The Tennessee Department of Commerce and Insurance stands to gross as much as $3 million from what some say are unwarranted and excessive fines to as many as 5,000 real estate agents.
Last year, the Tennessee Real Estate Commission, a nine-member regulatory board under the umbrella of the Commerce and Insurance Department, changed the way the state’s nearly 35,000 real estate agents apply for what is called “errors and omissions” insurance. That insurance covers agents against lawsuits in which they are accused of unknowingly withholding or misrepresenting information about a property.
Historically, every two years agents sent the commission two checks—one for their license renewal, the other for their insurance. But two years ago, the commission changed the rules of the game, requiring agents to send insurance checks directly to the state-contracted insurance firm, MedMarc. Last fall, the state discovered that nearly 5,000 real estate agents never sent their checks to the Louisville-based insurer.
That’s because the state’s notice to real estate agents said that the insurance carrier would notify them about paying the insurance directly. The carrier never did, according to various agents the Scene interviewed.
“This is an onerous and unfair penalty,” says Bob Moore, who has been a licensed real estate agent for nearly 20 years and who is appealing his $600 fine.
Marilyn Elam, the information officer for the Tennessee Department of Commerce and Insurance, says that while the approximately 5,000 agents weren’t insured with MedMarc, some of them may have had private insurance and therefore won’t be subject to the fine. As for those who don’t have coverage at all, Elam says while the state did change the renewal process, it conveyed that development to the state’s nearly 35,000 licensed real estate agents.
“It’s the agents’ responsibility to have errors and omissions insurance,” she says. “The state notified these folks though two newsletters and the renewal notice. There comes a point where you have to apply the law.”
John T. Rochford, a licensed broker and Realtor who also was fined, says he might take the state to court if it doesn’t grant him his appeal. “There are some due process issues here,” he says. “If you have up to 5,000 agents who made the same mistake, you’d think the commission would say we’ve had some bad communication here.”
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