1. Geo. F. Brown & Sons, Inc. Real Estate Errors & Omissions Insurance Risk Management and Loss Prevention Prepared for the Custom Realty Purchasing Group Association

2. Geo. F. Brown & Sons, Inc. Real Estate Errors & Omissions Insurance Policy Congratulations on your purchase of the GFB Real Estate E&O Policy and subsequent membership in the Custom Realty Purchasing Group Association. As a member of this Purchasing Group Association you receive numerous benefits. Geo. F. Brown & Sons has underwritten and managed the Real Estate Errors & Omissions Insurance program since its inception in 1982. The CRPGA Real Estate E&O policy has been tailored to respond to the specific needs of the real estate industry. It is one of the most comprehensive products being offered in the marketplace today.

3. Special Benefits of the Geo. F. Brown Policy Recommended by the NATIONAL ASSOCIATION OF REALTORS®* The NATIONAL ASSOCIATION OF REALTORS® continues to recommend Geo. F. Brown & Sons, Inc. and its Real Estate Errors & Omissions Insurance Program.* This insurance product is offered to NAR members as part of NAR’s REALTOR VIP® Alliance Program. Your policy automatically offers many special benefits that are not offered by other carriers offering this coverage. It is important that you understand the value of these coverage extensions in order to get the full benefit of the coverage you have paid for. *The REALTOR VIP® Program is an automatic benefit of your NAR membership that can save you hundreds of dollars a year through exclusive partnership discounts and special offers. NAR membership-Real Strength. Real Advantages.

4. How Your Coverage Works This Real Estate Errors & Omissions policy has specific requirements that must be complied with in order to have coverage for certain real estate sales. These include:  The Sale of Owned Residential Properties  The Sale of Owned Commercial Properties  50% Reduction of the Deductible

5. Sale of Owned Residential Property (Including Investment Property) For coverage to apply to the sale of owned residential properties the following must apply:  A seller disclosure form, signed by the seller, is provided to the buyer and acknowledged by the buyer prior to closing except in circumstances where the disclosure form is not applicable, such as the sale of estate and/or trust properties, properties not occupied by the seller for the last three years or newly constructed properties;  A home warranty was purchased prior to or at closing;  A property inspection was completed on the property; and  A state or local board approved standard sales contract was used or a sales contract drafted by a licensed attorney was used.

6. Sale of Owned Commercial Properties For coverage to apply for the sale of owned commercial properties the following must apply:  The property was acquired under a written Guaranteed Sale Listing Contract  The title is held for twelve months or less  The property was listed for sale continuously from the date of acquisition to the date of resale

7. 50% Reduction in the Deductible In order to reduce the deductible by 50% the following conditions must be satisfied:  A seller disclosure form, signed by the seller, was provided to the buyer and acknowledged by the buyer prior to closing except in circumstances where the disclosure form is not applicable such as the sale of estate and/or trust properties, properties not occupied by the seller for the last three years or newly constructed properties;  A home warranty was purchased prior to or at closing;

8. 50% Reduction in the Deductible  A statement outlining the reasons a property inspection should be completed and a list of at least three property inspection companies is provided to the buyer prior to the closing. Note: A minimum of three property inspection firms should always be provided as this reduces the firm’s liability exposure; and  A state or local board approved standard sales contract was used or a sales contract drafted by a licensed attorney was used.

9. 10 Simple Rules to Avoid Litigation  Based upon our experience in this class of business we have developed these 10 Simple Rules. It has been our experience that firms that conform to these rules have been successful in reducing their exposure to claims. These simple rules will help you avoid litigation.  1. Document, Disclose and Communicate… Sounds simple but if you follow these three standard, old fashioned business practices you will significantly reduce your exposure to unpleasant and costly claims experience.  2. The appropriate state approved Real Estate Agency Disclosure forms are utilized and signed by all appropriate parties. Depending on the state these may include:  Real Estate Agency Disclosure forms  Personal Interest Disclosures (if applicable)  The Buyer Representation Agreements  The Disclosure of Business Relationships form and

10. 10 Simple Rules to Avoid Litigation  3. On properties built prior to 1978 a Disclosure of Information on Lead-Based Paint and the related hazards is provided to and signed by the appropriate parties (if applicable);  4. The state approved contract is utilized, and the contract, as well as all counteroffers and addendum, are legible and signed by all appropriate parties. Do not draft your own special addenda – have a closing attorney or realty/title attorney draft needed addenda;  5. A Seller's Property Disclosure Statement, completed and signed by the seller, is provided to and signed by the buyer, even if the law does not require the use of one. Review the form carefully and make sure the information disclosed is consistent with what you know about the property. Share this information with prospective buyers;

11. 10 Simple Rules to Avoid Litigation  6. A home inspection is conducted or the HUD Form 92564-CN, For Your Protection: Get a Home Inspection is provided to and signed by the appropriate parties (if applicable);  7. A home warranty is purchased for the buyer. Note: this is not to be offered as a way to obtain listings, it is a way to limit liability;  8. A final walk-through of the property is conducted by the buyer before the close of escrow and acknowledged by the seller. If an inspection was not performed a Purchasers Inspection Form should be signed by the buyer;

12. 10 Simple Rules to Avoid Litigation  9. The fully executed contract, including counteroffers and any additional addenda should be reviewed by the broker owner or manager to catch any missing or inaccurate information.  10. The agent provides honest and truthful service to everyone and exhibits honesty, integrity and professionalism in all aspects of the transaction.

13. Most Common Legal Issues Facing Real Estate Agents and Brokers Geo. F. Brown and Sons’ Real Estate E&O product has been recommended by the NATIONAL ASSOCIATION OF REALTORS  for over six years. We closely monitor the claims that are generated to determine the most common claims facing real estate agents. These are as follows:  63%Misrepresentation  17% Failure to Disclose  10% Breach of Fiduciary Duties  3% Fair Housing  7%Miscellaneous

14. Benefits of Your Membership in the GFB Custom Realty Purchasing Group Association Congratulations, by purchasing your Real Estate E&O coverage from Geo. F.Brown & Sons you become a member of the GFB Custom Realty Purchasing Group Association (CRPGA). As a member of this Purchasing Group Association you receive additional benefits. This risk management presentation is just one of the many benefits.

15. Custom Realty Purchasing Group Membership Benefit InfoSource Line 866-792-8022 If you have questions regarding a potential claim or are in the middle of a closing and need some advice, the GFB InfoSource Line is available to you. InfoSource (866-792-8022) is offered to all Custom Realty Purchasing Group Members. This toll free number is available Monday thru Friday 8:30 AM to 4:30 PM CT. InfoSource is manned by an experienced claims person with 15 years Real Estate Errors & Omissions Insurance experience.

16. Other Benefits of Your Membership in the Custom Realty Purchasing Group In addition to the Membership Benefits previously explained you also will receive the following: Proof of Insurance Cards offer an easy way to provide coverage information to your agents and your clients The Paper Chase Newsletter provides timely information regarding issues that are important to the Real Estate Industry

17. Claims Reporting Proper claims reporting and timely notification are an extremely important aspect of your insurance coverage. It is imperative that all claims and incidents be reported immediately to: Diamond State Insurance Company® Attention: Claims Department 3 Bala Plaza, East, Suite 300 Bala Cynwyd, PA 19004 Phone: (610) 660-8877 or (800) 333-0352 FAX: (610) 660-8885

18. Claim Reporting It is imperative that accurate and complete claim information be provided to the carrier. Report all claims immediately to the carrier. Note: Late reporting may result in coverage denial by the Insurance Company. Do not admit liability! This may also cause coverage issues and potential denial of coverage. The information provided to the carrier must include the following:  A cover letter indicating the DATE and WHO was served with the complaint, together with the suit papers and/or demand letter. A demand letter is a letter demanding money or services.  A copy of the complete transaction file in chronological order.

19. Claim Reporting  A separate, detailed narrative from the most knowledgeable broker/agent stating the facts surrounding the claim/incident.  Identify all brokers/agents specifically involved in the transaction and/or other named defendants, and summarized their respective involvement in the claim.  Provide any critical evidence or relevant communications that may clarify the insured’s role and/or actions taken during the transaction or escrow process. (This includes the Property Condition Disclosures, Agency forms, HUD 1 form and all other addendum, disclosures, waivers and/or inspections which repudiate the claimant’s contentions, Property Management agreements, contractor reports, reconciliation notes regarding client meetings, conference calls, emails, etc.)

20. Remember, Document, Document, Document! The most important aspect of your defense in the case of a lawsuit is a complete, fully documented, transaction file. Your transaction file will often provide the most detailed portion of your defense posture in a lawsuit. Document any issues that were discussed during the negotiation phase of the transaction. Whenever possible, this documentation should include signatures from all parties involved. Do not assume that a phone call will suffice as a response to a question or a notice of a situation. Put it in writing! Remember, he or she who documents - WINS!!!