Attorneys handling property transfer cases have a fiduciary responsibility to the title agent, escrow/closing agent, abstractor, title examiner, or notary public they may be working with. In a transaction involving title transfer, your work is to secure the property and examine the documents to ensure that all parties involved meet their obligations.
However, some unintentional mistakes could happen during the transaction and result in claims or lawsuits. For example, if the property in question has a title hazard, you may be named in the lawsuit of the policyholder against the insurer.
To protect yourself, seek advice from an E&O insurance firm.
What is E&O Insurance?
Errors and omissions (E&O) insurance protect a business against baseless claims. The insurance may cover any judgments against you, court fees, and legal defense costs up to the limits of your policy. Moreover, in case you or your staff make a legitimate mistake, the E&O insurance will also offer protection.
There are different types of E&O insurance covers in the market. The insurance options are appropriately named based on the parties they cover. For example, an Attorney E&O cover is meant for legal firms while Agents E&O insurance covers players in the title industry.
What Does E&O Insurance Cover?
E&O insurance typically protects you against the following:
i) Incompetence or Inaccurate Documentation
You may act professionally and provide all documents to the client in good faith. However, some clients may still sue you and leave you with thousands of dollars in defense costs if the documentation is perceived to be incomplete.
ii) Breach of Contract
Most claims are mainly due to a breach of contract. Attorneys and title agents could be sued for breach of contract if they failed to follow the instructions on the said agreement. Depending on the issue at hand, clients may also sue you if you fail to redeliver goods on completion of the conditions of the contract.
Both buyers and sellers can sue you for breach of contract if they feel you went contrary to the agreement.
iii) Failure to Collect Funds
Escrow agents have to appropriately account for all escrow funds and ensure they are used exclusively for their intended purposes. The same also applies to any funds that are to be released. These are the primary reasons you should cover yourself with a policy from an E&O insurance firm.
