Summary of Survey Results from AAR’s E&O Workgroup

The Errors & Omissions (E&O) Workgroup created under AAR’s Risk Management Committee is investigating claims trends in our state with an eye to raising awareness among REALTORS® and developing risk management resources that can reduce claims in the future. The workgroup recently completed a broker survey on the topic and also contacted E&O companies for information on claim trends. Here are highlights from its findings:

Broker Survey

  • Most of the claims reported were made by buyers of residential property against listing brokers.
  • A third of the claims were filed more than 12 months after close of escrow.
  • Most of the claims were settled. Although the settlement amounts varied, interestingly about a quarter of the settlements did not involve the exchange of money.
  • In the cases that went to trial, the broker prevailed 67.6% of the time.
  • The top three claims categories were:
  • permits/zoning
  • property construction defects
  • plumbing leaks/mold
  • Transactions with clients, subdivisions, easements and termites also resulted in a significant number of claims.
  • Not surprisingly, the vast majority of brokers identified short sales and REOs as claims trends in the near future. Property management claims was another oft-cited concern.
  • Education was overwhelmingly cited as the best risk management tool that AAR can provide to the membership.


Trends According to E&O Companies
Exact numbers of claims and payments are proprietary and therefore unavailable. However, several companies were willing to share general statistics and claims trends.

  • Consistent with the AAR survey, the E&O insurers report that buyers bring the majority of claims, with the majority of those claims being against the listing broker, and involving residential property.
  • The insurers also cited vacant land transactions as a significant source of claims, both in number and severity.
  • Misrepresentation/failure to disclose continues to be the major claim theory alleged against brokers by a wide margin, followed by negligence and breach of fiduciary duty (including self-dealing).
  • Although claims involving dual agency are infrequent, these claims appear to result in increased defense costs for obvious reasons. One insurer reported that its average total defense cost is $18,000 and the highest total incurred was $167,001.
  • Like the AAR survey results, the top claims categories reported by the insurers included:
  • code violations (permits)
  • water infiltration/mold
  • Other common claims were specific performance and contract errors. The types of claims trends the insurers reported were:
  • raw/undeveloped/partially developed land
  • property management
  • lease purchase/lease option agreements


The E&O Workgroup members are: James “J.T.” Tsighis (Chair), Martha Appel, Betty Arthur, Bill Ashker, Rick Mack, Ron Moore, Lisa Robinson, Yvonne Coelet and AAR staff Michelle Lind, Christina Smalls and Jan Steward.

About the Author

Michelle Lind

K. Michelle Lind, CEO of Arizona REALTORS®, is also an attorney, State Bar of Arizona board certified real estate specialist, and the author of Arizona Real Estate: A Professional’s Guide to Law and Practice. Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.