NAR's Liability Insurance Coverage Gone

Implications and repercussions

Back in 2022, I wrote a post titled “Exploring the Worst Case Scenario: Copycat Litigation & Peculiar Hell for the Local MLS.” In it, I explained my concerns about (1) copycat lawsuits, and (2) that local Association and MLS leadership were completely unprepared.

Here’s an excerpt:

Lower down, you find "Coronavirus: A Guide for REALTOR Associations" and "Sustainability Resource Guide." What you don't find are any resources geared to help local AEs prepare for lawfare.

Here are a few resources I think AE's need to have soon:

• "You Got Served, Now What?"

• "Best practices on interviewing antitrust defense counsel"

• "How to preserve emails, text messages, and other evidence so you don't go to jail."

• "Forensic Accounting and You: What the AE needs to know about financial rectal exams."

• "Fiduciary duty of your Directors during a lawsuit"

• "Understanding liability insurance coverage"

• "How to talk to a Department of Justice investigator"

• "Bankruptcy 101: Chapter 7 vs. Chapter 11"

I understand and have always understood not panicking the membership over distance threats like big antitrust lawsuits. I have never understood not panicking Association Executives, MLS CEOs, elected leadership, and those men and women whose role is to do things like "strategy" for the local Association. Maybe I'm being unfair, and NAR has been informing the living shit out of the leadership across local, state and national levels about what's going on and what they need to do to prepare.

I doubt it though. Pretty sure I would have heard about such an effort if one existed.

So as of December of 2022, I conclude that most local and state Association leaders are wholly unprepared for what is headed their way starting sometime in April or May of next year when the Sitzer/Burnett decision will be handed down. At least... in a worst case scenario.

It goes without saying that this post fell on deaf ears over at NAR and elsewhere in REALTOR World, and when the jury handed down its verdict in Sitzer v. NAR, everybody freaked out because they didn’t know what to do.

One of the things I pointed out in that 2022 post was this:

Yet, in the aftermath of Sitzer, if worst case scenario occurs, then two consequences result. One, as mentioned in the previous post, NAR will be going through serious austerity. NAR might not have the money to be doing things like paying for local MLS liability insurance. (In fact, it isn't clear that NAR itself will have a company brave enough to keep insuring them. $300 billion liability exposure isn't something even Lloyds of London could take on easily.) Two, the local MLS's vulnerabilities all stem from NAR rules and policies since the local MLS doesn't make its own rules unless permitted to do so by NAR.

Which brings us to today’s news yesterday’s rumor.

I put this out already on Twitter, but I heard from a friend of mine who is in a position to know that the CEO of a major state REALTOR Association told a room filled with local AEs and local MLS leaders that NAR’s E&O insurance policy that it provides to all local REALTOR Associations and local MLSs has hit its limit. Therefore, there will be no funds available from that insurance policy for the cost of defending against antitrust lawsuits. Each local Association or MLS is now on its own as far as paying for legal fees just to defend itself from antitrust lawsuits.

From feedback I’ve been getting privately after posting that tweet, it appears that the rumor is true. NAR’s insurance policy is tapped out, and there are no funds available for REALTOR Associations and MLSs for legal defense costs.

That this is an enormous issue is understating things. I thought I would actually outline what I see as the implications and repercussions of this new fact. As always, I am a lawyer but not your lawyer, and I have very little expertise in liability insurance. Please consult your own attorney, your own insurance professional, and so on before taking any action. This post is strictly for edutainment purposes.

Let’s get into it.