Texas Home Inspector Practice Exam

What type of damages does TREC not cover from the Recovery Fund?

1. Compensatory damages

2. Punitive damages

3. Emotional distress damages

4. Property damages

The correct answer is: Punitive damages

The Recovery Fund established by the Texas Real Estate Commission (TREC) is designed to protect consumers from financial losses suffered due to the misconduct of licensed real estate professionals. It primarily covers economic losses incurred by individuals as a result of a licensee's actions, typically compensatory damages that are directly tied to actual financial loss. Punitive damages, on the other hand, are not compensatory in nature. They are awarded as a form of punishment to deter the wrongdoer and others from committing similar acts in the future. The purpose of punitive damages is not to compensate the victim for their actual loss but to punish the offender for egregious behavior and to act as a deterrent. This is why the Recovery Fund does not cover punitive damages; the fund focuses on making whole those who have been financially harmed rather than providing a financial penalty to the licensed individual at fault. Understanding this differentiation clarifies why punitive damages fall outside the scope of what the Recovery Fund aims to address, which is primarily centered on compensating for direct financial losses rather than punitive measures against professional misconduct.