[THIS PAGE NOT FOR PUBLICATION IN THE CODE OF COLORADO REGULATIONS]
DEPARTMENT OF REGULATORY AGENCIES
DIVISION OF REAL ESTATE
REAL ESTATE COMMISSION
4CCR 725-1

D-14.  ERRORS AND OMISSIONS (E&O) INSURANCE

Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado and to all persons who have requested to be advised of the intention of the Colorado Real Estate Commission (the “Commission”) to promulgate rules, or to amend, repeal or repeal and re-enact the present rules of the Commission.  

STATEMENT OF BASIS

The statutory basis for the rules titled Rules of the Colorado Real Estate Commission is Part 1 of Title 12, Article 61, Colorado Revised Statutes, as amended.
  
STATEMENT OF PURPOSE

The purpose of this rule is to effectuate the legislative directive to promulgate necessary and appropriate rules in conformity with the state statutes of the real estate practice act.

SPECIFIC PURPOSE OF THIS RULEMAKING

The specific purpose of this rule is to amend or repeal existing rules with respect to requirements for license renewal, transfer, inactivation and errors and omissions insurance for real estate brokers. 

Proposed New, Amended and Repealed Rules

D-14. Errors and omissions (E&O) insurance (See 12-61-103.6 C.R.S.)
Every active real estate licensee shall have in effect a policy of errors and omissions insurance to cover all acts requiring a license. In addition, all active licensed real estate companies that employ licensees in addition to the responsible broker must also have in effect a policy of errors and omissions insurance to cover all acts requiring a license.
(a) The Commission shall enter into a contract with a qualified insurance carrier to make
available to all licensees and license applicants a group policy of insurance under the
following terms and conditions:
(1) The insurance carrier is licensed and authorized by the Colorado Division of
Insurance to write policies of errors and omissions insurance in this state.
(2) The insurance carrier maintains an A.M. Best rating of “B” or better.
(3) The insurance carrier will collect premiums, maintain records and report names
of those insured and a record of claims to the Commission on a timely basis and
at no expense to the state.
(4) The insurance carrier has been selected through a competitive bidding process.
(5) The contract and policy are in conformance with this rule and all relevant
Colorado statutory requirements.
(b) The group policy shall provide, at a minimum, the following terms of coverage:
(1) Coverage for all acts for which a real estate license is required, except those
illegal, fraudulent or other acts which are normally excluded from such coverage.
(2) Deleted 10/1/03.
(3) That the coverage cannot be canceled by the insurance carrier except for nonpayment of the premium or in the event a licensee becomes inactive or is revoked
or an applicant is denied a license.
(4) Pro-ration of premiums for coverage which is purchased during the course of a
calendar year but with no provision for refunds of unused premiums.
(5) Not less than $100,000 coverage for each licensed individual and entity per
covered claim regardless of the number of licensees or entities to which a
settlement or claim may apply.
(6) An annual aggregate limit of not less than $300,000 per licensed individual or
entity.
(7) A deductible amount for each occurrence of not more than $1,000 for claims and
no deductible for legal expenses and defense.
(8) The obligation of the insurance carrier to defend all covered claims and the
ability of the insured licensee to select counsel of choice subject to the written
permission of the carrier, which shall not be unreasonably withheld.
(9) Coverage of a licensee’s use of lock boxes, which coverage shall not be less than
$25,000 per occurrence.
 (10) The ability of a licensee, upon payment of an additional premium, to obtain
higher or excess coverage or to purchase additional coverage from the group
carrier as may be determined by the carrier.
(11) That coverage is individual and license specific and will cover the licensee
regardless of changes in employing broker.
(12) The ability of a licensee, upon payment of an additional premium to obtain an
extended reporting period of not less than 365 days.
(13) A conformity endorsement allowing a Colorado resident licensee to meet the
errors and omissions insurance requirement for an active license in another group
mandated state without the need to purchase separate coverage in that state.
(c) Licensees or applicants may obtain errors and omissions coverage independent of the group plan from any insurance carrier subject to the following terms and conditions:
(1) The insurance carrier is licensed and authorized by the Colorado division of
insurance to write policies of errors and omissions insurance in this state and is in
conformance with all Colorado statutes.
(2) The insurance provider maintains an A.M. Best rating of “B” or better.
(3) The policy, at a minimum, complies with all relevant conditions set forth in this
rule and the insurance carrier so certifies in an affidavit issued to the insured
licensee or applicant in a form specified by the Commission and agrees to
immediately notify the Commission of any cancellation or lapse in coverage.
Independent coverage must provide, at a minimum, the following:
(i) The contract and policy are in conformance with all relevant Colorado
statutory requirements.
(ii) Coverage includes all acts for which a real estate license is required, except
those illegal, fraudulent or other acts which are normally excluded from
such coverage.
(iii) Coverage cannot be canceled by the insurance provider, except pursuant to
and in conformance with 10-4-109.7 CRS
(iv) Coverage is for not less than $100,000 for each licensed individual and
entity per covered claim, regardless of the number of licensees or entities to
which a settlement or claim may apply, with an annual aggregate limit of
not less than $300,000 per licensed individual and entity.
(v) Payment of claims by the provider shall be on a first dollar basis and the
provider shall look to the insured for payment of any deductible.
(vi) The ability of a licensee, upon payment of an additional premium to obtain
an extended reporting period of not less than 365 days.
(vii) That the provider of the independent policy has executed an affidavit in a
form or manner specified by the commission attesting that the independent
policy is in force and, at a minimum, complies with all relevant conditions
set forth herein and that the provider will immediately notify the
commission in writing of any cancellation or lapse in coverage of any
independent policy.
(viii) Coverage of a licensee’s use of lock boxes, which coverage shall not be
less than $25,000 per occurrence.
(d) Applicants for licensure, activation, renewal and reinstatement shall certify compliance with this rule and 12-61-103.6 C.R.S. on forms or in a manner prescribed by the Commission. Any active licensee who so certifies and fails to obtain errors and
omissions coverage or to provide proof of continuous coverage, either through the
group carrier or directly to the Commission, shall be placed on inactive status:
(1) immediately, if certification of current insurance coverage is not provided to the
Commission; or,
(2) immediately upon the expiration of any current insurance when certification of
continued coverage is not provided.