Axis Insurance Services, LLC  has experienced signficant growth in its E&O book of business, topping 40-50% in each year for the past 5 years.  We have only been able to accomplish this by specfically targeting key industries and then exploiting the market weaknesses.

For more information about our Architects and Engineers or Actuarial Consultants professional Liability Products, please contact Mike Smith at 201-847-9175 or msmith@axisins.com

Insurance Captive Manager $45,000

Structured Settlement Broker $5000

Insurance Broker $39000

Title Agent Owned by a developer $30,000

Mr Smith is a frequent speaker and writer on E&O related topics and available for other presentationsto the real estate Industry. Mike Smith is the President and CEO of Axis Insurance Services, LLC, a national Professional Liability Insurance Brokerage located in Franklin Lakes New Jersey.

Wholesale Insurance Broker E&O $15 million limits $149,000
Regional MGU E&O $3 million limits, $30,000
Large Insurance bank owned insurance agency $5M limits $191,000
Commercial Property Management Company $10 Million limits for $254,000
Title Agent with significant loss history $45,000

Axis Insurance Services continues to grow despite this down economy with a focus toward client needs and customer service. Mike Smith, President and CEO says, “we are continuing to expand our markets to have access to products and coverages that our competition simply doesnt seek. We are very pleased with our managed growth hope to continue at our current pace.”

Please feel free to contact Axis Insurance Services LLC at 201-847-9175 or visit us on the web at www.axisins.com

For further information on this or other E&O related issues, please feel free to contact Mike Smith directly at 201-847-9175

Question: Can an E&O policy be of any use when allegations of fraud or dishonest acts are made against an Insured?

Answer: It depends on the fraud, who committed it and the type of E&O policy issued.

Most E&O policies have an outright exclusion relating to any fraudulent activities including simple allegations of fraud.  We believe this is unfair to parties that did not participate or were not aware of such an act.  A standard exclusion in an E&O policy would read as follows:

“This policy does not apply to any claim arising out of or relating to any actual or alleged dishonest, fraudulent or criminal activity by or on behalf of any Insured”

The wording that comes next is the most important.  Many carriers have an absolute fraud exclusion in their policies and will not modify their coverage.  However, we have found that many carriers will modify this exclusion to add back coverage for those innocent parties who did not participate, acquiesce or remain passive relating to the fraudulent act.  For carriers that will not do this, many will at least add back defense until final adjudication proves that there was a fraudulent act.

Why is this important?

Similar to defending the Insured against any covered claim, even if the claim is groundless or false, fraudulent claims can be very expensive and time consuming.  Defending allegations of fraud can be as expensive as any other claim and  could erode assets of the company that we feel should be protected.  Since the investors and shareholders of the insured are usually unaware of a fraudulent act by their employees until after the fact, we believe the other insureds under the policy should be protected and not be put at risk by the unscrupulous actions of one or more individuals.  This is a similar concept to Directors and Officers being protected when others commit a fraudulent action in a D&O policy.

What if the insured is not guilty of fraud?

In many claims that we see, an allegation of Fraud accompanies a negligence allegation. It may be that the negligence cannot be proven and the plaintiff continues with the allegation of fraud in the suit.  We have seen many carriers continue to defend such a suit until a final adjudication in the matter.  In the event a verdict is favorable to the insured, they have been protected from a groundless allegation.  In the event a ruling is favorable to Plaintiff, then coverage typically ceases.

What happens if the Plaintiff wins the allegation of Fraud?

Policy forms differ when there is a final adjudication of fraud. The typical options are as follows:

1. Some policy forms require the named insured or the guilty insured to pay back the defense costs incurred.

2. Some policy forms will just cease coverage at that point.

3. Some policy forms will continue to defend or indemnify innocent parties that are also insureds including the named insured.

Unfortunately, carriers are often locked in by their forms and reinsurance carriers as to which one of the above options are available.  Certainly, option 3 is preferred, but again, not all carriers offer that option.

We recommend that you review the fraud exclusions carefully in your policy and weigh the benefits of what is available in the various options presented.

Our Commercial Real Estate clients have begun brokering mortgages for investors and clients. The transaction conceptually is no different than an investment sale which finds a buyer and seller for a piece of investment property except in this transaction the real estate broker finds a seller of a distressed mortgage and and investor willing to buy this mortgage.

Traditional Real Estate E&O insurance policies will exclude coverage for this type of transaction. From an insurance perspective the risk lies somewhere between a real estate agent, mortgage broker and investment advisor. If the real estate agent takes a piece of the action on the transaction it creates an even greter risk. All three of these risks are typically written on a separate and distinct E&O policies. The E&O risk of a claim for this type of transaction can come from the seller, buyer, tenant or other third party. It can also futher be complicated by bankruptcy and foreclosure issues.

Axis Insurance Serivces LLC is on the cutting edge of developing new and innovative E&O insurance policies for commercial real estate organizations. We have, in conjunction with one of our carriers, developed a product to help protect the real estate agent in these transactions. Please feel free to call our office to discuss any needs you may have
MIke Smith
Axis Insurance Services LLC
201-847-9175

What Is Errors And Omissions (E&O) Insurance?

Errors and Omissions Insurance is business liability insurance for professionals such as insurance agents, real estate agents and brokers, architects, third party administrators and other business professionals.  An error or omission,  a mistake, which causes financial harm to another, can occur on almost any transaction in any profession. This type of insurance (E&O) helps to protect a professional, an individual or a company, from bearing the full cost of defense for lawsuits relating to an error or omission while providing their Professional Services to others. This is a separate coverage from a standard general liability or property insurance policy.

Errors and Omissions Insurance may be referred as any of the following: E&O,  E&O Insurance,  Errors and Omissions or Professional Liability Insurance Malpractice (legal and medical professionals)

What Does Errors and Omissions Insurance Cover?

All E&O insurance policies are unique and therefore have different coverages and exclusions. However, in general E&O insurance is designed to help pay for defense costs and the damage awards associated with professional liability claims. Even the most diligent professional can be held liable for a professional error, omission or mistake. Defense costs are a significant portion of the cost of an errors and omissions insurance policy. It is not uncommon for a professional to spend thousands of dollars on defense costs for a matter that ultimately gets dismissed.

A Professional Liability claim must allege negligence in either the performance of or failure to perform Professional Services. Errors and omissions insurance policies have a specific limit of liability and usually include both legal costs and damage awards in a single limit. E&O insurance does not cover intentional, fraudulent or illegal activities or in most policies, punitive damages.

Remember all policies are unique, therefore not all claims may be covered in a policy and you should read your policy very carefully.

Why Should My Firm Purchase Errors and Omissions Insurance?

Lawsuits are not just about negligence; they are about allegations of negligence. We live in a litigious environment where any professional can be sued. Many innocent parties are brought into a suit simply because they are part of a transaction. In other words, the alleged error or omission does not have to be your error or omission. Defending the reputation of your business, whether the allegation is frivolous or not can still result in lost productivity and legal costs exceeding hundreds of thousands of dollars.

Errors and Omissions Insurance allows you plan ahead and transfer a portion of the risk of unpredictable legal expenditures to the insurance carrier, reducing the financial impact of an allegation against your business.

How Much Does E&O Cost?

Errors and omissions insurance premiums are based on several factors: Type of Professional Services Provided, State where Services are Provided, Size of Limits, Annual Revenues, Number of Professionals Providing Services, Loss / Claims History, and Type of Policy.

Do not be fooled by price alone. You could find yourself purchasing a cheaper policy that excludes all the Professional Services you provide. This of course would render the policy useless. Remember, defense costs are a significant portion of the cost of an errors and omissions insurance policy and a professional can easily spend thousands of dollars on defense costs for a matter that ultimately gets dismissed.

Each E&O insurance carrier has a different policy form and different exclusions. A properly structured E&O policy will offer your business proper protection with a competitive price for those coverages.

How Do I Find the Right Errors and Omissions Insurance Policy?

The first step to finding the right Errors and Omissions insurance policy is to find the right Professional Liability insurance agent. You would not use a tax attorney to defend a civil suit; likewise you should not use a workers’ compensation insurance agent to find the right E&O insurance policy for your company.

You should use an agent that specializes in E&O insurance to review your Professional Liability risk. Interview your agent and assess their qualifications and understanding of the industry. A Professional Liability agent or broker should have specific knowledge in dealing with your specific type of industry, have the requisite background and access to specialized insurance markets to assist you. Do not be afraid to ask for references.

When choosing the right E&O insurance policy you and your agent should work together to consider several factors, including:

1. What Professional Services do you provide? An E&O insurance policy should cover the specific Professional Services you provide. For example, are you a residential or commercial real estate agent, a life or property casualty insurance agent or even a structural or design engineer? It makes a difference in the policy you choose. Your errors and omissions insurance policy should spell out specifically the Professional Services you provide.
2. What is the legal structure of the business offering the Professional Service? Depending upon whether you are a Sole Proprietor, Corporation, Partnership, Limited Liability Company or other entity will determine who is covered under your errors and omissions insurance policy. For example, corporations have shareholders whereas LLCfs have members. Not all E&O policies address such issues correctly.
3. What Professionals are Performing Services on Behalf of our Company? Companies use a myriad of legal structures to fulfill their obligations. For example, companies can use employees, independent contractors, outside firms and other combination of professionals to fulfill a contract. Many policies do not cover services provided by independent contractors or others outside the corporate entity. Some policies will cover the services of independent contractors, but will not cover the independent contractor. In a real estate organization, for example, nearly all of the sales staff are likely to be independent contractors. An errors and omissions insurance policy that excludes coverage for independent contractors would leave the business at risk.
4. What Professional Services are provided by or to Related Parties? Some companies provide Professional Services to related parties. An example of a related party would be a real estate agency, where the real estate agency also manages a property owned by the broker. In an insurance agency, a related company might process claims. In both cases, with the wrong errors and omissions insurance policy, the insured would be left unprotected.

How do I get an errors and omissions insurance policy?

Determining if you can get an errors and omissions insurance policy is a relatively easy process. It starts with filling out an application for E&O insurance, which typically will ask for information such as name, address, type of business, annual revenues and something about your business. An application may also require financial statements or management bio’s depending upon the industry or company size. The underwriters need to understand what they are insuring.

We are seeing increased exposures for insurance related issues for property managers.  Almost all property manager’s E&O policies exclude coverage for any failure to place or procure any insurance for any client. The basis of the exclusion is that property owners and insurance agents should be held accountable for such claims not the property manager. Unfortunately, based on foreclosure rates and the economy, many property owners are not properly insuring their properties or have elected to drop the coverage altogether.  This creates a significant risk for the property manager that is not  covered by an E&O policy.

Example:

In the example of a slip and fall in a stairwell, typically the general liability policy for the building owner would respond to the claim and also extend protection to the property manager, if the policy is written correctly.  Property managers are traditionally named in this type of suit.  Since it is the intention of the general liability policy to cover this claim, E&O policies will most likely exclude this type of claim whether or not the actual policy is in force.  This presents a significant uninsured risk for the property manager.

What can you do?

As a property manager you should insist on being provided a certificate of insurance from your clients. The certificate should specifically name the property management/real estate agency as an additional named insured and as a certificate holder.  The certificate will not only protect you in the event they do not have insurance, but also should provide for you to be notified if the property owner cancels the coverage. Additionally, the property manager should put in place a procedure for getting updated certificates of insurance each year as certificates expire and property owners change polices.