Title, Escrow & Closing Agent Professional Liability Insurance
Stateside Underwriting is pleased to offer one of the most comprehensive national programs for Title, Escrow and Closing (TEC) Agents. Our program provides Professional Liability (Errors and Omissions) as well as Fidelity Bond policies for Title, Escrow and Closing Agents in all 50 states. Stateside Underwriting utilizes several markets to match the best coverage to the specific risk.
Our program can offer individual coverage limits to $3MM with minimum premiums starting at $2,000.
Our policies may provide errors & omissions coverage for any and/or all of the following professional services:
Stateside Underwriting Agency is one of the leading writers of fidelity bonds for title agents. Stateside also provides fidelity bonds for escrow agents and fidelity bonds for closing agents. A title agent fidelity bond is also referred to as a title agent crime bond, a title agent employee dishonesty bond or a title agent dishonesty bond.
A fidelity bond for title agents should be written on a Surety and Fidelity Association http://www.surety.org form 15 bond which is a type of bond used for title agents and mortgage bankers. We often see title agents relying on commercial crime bounds imbedded in the business owners policy (BOP) to address the unique exposures of title agents however buyer beware. The Surety and Fidelity Association’s (SFA) financial institutions bond forms are considered the standards for financial institutions and quasi-financial institutions. For instance, a bank would carry a SFA form 24 bond, broker dealer SFA form 14 and an insurance company SFA form 25.
The most important clause of the Form 15 fidelity bond for title agents or coverage part of the form 15 is Clause A. Fidelity. This clause is also referred to as Employee Dishonesty and covers direct financial loss sustained by the assured resulting directly from fraudulent or dishonest acts of an Employee acting with the manifest intent to obtain improper financial gain and/or cause financial loss to the assured. Employee embezzlement is the most common type of loss covered under a fidelity bond for title agents.
Fidelity bonds do not cover losses caused by the principal owner of the assured. As a matter of public policy, a person is not permitted to purchase coverage to insure against loss caused by his/her own dishonest acts. By extension, therefore, fidelity coverage typically does not cover loss caused by a person who is the alter ego of the insured, e.g., someone who is the sole shareholder or partner of an assured.
Some title underwriters and the state of Washington via The Washington State Department of Financial Institutions are requiring their escrow, title or closing agents who handle settlement funds to purchase a bond which obviates the alter ego defense. Title underwriters are accomplishing this requirement by mandating and/or strongly encouraging that their agents purchase a special fidelity bond for title agents referred to as the Escrow Security Bond or the Escrow Security Fidelity Bond. The Escrow Security Bond is tailored for title, closing and escrow agents because the basis of the Escrow Security Bond is a Fidelity and Surety form 15. The form 15 is then modified to include computer crime coverage via the Computer Crime rider, owner defalcation cover via the Theft of Settlement Funds and Title Premium rider and Special Loss Payee rider naming the sponsoring title underwriter. In addition the Escrow Security Bond is further modified to address nuances unique to the title industry which provides more clarity when a loss is sustained by the title or escrow agent.
It is very important to note that the Escrow Security Bond is firstly and most importantly an employee dishonesty fidelity bond which protects the assured title agent from dishonest acts of his/her Employees. The Escrow Security Bond’s owner defalcation coverage only applies when the dishonest act was perpetrated by the principal owner of the assured. Under that scenario, a standard fidelity bond would become void and of no value because of the owner exclusion however the Escrow Security Bond allows the title underwriter to report and pursue a claim to Underwriters as long as their interests were affected and they were named on the Special Loss Payee rider of the Escrow Security Bond.
The Washington State Department of Financial Institutions has recently announced that they too will require an endorsement referred to as The Washington State Escrow Agent Endorsement which provides coverage similar to the Escrow Security Bond. The new Washington Escrow Agent Endorsement required by the WA State Department of Financial Institutions (WA DFI) appears to have been created to protect the consumers (i.e. typically the buyers or sellers involved in a real estate transaction) interests which have been “harmed” due to the theft of escrow funds by the owner or Employee of the escrow agent.
You can find the requirement of this new Washington State Escrow Agent Endorsement at the following link http://www.dfi.wa.gov/cs/escrow/fidelity-bond-faq.htm. Stateside in one of the Lloyd’s Coverholders who can provide an approved Washington State Escrow Agent Endorsement.
Regardless of whether there is a specific requirement for a title agent to carry a fidelity bond, title agents should carry fidelity bond coverage as a peace of mind and to protect them from employees stealing money, including escrow and operating funds from the agency. The title agent should not rely on the minimum fidelity bond limit requirements by states, lenders and title underwriters for title agents because in many cases the fidelity bond limit requirements is just too low to afford any meaningful protection from an employee determined to commit fraud or other dishonest acts against his/her title agent employer.
CLAIM DETERMINATION...Any claim is subject to the actual policy wording/endorsements and the coverage for a claim shall be determined using the policy wording.
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Stateside Underwriting Agency, Inc.
A New Approach to Old Fashioned Service®
CA Licensed Broker Richard Nowell (Lic. #0H18186)
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