Escrow Officers have a significant responsibility in real estate transactions. Accuracy and attention to detail are important. There are many risks involved and if something goes wrong, an Escrow Officer could face a lawsuit, along with others involved in the transaction.
What are the risks? Learn how Escrow Officers can protect themselves against a lawsuit, and what insurance is needed.
Beware of the Risks
Most claims against Escrow Officers relate to: breach of contract, funding and payment issues, documentation problems, or a breach of fiduciary duty.
Breach of Contract
A breach of contract lawsuit could arise if the contract is not followed to the letter or if something is incomplete. This might happen if an Escrow Officer releases a property before the scheduled time specified in the contract. If this happens, even if it was an oversight and not intentional, the Escrow Officer could be sued.
Funding and Payment Issues
The timing of the collection and dispersal of funds is critical in real estate transactions. If this doesn’t happen, it can delay the transaction. In extreme cases, it could even stop the transaction from happening at all.
Another funding-related issue that could arise is if money is transferred to the wrong accounts. This could be due to a mix-up of bank account numbers, a fraudulent scam or human error by the Escrow Officer or another party providing the account information. This can cause significant delays and be difficult to unravel to get the transaction back on track.
Accurate and complete documentation is critical in real estate transactions. If Escrow Officers make an error with the documentation that causes harm to any party to the transaction, they could be sued. Typical examples include missing signatures or incomplete forms.
Breach of Fiduciary Duty
An Escrow Officer must act ethically and in the best interest of all parties involved. Lawsuit claims for a breach of fiduciary duty arise when a party to the transaction alleges you have not acted in that party’s best interests.
What Insurance Do Escrow Officers Need?
Escrow Errors and Omissions insurance can protect Escrow Officers if a mistake is made as part of the escrow process. E&O insurance typically covers legal defense costs, attorney fees and damages if you lose the case.
CRES E&O + ClaimPrevent® also offers extra protection and access to qualified and experienced attorneys 7 days a week. This means Escrow Officers can seek legal advice from attorneys who have been defending real estate professionals for decades — and help you to prevent claims.
Escrow Officers running their own business should have a Business Owner’s Policy. This insurance combines essential types of insurance into one policy, including: General Liability Insurance, Buildings and Property coverage, Loss of Business Income, Equipment Breakdown, Personal and Advertising Injury, and Medical Payments. This insurance package protects you if another person is injured or if their property is damaged during a covered activity.
If you have others working on your Escrow team as employees, you should have Workers’ Compensation insurance. This provides coverage if any of your staff suffer from a workplace injury.
Escrow Officers’ should also have Fidelity Bonds, also known as Surety Bonds. These bonds allow clients to be compensated in the case of fraudulent or misleading escrow practices. An aggrieved client can make a claim against the bond, and the Escrow Officer or Escrow Company then has to repay the money to the bond company.
With the rise in cyber scams impacting businesses across the globe, Escrow Officers should consider a Cyber Liability Insurance Policy. Real estate transactions are vulnerable to hackers who may infiltrate communications to adjust bank account numbers or access systems to steal funds.
Contact CRES Today
Are you interested in a tailored E&O + ClaimPrevent® insurance policy designed especially for Escrow Officers?
CRES can tailor an insurance package to suit the specific risks you face as an Escrow Officer. This high level of customization is not typical for E&O insurers and provides you with extra E&O protection for your Escrow Officer activities.
Contact CRES at 800-880-2747 for a confidential discussion today and our team can guide you through your insurance options.
As part of one of the largest insurance carriers in the world, we have unparalleled access to insurance options that others just don’t. Let us find you the right policy at the right price.