Difficulty: Hard

Average Score: 25%

Who among the following is EXEMPT from maintaining errors-and-omissions insurance according to Tennessee real-estate laws?

Rationale

A licensee whose license is in retired status.

In Tennessee, a licensee with a retired status is not actively engaging in real estate transactions and therefore is exempt from maintaining errors-and-omissions insurance. This status signifies that they are not operating in the capacity that would typically require such insurance coverage.

A (A principal broker of a corporate real-estate firm) YOUR ANSWER

A principal broker is actively engaged in real estate transactions and is responsible for overseeing licensed agents. As such, they are required to maintain errors-and-omissions insurance to protect against potential claims arising from their professional activities.

C (A licensed affiliate broker whose firm carries liability insurance for all employees) YOUR ANSWER

While a licensed affiliate broker may work in a firm that provides liability insurance, they are still individually responsible for maintaining their own errors-and-omissions insurance as required by Tennessee law. The firm’s coverage does not exempt them from this obligation.

D (An affiliate broker who works as a property manager and deals only with leasing contracts) YOUR ANSWER

Even though this affiliate broker may focus solely on leasing contracts, they remain actively involved in real estate activities. Therefore, they are required to maintain errors-and-omissions insurance to cover any potential liabilities that may arise from their property management work.

Conclusion

In Tennessee, the exemption from maintaining errors-and-omissions insurance applies specifically to licensees with a retired status, as they are not engaging in real estate transactions. Other roles, including principal brokers and active affiliate brokers, must maintain this insurance due to their involvement in real estate activities, regardless of the type of transactions they handle. This distinction is crucial for understanding the legal requirements for real estate professionals in Tennessee.

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