(Originally published in the November 2012 issue of The National Notary magazine)
By Vicki Gardner, Associate Editor
We all have insurance — for our homes, our cars, our health and our lives. The details of those policies are as varied as the people they cover. The same is true for Errors and Omissions (E&O) coverage for Notaries … and there’s a lot you need to know.
As a Notary, your commission belongs to you, and you are responsible for all your notarial acts. Whether you’re a Notary Signing Agent, the owner of a shipping store or you work for a bank, the ins and outs of your E&O policy can be very different depending on your circumstances. While E&O is designed to protect you, understanding how it works and what its limits are will help you get the most out of it.
The National Notary recently posed a number of questions to several experts and experienced Notaries to offer an in-depth view of E&O insurance.
How much will it cost if I don’t have an E&O policy and I get sued?
You will have to pay all your legal expenses out of your own pocket as well as the cost of any judgment or settlement.
“Mistakes happen,” said Michael Safris, an Assistant Vice President and Assistant Claims Manager with Merchants Bonding Company, an E&O insurance provider. “The costs can escalate quickly, and the financial impact on a Notary who does not have this protection can be devastating.”
Even if all your records are in order and you have done nothing wrong, the cost of defending a claim or a suit can be thousands of dollars simply to prove the notarization was valid, he added.
Notary errors and omissions insurance premiums are generally much more affordable than similar insurance carried by doctors and attorneys.
What does and doesn’t it cover?
E&O insurance covers unintentional errors or omissions by a Notary. It covers the amount of the claim and, in most states, attorney fees and court costs up to the limit of the policy, said William A. Anderson, the NNA’s Vice President of Best Practices and Legislative Affairs. In several states, E&O policies have a separate policy limit for legal costs.
E&O protection does not, however, extend to fraudulent acts or intentional errors. One of the most deliberate cases of fraud took place recently during the “robo-signing” crisis. Certain mortgage servicing companies had their Notary employees improperly notarize signatures without requiring personal appearances or identification, and some even signed documents on behalf of others.
While the resulting National Mortgage Settlement has mandated regulations and training for the lending institutions to prevent this kind of abuse in the future, Notaries involved in deliberate wrongdoing could still face stiff legal claims and E&O policies would not cover their costs in those cases.
E&O policies for Notaries only cover claims involving notarial acts, as Jan Tatangelo, a former California Notary Signing Agent, discovered.
A few years ago, Tatangelo notarized a power of attorney for an elderly man, and the notarization was performed correctly. When the man later complained to her that he felt pressured to sign the power of attorney, she contacted the police. Relatives of the man later sued Jan for defamation for calling the police. Because Notary E&O insurance excludes coverage for slander and libel, Jan’s E&O insurance did not cover her substantial legal costs defending against the charges of defamation. Although the lawsuit was later ruled bogus, she was unable to recover any damages and was out of pocket $11,000 for attorney fees.
For this reason, Notaries who are small business owners may also want to consider carrying other insurance to protect against these other exposures. In an earlier interview with the NNA, Elizabeth Milito, Senior Executive Counsel of the National Federation of Independent Business’s Small Business Legal Center, recommended that Notary entrepreneurs work with a good insurance broker to make sure they have the right type and amount of insurance.
“Liability is a huge concern in today’s climate,” Milito said. “It’s critically important to maintain adequate insurance. It will protect you if an issue escalates to legal action.”
If there is a claim against me, what happens?
“Generally, the client or their attorney will contact the E&O insurance carrier,” Anderson said. “They may file a lawsuit and forward it to the insurance company, or serve the lawsuit to the Notary directly, who would then contact their carrier.”
After the claim has been filed, the E&O attorney works closely with the Notary to obtain necessary documentation and background on the claim, and then handles the legal proceedings from that point forward.
How much E&O should a mobile or self-employed Notary carry?
This is an individual decision, said Anderson. At the minimum, a Notary should have enough to cover the cost of their surety bond if a bond is required by state law and about $10,000 over that amount for extra expenses. If the Notary has liquid assets such as a home the exposure could be much greater. In determining the right amount of coverage, ask yourself:
- What are my assets?
- How comfortable am I with risk?
- How much premium can I afford?
Signing Agent Walter Hertz of Toms River, New Jersey, handles large loan closings, most of which are $750,000 or higher. “I feel that a Notary that handles this type of transaction should carry at least $100,000,” he said.
If my employer carries E&O insurance for me, am I covered for everything, or just on the notarizations I perform for the company?
Anderson recommends talking to your boss to get a full understanding of what the company policy covers. Generally, if the employer policy covers notarial acts (not all do), then it will only cover acts performed by the Notary during the scope of employment. One employer’s policy the NNA reviewed was found to cover only documents prepared in-house. Documents originating outside the company were excluded.
It also might be helpful to ask to review your company’s E&O policy if you have any questions and to make sure you understand the extent of coverage or exclusions.
If you also notarize outside of work, or you are planning to leave your job, you should consider obtaining an individual E&O policy. While company policies will only cover you on the job, individual policies will cover you 24/7/365.
Am I still covered if I stop being a Notary?
It depends on the type of policy that covers you. Anderson explained that there are two types of E&O policies: occurrence-based and claims-made.
With an occurrence-based policy, the insurance will protect you if the policy was in force at the time the notarization was performed. That’s true even if you leave your employment, stop being a Notary or no longer have the policy. Typically, those policies are for amounts up to $100,000.
Claims-made policies cover you only if the claim itself is made while you have the policy. Once you stop paying the premiums, you cease to be covered. Since a claim or lawsuit can happen years after the act giving rise to the claim, cancelling a claims-made policy when one ceases to be a Notary is risky. These policies generally are for amounts over $100,000, and you can purchase a tail policy for a smaller premium that will extend your coverage.
What does E&O coverage cost and how do I get it?
Premiums vary by state based on the amount of coverage and the term of the policy. You can contact any insurance agent or broker licensed to sell property and casualty polices.
The NNA also offers a variety of options to fit your needs and budget. There are no deductibles and no repayment of claims up to the limit you select.
One consideration that could affect your decision is where you purchase your surety bond. If you buy your E&O policy and bond from the same provider, any claim and expenses typically will be paid out of the E&O policy before your bond.
In addition, in some states, claims made against your bond must be reported to the Secretary of State’s office, and your commission could be suspended until any settlement paid from your bond is reimbursed. If you have an E&O policy from your bond company, they won’t have to report it to the state, and you can keep performing your notarial duties.
Do previous errors or omissions on my record affect the amount of premium I will pay?
Policies issued through the NNA require no underwriting; they have stated premiums. However, if a Notary has a past claim, future coverage may be denied.
Michael Safris from Merchants Bonding provided some final advice regarding E&O insurance. “Whether notarizing a power of attorney, a will, a real estate document or otherwise, the one thing you can be sure of is that someone is relying on that document, and relying on the Notary to fulfill his or her duty. Particularly where there is a statutorily required bond in place, the claimants’ attorneys see the potential for recovery from the Notary or the Notary’s surety. For this reason alone, E&O insurance is a good investment.”