Nearly all Errors & Omissions (E&O) insurance is provided in the form of a “claims-made” policy. Claims-made policies require that the policy be in effect at the time a claim is made or reported regardless of when the wrongful act took place. This is different from an “occurrence” policy which responds even after a policy is canceled or has expired as long as the incident occurred during the in-force policy period.
Carefully consider all of the transactions in which your firm has been involved. Even if your policy was active while you worked on a transaction, if a claim is brought against you as a result of that transaction after you have let your claims-made policy lapse, you will not be covered. It would be as though the policy never existed.
Many claims-made contracts include a “retroactive” or “prior-acts” date. This is the date from which your uninterrupted coverage begins and the policy provides coverage for wrongful acts that occur on or after this date. Policies without a retroactive date are referred to as “full prior-acts” coverage policies.
Understanding your E&O policy and its coverages is vital to protecting your assets. Some title professionals may consider an E&O policy with severe limitations or even going without coverage to reduce expenses. However, dropping your E&O coverage or switching to a more restrictive option may cost more than you think. Keeping your E&O coverage in force is the best way to protect your firm against future claims.
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This information is provided for the purpose of illustration. The coverage provided is that set forth in the terms, conditions, and limitations of the policy of insurance.