What to Look for When Shopping for an E&O Policy

Author – Thomas R. Schneider, Account Executive, Horst Insurance

There are many factors to consider when looking into Title Agents Errors and Omissions Insurance. Of course, the coverage, limits, deductibles and exclusions are all very important when considering a new insurance company; however, just as important, and often overlooked, is the retro-active date on the policy.

The retro-active date also known as “prior acts coverage date” establishes when the coverage for your current policy begins. Most of the title agents errors and omissions policies are written on a claims made basis. In order for the claim to be covered, the alleged error or omission must occur on or after the retro-active date. There must be a policy in place at the time the claim is made and the claim must be reported in the amount of time the insurance carrier has mandated in the policy. Even if you have a current policy in place, if an alleged error or omission occurs prior to the retroactive date, then unfortunately, there will be no coverage.

For example, you closed a loan in May 2002. In June 2009, you obtained a new E&O policy without purchasing prior acts coverage; therefore, your effective date is June, 2009. In September 2009, you receive notice that there was a missed mortgage on the transaction you closed in May 2002. Even though you currently have a policy in place, without coverage back to 2002, you are not covered for the missed mortgage. Then again, none of the files you closed before June 2009 are covered. Is that a risk you’re willing to take, especially in a market with increasing foreclosures?

Another recommendation when looking for competitive errors and omissions insurance is to make sure the insurance carrier is rate “A” or better by A.M. Best Co. and is an admitted carrier. Most insurance proposals include the rating of the insurance carrier by A.M. Best, but you can also visit www.ambest.com.

Unfortunately, many insurance carriers have continued to raise their premiums due to the increasing number of claims. A few insurance companies have also decided to no longer offer errors and omissions insurance to title agents. The good news is that there are still many highly rated and competitive insurance carriers offering competitive errors and omissions insurance to title agents.

If you have any questions regarding your errors and omission insurance or lines of business insurance, please contact your current E&O broker or Tom Schneider with Horst Insurance at 215-348-8141 ext. 111.