NAR runs out of liability insurance coverage: Sources

Key Takeaways:

– The National Association of Realtors (NAR) has reportedly run out of liability insurance funds.
– NAR offers two types of insurance to associations, subsidiaries, and MLSs at no additional cost: professional liability insurance and patent infringement insurance.
– The liability insurance covers antitrust claims with a policy limit of $1 million per policy and an aggregate limit of $10 million.
– All of NAR’s insurance funds, including excess coverage, have been depleted.
– NAR’s professional liability insurance has been extended but not renewed, and the insurance provider is no longer offering new excess coverage policies.
– Smaller associations without independent coverage are particularly affected by this news, as they may not be able to afford legal defense costs.
– Copycat suits against Realtor associations and MLSs are increasing, leading to higher legal costs.
– The exact timing of when NAR ran out of insurance coverage is unknown, as the trade group did not confirm or deny the issue.

HousingWire:

Sources have confirmed to HousingWire that the National Association of Realtors (NAR) has run out of liability insurance funds. The news about NAR’s insurance predicament began circulating late Wednesday, with industry analyst Rob Hahn highlighting the news in the Thursday edition of his email newsletter NotoriousROB

“NAR’s insurance policy is tapped out, and there are no funds available for REALTOR Associations and MLSs for legal defense costs,” Hahn wrote. “That this is an enormous issue is understating things.”

NAR has two types of insurance it offers to associations, subsidiaries, affiliates and association-owned MLSs at no additional cost. These policies include professional liability insurance and patent infringement insurance. The liability insurance, which is offered through insurance provider Chubb, is designed to cover antitrust claims, but the policy limit is $1 million per policy. Additionally, the policy has an aggregate limit of $10 million.

For an additional cost, state and local Realtor associations, as well as association-owned MLSs, can purchase excess insurance coverage. But as Hahn wrote, and as sources confirmed to HousingWire, all of NAR’s insurance funds — including the funds in its excess coverage pool — are gone. 

Additionally, NAR’s professional liability insurance has been extended through June 30, 2024, but it has not been renewed and Chubb is no longer making new excess coverage policies available for purchase. 

For large MLSs and Realtor associations, which have their own liability insurance independent of NAR, this news is disappointing but isn’t catastrophic. But for smaller associations that do not have independent coverage and have found themselves in the crosshairs of a copycat commission lawsuit, the news is devastating. 

“Up until now, NAR’s insurance policy covered the costs of those lawyers,” Hahn wrote. “Going forward? They would have to find a way to pay those lawyers themselves.”

In Hahn’s estimates, an association with 1,000 members that charges $150 in annual dues for an annual income of $150,000 cannot afford to defend itself against one of the many copycat suits. 

“If you can’t defend yourself, then you have to settle. And you don’t get to negotiate a whole lot because the plaintiff attorneys know for a fact that you can’t afford representation,” Hahn wrote. “So your only leverage in negotiating the settlement is, ‘We’ll just file bankruptcy.’”

As copycat suits continue to pile up, it is clear that this issue will not be disappearing anytime soon, and that legal costs for Realtor associations and MLSs will only increase. It also remains unknown as to exactly when NAR ran out of insurance coverage. The trade group did not return HousingWire’s request for comment, and it did not confirm or deny that it had run out of insurance coverage. 

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Property Chomp’s Take:

If you’re familiar with web development, chances are you’ve come across the

element. It’s a fundamental building block of HTML and CSS, allowing developers to create structure and organize content on a webpage. But did you know that

is also making headlines in the real estate industry? That’s right, the National Association of Realtors (NAR) has run out of liability insurance funds, and the news has sent shockwaves through the industry.

The issue of NAR’s insurance predicament came to light recently, with industry analyst Rob Hahn highlighting the news in his email newsletter. According to Hahn, NAR’s insurance policy is tapped out, and there are no funds available for REALTOR Associations and MLSs (Multiple Listing Services) for legal defense costs. This is a significant problem that cannot be understated.

NAR has two types of insurance it offers to associations, subsidiaries, affiliates, and association-owned MLSs at no additional cost. These policies include professional liability insurance and patent infringement insurance. However, the liability insurance, which is offered through insurance provider Chubb, has a policy limit of $1 million per policy and an aggregate limit of $10 million.

For an additional cost, state and local Realtor associations, as well as association-owned MLSs, can purchase excess insurance coverage. Unfortunately, all of NAR’s insurance funds, including those in its excess coverage pool, have been depleted.

This news is particularly devastating for smaller associations that do not have independent coverage and have found themselves in the midst of a copycat commission lawsuit. These associations simply cannot afford to defend themselves without NAR’s insurance coverage. As Hahn points out, without the financial means to pay for legal representation, these associations are left with no choice but to settle. This puts them at a severe disadvantage when negotiating settlements with plaintiff attorneys.

The situation is further complicated by the fact that copycat commission lawsuits continue to pile up, increasing legal costs for Realtor associations and MLSs. It remains unclear exactly when NAR ran out of insurance coverage, as the trade group has not provided any comment on the matter.

So, what does this mean for the real estate industry? It highlights the importance of having adequate insurance coverage and the potential consequences of lacking such protection. Associations and MLSs must now find alternative ways to finance their legal defense costs, which can be a significant burden for those with limited resources.

In conclusion, the news of NAR running out of liability insurance funds serves as a reminder of the challenges faced by the real estate industry. It underscores the need for associations and MLSs to have comprehensive insurance coverage to protect themselves from potential legal risks. As the industry continues to grapple with copycat commission lawsuits, finding alternative solutions to cover legal expenses will be crucial in ensuring the continued success and stability of the real estate market.

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