ATTACHMENT D - KREC Detailed Requirements for Coverage - RFB 758 2600000247.pdf

ATTACHMENT D

KREC DETAILED REQUIREMENTS FOR COVERAGE

KENTUCKY REAL ESTATE COMMISSION

ERRORS AND OMISSIONS LIABILITY INSURANCE

NAMED INSURED:

Commonwealth of Kentucky Kentucky Real Estate Commission (KREC) 500 Mero Street, 2NE09 Frankfort, KY 40601

Named Insured is defined as the Kentucky Real Estate Commission (KREC) on behalf of all individuals licensed by the Commonwealth of Kentucky under Kentucky Revised Statutes Chapter 324, except those individuals furnishing the Commission with evidence of acceptable substitute insurance in accordance with KRS 324.395 (4) and

201 KAR 11:220.

Additional Insured shall be the real estate firms for their vicarious liability for the errors and omissions of the licensed individuals and any other employers of the licensed individuals for their vicarious liability for the errors and omissions of the licensed individuals.

Each individual's coverage shall be deemed to cover as additional insureds, within the limit of liability, the "principal broker" and the broker's firm, as well as the "broker" and the "sales associate" as defined in KRS 324.010.

COMMONWEALTH CONTACT INFORMATION:

Commonwealth of Kentucky, Public Protection Cabinet Kentucky Real Estate Authority, Kentucky Real Estate Commission (KREC) 500 Mero Street, Second Floor, Frankfort, KY 40601

RISK PROFILE AND UNDERWRITING INFORMATION:

The Kentucky Real Estate Commission is an agency of the Commonwealth of Kentucky and is empowered under Kentucky Revised Statutes (KRS), Chapter 324 to regulate state licensing and education of real estate brokers as well as sales associates and to safeguard and protect the public interest. To that end, all active Kentucky real estate licensees are required to carry errors and omissions insurance as a condition of licensure pursuant to KRS 324.395 and 201 KAR 11:220. KRS 324.395 also requires inactive licensees to carry extended reporting period coverage for a period of one (l) year following the date a license is placed into inactive status. Real estate firms are not required to buy Errors & Omissions (E&O) insurance, only licensees. The required insurance for licensees may be purchased independently or from the group insurance provided by the Kentucky Real Estate Commission.

LICENSEE TOTALS & PREMIUM HISTORY:

Total Number of Active Licensees by Calendar Year:

2021 15,668 (as of 7-1-2021) 2020 15, 351 (as of 12-31-20) 2019 14,935 (as of 8-14-2019) 2018 14,636 (as of 12-31-2018) 2017 13,668 (as of 12-31-2017) 2016 13,514 (as of 12-31-2016) 2015 12,964 (as of 12-31-2015) 2014 12,661 (as of 09-30-2014) 2013 12,393 (as of 09-30-2013) 2012 12,269 (as of 09-30-2012) 2011 12,809 (as of 09-30-2011) 2010 13,605 (as of 09-30-2010) 2009 14, 162 (as of 10-30-2009) 2008 15,360 (as of 9-30-2008) 2007 16,011 (as of 2-31-2007) 2006 15,830 (as of 12-31-2006) 2005 15,404 (as of 12-31-2005) 2004 14,461 (as of 12-31-2004) 2003 13,641 (as of 12-31-2003)

Total Number of Active licensees in the Group Program:

2021 - 13,372 (as of 07-01-2021) 2020 - 13,391 (as of 12-31-2020) 2019 - 12,677 (as of 07-31-2019) 2018 - 13,037 (as of 07-31-2018) 2017 - 12,586 (as of 07-31-2017 2016 - 12,020 (as of 07-31-2016)

2015 - 11,412 (as of 07-31-2015) 2014 - 10,840 (as of 09-30-2014) 2013 - 10,650 (as of 09-30-2013) 2012 - 10,646 (as of 09-30-2012) 2011 - 11,177 (as of 09-30-2011) 2010 - 8,715 (as of 09-30-2010) 2009 - 12,982 (as of 10-30-2009) 2008 – 9,101 (as of 9-30-2008) 2007 - 14,512 (as of 12-31-2007) 2006 - 14,557 (as of 12-31-2006) 2005 - 13,702 (as of 12-31-2005) 2004 – 12,821 (as of 12-31-2004) 2003 – 11,827 (as of 12-31-2003)

Per Licensee Premium History (excluding municipal premium tax or Kentucky surcharge):

2020 - 2021 $106.00 2019 - 2020 $126.00 2018 - 2019 $126.00 2017 - 2018 $126.00 2016 – 2017 $126.00 2015 - 2016 $122.00

2014 - 2015 $128.00 2013 - 2014 $116.00 2012 - 2013 $107.00 2011 - 2012 $107.00 2010 - 2011 $107.00 2009 – 2010 $117.00 2008 - 2009 $130.00 2007 - 2008 $140.00 2006 - 2007 $140.00 2005 - 2006 $140.00 2004 - 2005 $123.00 2003 - 2004 $123.00

DESCRIPTION OF REQUIREMENT:

POLICY TERMS AND CONDITIONS:

1. SAMPLE POLICY-

Complies with the provisions of KRŞ 324.395 and 201 KAR 11:220 in effect at the time the policy is offered. Coverage is made available on claims made basis to all real estate licensees performing a professional service for which a license is required by the Commonwealth of Kentucky under KRS 324.010 for all acts for which a real estate license is required, except as provided in 201 KAR 11:220.

2. POLICY LIMITS-

$100,000 coverage per licensee per claim. $1,000,000 aggregate per licensee. No deductible for damages.

No deductible for claims expenses. $5,000 sub-limit for Lock Box Coverage.

3. MINIMUM COVERAGE REQUIREMENTS-

PRIMARY RESIDENCE COVERAGE -

Provides coverage for sale or listing of Licensee's primary residence through insured's broker.

ENVIRONMENTAL COVERAGE -

Provides minimum coverage of $5,000 per claim, $10,000 aggregate coverage for environmental claims including molds, spores, and fungi.

FAIR HOUSING COVERAGE -

Provides minimum coverage of $10,000 per claim, $10,000 aggregate coverage for fair housing discrimination claims.

ESCROW ACCOUNT/EARNEST MONEY COVERAGE -

Provides minimum coverage of $2,500 per claim, $5,000 aggregate coverage for claims concerning escrow/earnest money accounts.

FRANCHISE GRANTOR COVERAGE -

Provides for coverage for Real Estate Group as Franchise Grantors.

REGULATORY COVERAGE -

Provides minimum coverage of $2,500 per claim, $5,000 aggregate coverage for regulatory complaints.

VENDORS SHALL BID BY SUBMITTING ONE PRICE THAT INCLUDES THE

MANDATORY SIX (6) COVERAGES LISTED ABOVE. DO NOT BREAK OUT A

UNIT COST FOR ANY SPECIFIC COVERAGE.

NOTE: There will not be points awarded for additional coverage, which is in addition to the minimum coverage requirements.

4. EXTENDED REPORTING PERIOD-

Provides an automatic extended reporting period for a period of at least ninety (90) calendar days. The insured shall have the right upon payment of the additional premium within ninety (90) calendar days after such termination of coverage, to have issued a certificate providing a two (2) year optional extended reporting period. The premium for the two-year extended reporting period should not be more than 200% of the current annual price.

5. OFFER FOR EXTENDED REPORTING PERIODS-

Successful Vendor shall e-mail or mail to each licensee/individual who does not renew group insurance coverage or who replaced the insurance furnished by the group insurance policy with other insurance, a notice providing the licensee/individual with full information regarding the nature of the claims made coverage provided by the group policy, the nature of the extended reporting period coverage and the cost thereof.

The notices shall include an offer to provide the extended reporting period coverage with instructions for the acceptance of the offer.

6. ADDITIONAL POLICY REQUIREMENTS-

If an insured person’s license is placed into inactive status during a year in which that person has paid their premium, coverage shall continue for the remainder of the policy year for that person as if the license had not been placed into inactive status, regardless of whether the license is reinstated, except that coverage shall not be provided for acts occurring during the period when the license was in inactive status.

SCOPE OF SERVICES -

1. Insurer is licensed and authorized.

Insurer is licensed and authorized by the Kentucky Department of Insurance (DOI) to write policies of Errors and Omissions insurance in this state.

2. A M. BEST RATING.

Vendors shall have a B+ or better A.M. Best Rating. Bidders with an A.M. Best rating lower than B+ shall not be considered. Should the successful Vendor drop below a B+ rating from A.M. Best during the contract term, the Commonwealth of Kentucky may take appropriate action to secure or maintain this coverage.

3. The Vendor is required to comply with all applicable federal, state, and local rules, regulations, and statutes, including but not limited to, the insurance code in Chapter 304 of the Kentucky Revised Statutes (KRS), as interpreted by the Kentucky Department of Insurance (DOI), during the contract term.

4. Any servicing agents shall be licensed and have on file with the Kentucky Department of Insurance proof of financial responsibility as required under Chapter 304 of the Kentucky Revised Statutes during the contract term.

5. Any claims adjuster(s) shall be licensed as required under Chapter 304 of the Kentucky Revised Statutes during the contract term.

6. Vendors shall compile a list of approved attorneys from which insureds can choose.

Approved attorneys must have at least one year experience in real estate litigation and must maintain a principal business address in Kentucky. Attorneys that are licensed in Kentucky whose principal address is located within 50 miles of Kentucky will be considered as maintaining a Kentucky principal business address. (A list of approved attorneys and their business addresses should be included as part of the Bid Response packet.)

7. Vendors shall provide an electronic web service system to verify licensee compliance in real time that is compatible with the Commission's professional licensing back office.

TERRITORY OF THE INSUREDS-

If the Insured Licensee is not a resident of the Commonwealth of Kentucky, then this policy applies only to negligent act(s), error(s), or omission(s) arising out of

Professional Services committed in Kentucky or related to real estate located in Kentucky. If the Claim results in or from a suit for damages, it must be brought within the United States of America, its territories, or possessions.

If the Insured Licensee is registered with a firm with an active place of business in

Kentucky that is located within a fifty (50) mile radius of the licensee's home, then the

Insured Licensee will be considered a resident of Kentucky for purposes of this section.

The territory above applies to all "insured licensees" and all endorsements.

Information to be Provided Insured A specimen policy shall be issued to each insured principal broker, and a final policy will be mailed to each and every licensee who purchases coverage under the group policy. It is possible the specimen policy could be e-mailed, but that will be at the discretion of the Commission. The successful bidder will send each licensee covered under this program a "mailer." The "mailer" shall have prior approval of the Commission and be prepared for mailing within thirty (30) calendar days of the award of the contract. The "mailer" can be included with the Commission's renewal mailing if mailing costs are equally shared between successful bidder and the Commission.

The "mailer" shall give a general description of the coverage provided, terms and conditions, optional coverages if applicable, and instructions for securing additional information and for reporting claims. Such instructions shall specify a toll-free telephone number(s) other than that of the Commission for the purpose of securing information and reporting claims.

The Kentucky Real Estate Commission shall have final approval on any and all correspondence that is sent from the Vendor to licensees.

Premium The premium to be charged each individual shall be the amount shown on the bid submitted by the successful bidder and shall be the same amount for every licensed person. In accordance with KRS 324.395, this amount for the basic policy may not exceed two hundred dollars ($200) per person for errors and omissions coverage and may not exceed two hundred dollars ($200) per person for basic extended reporting period coverage. Each principal broker shall receive due notice of the insurance provided in response to the invitation for bid, and the vendor shall collect the necessary premiums for each insured individual.

Each licensee's insurance premium shall be calculated quarterly on a pro rata basis throughout the policy term. Any person who is insured during the year, and whose license has been placed in inactive status, shall not be charged an additional premium if that person's license is reinstated during the year.

Fully Earned Premium All premiums that are paid to the insurer are considered fully earned by the Insurer when the policy is issued. However, pursuant to KRS 304.12-190, the Policyholder shall be eligible for a pro rata refund if the request to cancel group insurance policy is requested in writing, by the Policyholder, prior to the expiration of the policy to the successful bidder.

Applicable Taxes Charges for any and all taxes and / or policy fees shall be in addition to the insurance premium charge. Bidder must comply with KRS 136.392 with regards to the 1.8% Kentucky surcharge, disclosure of premium surcharge pursuant to KRS 136.392 and 806 KAR 2:100. All Vendors shall submit documentation of their ability to comply with and implement the requirements of KRS

136.392 and 806 KAR 2:100.

Mid-term Changes The Commission shall report all additional insured licensees to the successful bidder within thirty (30) calendar days of the end of each month. The pro rata premium shall be computed quarterly based on the month that such addition occurred. The pro-rated premium (plus any applicable taxes and / or fees) for periods other than the full year commencing April l, 2026, shall be reduced to reflect the remaining quarters.

New licensees who are added as insureds after the effective date of the policy shall be insured as of the date of license issuance. Individuals for whom this policy shall replace other insurance after the effective date of this policy shall be insured as of the date when the application for same has been received and the correct premium processed for deposit by the Commission.

Note: Licensee who is released by his or her principal broker in March must be allowed to continue uninterrupted coverage until re-affiliation with another principal broker.

This re-affiliation must be made within 30 calendar days from release. In the month of April, payment of the full premium would be required. The carrier shall make this policy retroactive to April l, 2026. Licensees who renew late and purchase group insurance coverage in the month of April shall have their coverage retroactively effective to April l, 2026.

Premium Payment The successful bidder shall receive payment of all premiums directly from licensees enrolled in the group program. The Commission shall not handle premium funds for the successful bidder or licensees enrolled in the group program.

Claim Reports The successful Vendor will furnish the Kentucky Real Estate Commission with a copy of a loss run containing the following information on a quarterly basis:

l. Name of Licensee

2. Date of Payment

3. Real Estate Firm

4. Narrative Description of Allegation

5. Principal Broker

6. Pre-trial Settlement

7. Post-trial Settlement

8. Claimant Name

9. Date of Notice

10. Date Reported to Insurer

11. Amount of Reserve

12. Date of Loss

13. Amount of Payment

Legal Defense Bidders shall compile a list of approved attorneys and allow the insured to choose legal defense from that list. Acceptable attorneys shall have at least one year experience in real estate litigation and shall maintain a principal business address in Kentucky.

Attorneys licensed in Kentucky whose principal address is located within 50 miles of Kentucky will be considered as maintaining a Kentucky principal business address.

COVERAGE PROVISIONS

Coverage Form: Claims made basis.

Defense Costs: Outside the limits of liability

RETROACTIVE DATE

The retroactive date should be May l, 1987, if uninterrupted coverage has been in effect since that date. The retroactive date is established separately for each licensee. If coverage is interrupted - Coverage under the new policy established from the procurement shall be retroactive to April 1. 2026.

Term of Master Agreement Contract and Renewal Options

The initial term of the Master Agreement Contract shall be for a biennial period of two

(2) years from the effective date of the Award of Master Agreement Contract. The insurance coverage effective dates shall be from April 1st of the first year through March 31st of the second year as well as for any renewal period should it be exercised.

The Office of Procurement Services of the Finance and Administration Cabinet and the Kentucky Real Estate Commission (collectively "the Commonwealth") will coordinate with the Vendor in approximately December of each year to complete the Master Agreement renewal modification / paperwork prior to January 1st of each year. The time from January 1st to March 31st will be utilized by the Kentucky Real Estate Commission for their mailings and other administrative requirements that must be completed prior to April 1st.

This Master Agreement Contract may be renewed at the completion of the initial Master Agreement Contract period for one (1) additional two (2) year period upon the mutual agreement of the Parties. Such mutual agreement shall take the form of an addendum to the Master Agreement Contract under Section 40.050 - Changes and Modifications to the Contract.

The Commonwealth reserves the right not to exercise any or all renewal period options.

The Commonwealth reserves the right to extend the contract for a period less than the length of the above-referenced renewal period if such an extension is determined by the Commonwealth Buyer to be in the best interest of the Commonwealth.

The Commonwealth reserves the right to renegotiate any terms or conditions as may be necessary to meet requirements for the extended period. The Vendor will be advised of any proposed revisions prior to the renewal periods. In the event proposed revisions cannot be agreed upon, either party shall have the right to withdraw without prejudice from either exercising the option or continuing the contract in an extended period.

PRICE GUARANTEE

All bids shall be guaranteed for 90 calendar days after the Bid opening. Rates must be guaranteed until the expiration of the Master Agreement Contract. Price adjustments may be considered for subsequent policy years, only if the insurer notifies the Office of Procurement Services in writing no less than 90 calendar days prior to the expiration date of its intention to change the existing contract rates for the next policy year.

CANCELLATION AND SPECIAL PROVISIONS

The insurer shall provide a one hundred twenty (120) day notice of cancellation or nonrenewal. Refunds shall be computed on a pro rata basis upon cancellation, whether requested by the insured or the carrier.

METHOD OF PREMIUM PAYMENT

The insured will render payment within 30 business days (45 calendar days) as required in KRS 45.453, upon presentation of two accurate and complete copies of the billing. Premium will be paid on an annual basis.

LEGAL REQUIREMENTS

The Vendor is required to comply with all applicable federal, state, and local rules, regulations, and statutes, including but not limited to the insurance code in Chapter 304 of the Kentucky Revised Statutes (KRS), as interpreted by the Kentucky Department of Insurance, during the contract term.

Any servicing agents shall be licensed and have on file with the Kentucky Department of Insurance proof of financial responsibility as required under Chapter 304 of the Kentucky Revised Statutes during the contract term.

Any claims adjuster(s) shall be licensed as required under Chapter 304 of the Kentucky Revised Statutes during the contract term.

CONTRACT EXECUTION

The original copy of the binder shall be furnished to the Kentucky Real Estate Commission within ten (10) calendar days of award of contract, but no later than two

(2) calendar days prior to the effective date of coverage. The original policy and its endorsement s shall be furnished within 45 calendar days after the effective date of coverage.

ORIGINAL INSURANCE CARRIER

During the term of this Master Agreement Contract, the successful Vendor will maintain coverage with the original insurance carrier, unless written permission is granted by the Office of Procurement Services and the Kentucky Real Estate Commission to place coverage elsewhere. Any request for changes must be provided to the Office of Procurement Services and the Kentucky Real Estate Commission, in writing at least 90 calendar days prior to the expiration of the current policy.

Consideration will only be given if it is deemed to be in the best interest of the Commonwealth.

LOSS SUMMARIES

The successful Vendor shall provide two (2) copies of annual loss summaries by June 1st of each year to ATTN: Kentucky Real Estate Authority, Public Protection Cabinet at 500 Mero Street, 2NE09, Frankfort, KY 40601. Please include the following information:

1. Policy Number

2. Claimant Name

3. Date of Loss

4. Claim Status

5. Description of Loss

6. Amount Reserved

7. Amount Paid

NOTICES

After the award of the Master Agreement Contract, all normal communications, exclusive of price considerations, are to be delivered to the address below or to such other addresses or party as is designated:

Office of Legal Services, Public Protection Cabinet Kentucky Real Estate Authority Kentucky Real Estate Commission 500 Mero Street, Second Floor Frankfort, Kentucky 40601

E-mail: KREA.Legal@ky.gov

Phone: (502) 782-0562

After the award of the Master Agreement Contract, all notices of a contractual nature are to be delivered to the address below or to such other address or party as is designated:

Daniel J. Salvato Finance & Administration Cabinet Office of Procurement Services (OPS) 200 Mero Street, 5th Floor Frankfort, KY 40601 mailto:KREA.Legal@ky.gov

Phone (502) 564-5862

Daniel.Salvato@ky.gov

INTERNET INFORMATION

General Program Information - www.krec.ky.gov mailto:Daniel.Salvato@ky.gov http://www.krec.ky.gov/

INTERNET INFORMATION