Rice Insurance briefs commission on E&O claims: Tennessee accounts for $25M of group program losses since 2015

Rice Insurance Services, which administers the Tennessee mandatory errors-and-omissions (E&O) group program, presented claims data to the Tennessee Real Estate Commission on Feb. 6 and urged licensees to report incidents early and maintain appropriate coverage.

Christine Campbell, Rice senior claims specialist, told commissioners the program has handled more than 20,000 real-estate claims nationwide since 2003 and over 5,000 claims from Tennessee. She said Continental Casualty Company (the group-policy carrier) has paid more than $149 million across all programs Rice administers; of that, more than $25 million was incurred in Tennessee for closed and open claims from 2015 through 2024.

Key figures and trends - Tennessee closed-claim payments (2015–2024): $12,813,587.91 (Campbell read the quarterly report). - Reserved amount for open Tennessee claims: approximately $4.7 million. - Total Tennessee incurred (open + closed) since 2015: about $17.5 million (report figure read aloud).

Campbell stressed that many E&O benefits come from defense against meritless claims: "Most of the benefit that licensees get from their E&O insurance isn't actually the payment of claims — it's the defense of frivolous and meritless claims," she said during her presentation.

Common claim types and emerging issues Rice summarized claim types: approximately 40% of files are lawsuits and about 38% are demand letters or notices that may become lawsuits. About 56% of claims are brought by buyers; seller claims account for roughly 16% of files. Typical causes include alleged seller nondisclosure, disputes over septic permits versus bedroom counts, square-footage discrepancies, missed contract dates, termite damage, and increasingly, vacant-land fraud and third-party deception (wire/email scams). Rice noted a recent uptick in vacant-land scams involving purported sellers and remote-only transactions that fall into policy exclusions (conversion/third-party deception and wire-fraud exclusions).

Policy mechanics and implications Campbell explained that the group policy required only that a licensee have an active license and pay the premium at the time of purchase; premiums are multi-year and, in Rice's experience, if the policy period includes the transaction date, the policy will respond for covered claims arising from that transaction. However, once a license becomes inactive, the policy contains an exclusion for claims arising from transactions that occurred while the license was inactive. Campbell said that Messrs. and Ms. in the room often still appeared to hold active E&O coverage in late 2024 even when licensure had lapsed earlier in the year because the group policy period spanned multiple calendar years.

Rice's recommendations and licensee guidance - Report potential claims early; many files begin as reports and never become paid losses but still require defense resources. - Maintain active E&O where required and consider general-liability or other specialized coverage for risks not covered (for example, wire-fraud/business-email compromise that may be covered under other commercial policies rather than E&O). - Licensees should ask insurers about what exclusions apply (vacant-land scams, conversion/third-party deception).

Campbell answered commissioners' questions, confirming the group policy is guaranteed-issue to licensees meeting the statutory purchase criteria and that premiums are not individually rate-adjusted based on a licensee’s claim history. The commission thanked Rice and indicated the presentation will be scheduled annually.

Ending note: Rice's data illustrated why the commission and licensees track E&O status carefully: claims can have sizable legal-fee and reserves even when damages ultimately are limited.