I'm sure many of you have seen the Tom Hanks classic family film from 1986, "Money Pit." As you may remember, when Tom and his wife (played by Shelley Long) first toured the home of their dreams, it was in perfect condition. After they purchased the home, it was in shambles, seemingly needing every contractor known to man to help put the house back together. What you probably don't remember from the movie was the lawsuit behind the scenes where Tom and Shelley sued the previous owner and the seller's agent for nondisclosure and negligent misrepresentation. Fortunately, the seller's agent had E&O insurance to provide a defense and indemnity for the claim.

Okay, so that part of the movie doesn't actually exist. E&O insurance is a bit too dry a topic for Hollywood.

In real life, however, it can be the star of the show.

Having worked as claims counsel for an E&O carrier, I have seen my share of real estate claims. Most recently, claims counts have increased as the flagging market has disappointed buyers hoping for a quick return on their investment.

Increasingly, the "losing" parties in real estate transactions are looking for others to blame, including real estate and mortgage brokers, title and escrow agents, and inspectors. And they aren't afraid to make claims, no matter how frivolous, in order to recoup at least some of their losses.

There are "normal" claims brought against real estate agents -- i.e. nondisclosure of water damage, roof status, foundation stability or termite infestation; incorrect boundary listings and misrepresentation of property, to name a few. However, I include below a few unique examples of recent covered claims I've witnessed that could be indicative of the current market and industry conditions:

• A buyers' agent being sued for nondisclosure on a piece of property that included archeological and burial sites (unbeknownst to the agent).

• A dual agent sued over the purchase of a condominium that the purchaser claims does not contain enough sound proofing. (did not bring a claim until buyer discovered he was "upside-down" a few years later when trying to resell.)

• The seller's agent having a 3rd party claim brought by the seller, after the buyer discovered a faulty septic system and brought suit. (The seller maintains the agent should've required testing of the system.)

• An agent that helped sellers sell an old home and buy a new one being sued over alleged comments regarding payoff of mortgage loans during the negotiating process. (The sellers now want the agent to make up a shortfall on their old loan.)

• A seller's agent being sued because the asking price wasn't high enough to satisfy the beneficiaries of a trust, even though the trustee had an appraisal and approved the sale of the trust property.

  A defense verdict was obtained in that last one, though it cost about $100,000 to defend.

After reading the list of nontraditional claims examples, you might be asking, "if those claims can be brought, how can I possibly avoid them in this litigious environment?"

While there are no surefire ways to avoid being named, there are ways to plausibly limit your liability exposure, damages and defense costs. First and foremost, disclose, disclose, disclose 00 always the most important thing.

Next, put everything in writing, and get signatures on agreements outside the standard contract. Have an attorney review your advertising, disclosures and practices for RESPA violations and to keep them current with the law. Seek a signed waiver stating that the agent performed no independent investigation of the premises. Provide copies of all infestation, radon and foundation reports. Allow the buyer to select inspectors and contractors. Allow the seller to choose the closing agent. Let your client make major decisions on setting a sales price or negotiating. Avoid conflicts with title agents/companies as sister entities. Don't get involved with appraisals or financing. And send even the smallest potential claims to your E&O carrier. They can help by possibly halting a claim before it gets out of control, which can happen easily, and quickly.

And here it comes -- the pitch. E&O insurance carriers deal with these types of claims every day. They really can help. If you already have this insurance, you're ahead of the game. Tender all potential claims immediately.

It might seem counterintuitive, but hiring an attorney early could help avoid higher costs later on. The faster (and usually more cheaply) they are resolved, the less of a hit your loss-ratio will take and, in turn, your future premiums will be more reasonable.

If you don't have this insurance, ask yourself a few questions. Are you incapable of mistakes? Can you afford the costs of litigation when you do make a mistake? Do you want to have to deal with it alone or let someone else help take care of it? Can you manage your own money pit? Think about your answers, and then call your broker today.