Here is the scenario that plays out more often than most real estate operators realize: A leasing agent works under your property management LLC for eight months. You terminate the relationship — legitimately, for performance reasons. Two weeks later, you receive a demand letter. The claim: wrongful termination, discrimination, and unpaid commissions on a transaction that closed after the termination date. Your E&O carrier reviews the claim and declines coverage. The claim is not against a client. It is against you, as an employer. Your E&O policy was never designed to respond to this. You are now defending a $40,000 claim out of pocket.
This is not a hypothetical. It is the most common uninsured loss scenario in real estate operations that have any team structure at all. And it is entirely preventable with one policy most agents have never heard of.
What does E&O actually cover — and where does it stop?
Errors & Omissions insurance is a professional liability policy. Its job is to protect you when a client claims your professional services caused them financial harm. The covered scenarios are well understood in real estate:
E&O covers claims by your clients, including:
The boundary is the client relationship. E&O is designed to protect you from the people you serve — not from the people who work for you or with you. The moment a claim originates from inside your operation, your E&O policy has no obligation to respond.
"Your E&O covers the people you serve. EPLI covers the people who serve alongside you. Most real estate operators carry one and not the other — until a claim arrives."
What is EPLI — and what does it cover that E&O does not?
Employment Practices Liability Insurance (EPLI) covers claims made against your LLC or business entity by the people working inside your operation. In real estate, that means:
EPLI covers claims by people inside your operation, including:
The critical point: independent contractor status does not eliminate EPLI exposure. In Texas, an IC can still file a claim alleging discrimination, retaliation, or that they were misclassified as an IC when they should have been treated as an employee. These claims are expensive to defend regardless of their merit. The average cost to defend a single employment practices claim — even one that is ultimately dismissed — exceeds $50,000 in legal fees.
Who needs EPLI in real estate?
If your real estate operation involves any of the following, EPLI is not optional — it is a core operating expense:
LLC Entities with Agents or Assistants
If your LLC has any person working under it — even one part-time assistant or a single showing agent — you have EPLI exposure. The LLC is the named entity in any claim, and your personal E&O policy does not extend to the entity.
Property Management Companies
PM companies are among the highest-risk EPLI environments in real estate. Leasing agents, maintenance contractors, and administrative staff all represent potential claimants. Terminations, commission disputes, and fair housing-related employment claims are recurring features of PM operations.
Commercial Agents with Team Structures
Commercial agents who operate with assistants, analysts, or co-brokers under an LLC structure carry the same EPLI exposure as any other employer. High-value transactions create high-value commission disputes when team relationships end.
Apartment Locators with Referral Networks
Apartment locators who pay referral fees to other agents or maintain a network of showing agents have IC relationship exposure. If a referral arrangement ends badly, EPLI is the policy that responds.
What does EPLI cost — and what does not having it cost?
EPLI Annual Premium
$800–$1,500/yr
For a small real estate LLC or PM company in Texas with 1–5 team members or ICs. Varies by entity size, claims history, and number of ICs.
Average Undefended EPLI Claim
$50,000+
Legal fees to defend a single employment practices claim — even one that is ultimately dismissed. Settlement costs are additional.
The math is straightforward. A single undefended EPLI claim costs more than 30–50 years of EPLI premiums. This is not a policy you buy because you expect to need it. It is a policy you carry because the cost of not having it when you need it is catastrophic relative to the annual premium.
Common Questions About E&O vs. EPLI
What does E&O insurance cover for a real estate agent?
Errors & Omissions (E&O) insurance covers claims made by your clients — buyers, sellers, tenants, or landlords — who allege that your professional services caused them financial harm. This includes missed deadlines, failure to disclose material facts, misrepresentation of property condition, and errors in contract preparation. E&O does not cover claims made by people who work for you or with you inside your operation.
What does EPLI insurance cover that E&O does not?
Employment Practices Liability Insurance (EPLI) covers claims made against your LLC or business entity by the people working inside your operation — assistants, transaction coordinators, leasing agents, showing agents, and independent contractors. These claims include wrongful termination, commission disputes, discrimination, harassment, and retaliation. Your E&O policy will not respond to these claims. EPLI fills that gap entirely.
Do independent contractors count as employees for EPLI purposes?
Yes — in most EPLI policies and in Texas employment law, independent contractors can still bring claims that trigger EPLI coverage. Misclassification claims (where an IC argues they were actually an employee), commission disputes, and discrimination claims can all be filed by ICs against your entity. The fact that someone is labeled an independent contractor does not prevent them from suing your LLC under employment practices theories.
How much does EPLI cost for a real estate LLC or property management company?
For a small real estate LLC or property management company in Texas, EPLI typically runs $800 to $1,500 per year depending on the number of employees, ICs, and leasing agents under your entity. This is a core operating expense for any entity that has people working inside it — not an optional add-on. The cost of one undefended EPLI claim routinely exceeds $50,000 in legal fees alone.
Is EPLI required for Texas Broker Sponsor LLC sponsorship?
EPLI is required for LLC entities and property management companies under Texas Broker Sponsor™ sponsorship that have assistants, leasing agents, transaction coordinators, or independent contractors working under the entity. If your LLC operates as a solo agent with no team members, EPLI may not be required — but it is strongly recommended as your operation grows.
What is the most common EPLI claim in real estate?
The most common EPLI claims in real estate involve commission disputes and wrongful termination of independent contractors. A showing agent or leasing agent who is terminated — even for legitimate reasons — can file a claim alleging discrimination or retaliation. These claims are expensive to defend even when the employer wins. Commission disputes between LLC owners and their ICs are the second most common trigger, particularly when a transaction closes after the IC relationship ends.
Get Your EPLI Quote from Serena
Serena O'Gwin-Miranda · Networth Insurance Services, LLC · TDI #2466438
Quotes typically returned within 2 hours. Coverage can bind same-day.
[email protected] · Licensed Exclusively in Texas Since 2019 · Women-Owned Business
Sources & References
- 1. Texas Department of Insurance — Employment Practices Liability Insurance overview. tdi.texas.gov
- 2. SHRM — Average cost to defend an employment practices claim: $50,000+ in legal fees before settlement. shrm.org
- 3. Texas Labor Code — Independent contractor classification standards and misclassification exposure. statutes.capitol.texas.gov
- 4. Victor Insurance — Real estate EPLI specialty market guidelines (2025). victorinsurance.com
- 5. TREC Rule 535.2 — Broker responsibility for sponsored agents and entity oversight requirements. trec.texas.gov