As a real estate broker, you have big responsibilities and when things go wrong, the consequences can be significant. To avoid professional liability claims, beware of these common exposures.

Breach of Duty and/or Contract Violation

One of the most common claims is that a real estate agent or firm breached its responsibility to represent its client’s best interests. Among other things, this may involve a failure to help your seller or buyer to negotiate a fair purchase price. It may also involve disclosure issues such as failure to counsel the seller to perform complete and accurate disclosures or failure to communication zoning restrictions, water damage or other property conditions. Breach of duty can also involve simple mistakes such as failure to file an important document.

The breaches of duty above involve human error. However, at some point in your career, you could be accused of intentionally mispresenting facts. It’s important to minimize the chance of this occurring because many professional liability policies exclude coverage for intentional or criminal acts.


  • Be honest to a fault and overcommunicate.
  • Create process checklists to minimize the chance of human error.
  • Know what’s in your contract and explain it carefully to your clients. They should know what you are and are not responsible for.
  • Document everything. If you are sued, your documentation will may become an invaluable element in your defense. If you don’t have documentation, you open yourself up to he said/she said scenarios.
  • If you notice that something is inaccurate, fix it immediately.

Cyber and Data Privacy Negligence

Data breaches and lawsuits involving large companies tend to make headlines, but smaller businesses are also vulnerable to cyberattacks, and they too have a responsibility to keep consumer data safe. According to Verizon Business 2020 Data Breach Report, 28 percent of data breaches involved small business.

Real estate brokers conduct a lot of business electronically, putting them at a heightened risk for cyberattacks and data breaches. They must comply with various data privacy laws, such as the California Consumer Privacy Act, and take measures to keep data safe.


  • Ensure your cyber policy addresses cyber crime (wire fraud) along with theft of data and cyber liability in the event of a breach. Wire fraud is the largest exposure.
  • Follow strong cyber security practices, including the use of secure networks, strong passwords, updated software and encryption.
  • Know your state’s data breach notification and data privacy laws.
  • Know your state’s data privacy laws and carefully follow them.
  • See for more on what to do before, during and after a cyberattack.
  • If your team is working from home due to COVID-19, be sure your cyber policy does not exclude losses originating from remote work.

Real Estate and Rental Scams

Real estate scams are common and expensive. According to the 2019 Internet Crime Report, in 2019, there were 11,677 victims of real estate and rental scams in 2019, with losses of more than $221 million. The Consumer Financial Protection Bureau has warned about mortgage closing scams in which fraudulent and very convincing scammers send emails requesting wire transfers.


  • Watch out for red flags and suspicious activity and encourage your clients to do the same.
  • Put a dual verification system in place so that two people are required to approve wire transfers and financial transactions. (Note: Cyber liability carriers are now requiring dual factor authentication and a secure gateway like Mimecast or Proofpoint before they will provide coverage for wire fraud in the real estate space.)
  • Ask your insurance agent about coverage to protect you against financial exposures.

The Bottom Line

Professional liability claims are serious. Even if you are wrongly accused, the process of defending yourself or your firm will be costly and emotionally draining. You can’t be too careful – even if you have years of experience. Work with your broker to ensure you have proper professional liability and crime coverage and risk management protocols in place. Contact us to learn more.