NAR’s Insurance for Commissions Suits Tapped Out

The National Association of Realtors is unable to cover legal defenses for its local affiliates and multiple listing services in the slew of antitrust commission lawsuits.

NAR hit its maximum coverage limit for claims related to antitrust commissions lawsuits, the trade group told its local and state associations last week in an email reported by Inman.

Lesley Muchow, NAR’s deputy general counsel and vice president of legal affairs and antitrust compliance, said in the email the trade group “reached our maximum coverage limit of $1 million for lawsuits challenging cooperative compensation practices on the MLS.”

Coverage for other types of claims is still available, Muchow wrote. The trade group Chubb, an insurance provider to the group, determined copycat lawsuits related to a determination in 2019 about coverage involving cooperative compensation, sometimes known as the Participation Rule.

The policy was at the center of landmark cases against NAR, including Sitzer/Burnett — in which a jury awarded $1.8 billion in damages to a class of homesellers — Moehrl and copycat lawsuits being filed across the country.

NAR is working to extend its professional liability insurance with Chubb beyond the end of June. Real estate consultant Rob Hahn, whose blog Inman credited for first identifying the exhausted coverage, told the outlet NAR could have to self-insure going forward as providers watch the barrage of cases unfold.

The trade group’s insurance hasn’t changed or been lost, but that will likely be little comfort to the local and state associations looking for help to defend against commissions claims. State and local associations that purchased additional insurance for excess coverage can fall back on that, but they would’ve had to make that purchase by early last year.

A spokesperson for NAR said the trade group is committed to working with local and state associations to help them where possible.

Antitrust lawsuits can be a uniquely expensive challenge for defendants, and add a costly facet to trade groups and brokerages’ contending with uncertain economic conditions and stubborn markets across the United States.

“Antitrust litigation is notorious in a way very few kinds are … for being extremely expensive because it often requires so much document production and such lengthy discovery to figure out whether or not the plaintiffs’ claims are founded,” Daniel Francis, former deputy director of the FTC’s Bureau of Competition and a law professor at New York University, previously told The Real Deal.

“We’re going to see defendants writing checks and very likely changing their practices if the verdict survives,” Francis said of the Sitzer/Burnett trial.

— Holden Walter-Warner