Why Errors and Omissions Insurance is Essential for Escrow Companies
As a neutral, trusted third party, your escrow agent clients have a lot of responsibility to the clients they serve, especially since those people may never even end up meeting each other. In addition to fiduciary responsibilities, escrow agents must secure the property and examine documents to make sure that all the terms of the sale are met on each end in order to serve both the buyer and the seller in the transaction.
So why do these escrow agents need Errors and Omissions (E&O) Insurance, also called Professional Liability Insurance? They face a number of exposures to E&O claims as well as malpractice claims. A few of these claim risks are:
Breach of Contract. An escrow agent can be held liable for breach of contract if they have not followed the instructions outlined on the said contract, or if they fail to redeliver goods on the completion of conditions on the contract. Ultimately, if an escrow agent breaches duty to either party, or is even perceived to have done so, they can find themselves facing a breach of contract errors and omissions claim.
Failure to collect all funds or funds released before all conditions are met. An escrow agent has the duty to properly account for all escrow funds and ensure that the usage of those funds is exclusively for the purpose intended.
Improper or inadequate documentation. Even if an escrow agent acts professionally and provides all documents in good faith, they may still be sued and easily be faced with thousands of dollars in defense costs if the documentation is not specific enough, or perceived to be incomplete.
These are just a few of the exposures that your escrow agent clients face. Other risks include breach of fiduciary duty, failure to make appropriate payment, or funds wired to the wrong account. In order to protect against these potential claims, it’s essential that these individuals carry Errors and Omissions Insurance for Escrow Agents. PL Risk offers policies in this area as well as a number of other professions. Please contact us today for more information at (855) 403-5982.