provisions closely before signing, and share them with your agent so you can confirm that your policy can meet them.
Practical Steps to Reduce Claims
Strong procedures often help prevent problems:
Use written management agreements that define duties, limits, and authority. Keep thorough, organized records of decisions, notices, and communications. Follow written procedures for handling funds, with approvals and reconciliations. Vet vendors and require proof of their insurance. Train staff on fair housing and on the rules in each client’s governing documents. Document board or owner direction in writing before acting.
Consider Related Coverages
In addition to E&O, many management firms look at general liability, crime or fidelity coverage, cyber liability for tenant and owner data, employment practices liability, and workers’ compensation. Each addresses a different piece of the risk picture.
Talk With an Independent Agent
Managing other people’s property is a responsibility that deserves thoughtful insurance planning. An independent agent can compare options from carriers that understand property and association management, explain how retroactive dates and tail coverage work, and help you meet client requirements. If you manage rental, commercial, or association properties, consider scheduling a review with an independent agent.
Leave a Reply