General Liability for Wholesaling

[Andrzej Lipski]

I'm having a hard time finding an insurance company that provides GL and Error and Omission insurance for wholesaling. Does anyone recommend a provider?

[Steve K.]

E&O insurance is meant primarily for licensed agents/ professionals providing services to clients. E&O typically doesn't cover agents when they are a principle in the transaction, as it is designed to protect against claims from 3rd parties, not an insureds self-dealing. For this reason some employing brokers require a non-owner agent within the brokerage to handle agent-owned property transactions, and some agents prefer to have a colleague handle the sale of their property rather than handling it themselves. As a wholesaler you are treading the line between being a principle and a real estate professional. Providing services to clients is what would qualify you to have E&O insurance, but then you've crossed the line into what would be considered licensed activity, which is illegal and insurance won't cover illegal activity of course. I'm not sure how general liability would protect you either, my understanding is that this is mainly for bodily injury, property damage or other damages inflicted by you or your company, etc. and not anything along the lines of transactional issues that E&O would normally cover. Perhaps an insurance professional can speak to that more. Maybe an umbrella policy? Small business insurance? I don't know, but I think wholesaling as it is often practiced today exists in kind of a grey area, the downside of which is that insurance coverage may not provide the level of protection one would hope for. I don't think you can have "equitable interest" in a contract, ostensibly as a principle in the transaction, and also be covered by E&O. Curious to hear what insurance professionals and attorneys would say about this, my suspicion is that unlicensed wholesalers inevitably take on a certain amount of legal exposure (and licensed wholesalers also for that matter, nothing against it personally but it's part of the deal when wholesaling IMO).