Knowing what your Errors and Omissions policy covers is an important part of keeping yourself safe from liability. Take our quiz and see if you can separate the E&O facts from fiction.
ANSWERS:
1. State laws require newly commissioned Notaries to have E&O insurance
A. True
B. False
Answer: False. Some states require Notaries to have a surety bond that reimburses a signer who suffers financial loss due to the Notary’s negligence or fraud, and Louisiana allows a Notary to choose between a $10,000 bond or E&O insurance. A surety bond is not the same thing as E&O insurance. Any amount paid in damages from a surety bond must be paid back to the bonding company by the Notary, and a surety bond only provides compensation for a signer — there is no coverage for the Notary. Outside of Louisiana, which allows a Notary to carry a surety bond or E&O insurance, no state requires Notaries to have an E&O policy.The NNA strongly recommends having E&O coverage to protect yourself against liability.
2. Many lenders and signing services prefer Notary Signing Agents they contract for loan document signings to have E&O insurance policies
A. True
B. False
Answer: True and in many cases, it is required. An E&O policy assures signing services and lenders that a Signing Agent selected to perform a loan document signing has coverage against possible lawsuits for accidental errors and omissions. An error on home loan documents can be very costly to a borrower and leave a Notary, lender or signing service potentially liable for thousands of dollars if a loan transaction is harmed due to a faulty notarization.
3. A Notary who notarizes less than 25 documents each year does not incur liability risk and therefore does not need an E&O policy
A. True
B. False
Answer: False. Notaries should never assume they are safe from liability because they notarize comparatively few documents, or because the Notary doesn’t regularly notarize documents related to costly transactions. If a signer suffers damages and believes a Notary is at fault for an improperly notarized document, the signer can file a claim against the Notary.
4. A Notary may have to pay court costs and attorney fees in a lawsuit even if the Notary is not found liable for damages.
A. True
B. False
Answer: True. Even if a court later finds that the Notary is not to blame, the Notary still may need to pay expensive legal filing and attorney fees in order to resolve the case. Most E&O policies will cover court expenses and attorneys’ fees in the event of a lawsuit.
5. E&O covers claims against Notaries that don’t involve notarial acts.
A. True
B. False
Answer: False. E&O policies for Notaries only cover claims involving notarial acts. E&O does not cover costs if a Notary is sued for a reason unrelated to notarization. For example, if someone sued a Notary Signing Agent for failing to properly obtain signatures on a Notice of Right to Cancel or Truth in Lending Statement, documents that are not notarized, an E&O policy would not cover legal fees or damages. Notaries may wish to consult with a qualified insurance broker or agent to determine if they need additional insurance coverage that protects them from risks that don’t involve notarized documents.
David Thun is an Associate Editor at the National Notary Association.