Friday, December 7, 2007

Colorado Requires Errors and Omissions Insurance

Colorado has adopted a rule, effective November 13,2007, to require that all mortgage brokers maintain errors and omissions insurance in an amount not less than $100,000 per licensed individual for each covered claim and an aggregate of not less than $300,000 per licensed individual. The deductible on the insurance cannot be more than $5,000.

I have stated before that each mortgage company should carry errors and omissions insurance. Even if you are the sole employee of your company, you may not even realize that the statements that you make to a customer or the actions you take might in the future lead to a lawsuit. This is true even if you have done nothing wrong. The coverage will pay for your legal costs as well as any possible settlement or judgment (if the settlement is negotiated by and agreed to by your insurance carrier).

Mistakes happen. And you can’t be everywhere, watching what your employees do and say to every customer. Errors and omissions insurance covers your mistakes and the mistakes of your employees and independent contractors.

Even if you are not licensed in Colorado, it’s a good business practice to have errors and omissions insurance in place now. Talk to your insurance broker to get this done. You can’t afford to be without it. Currently, Ameriquest is a defendant in a lawsuit that alleges that it falsified borrower documents to get approval of the loans. Various mortgage brokers are being brought in by Ameriquest as defendants, claiming that the mortgage brokers provided the falsified documents. Attorneys typically ask for a $5,000 retainer to take the case. Do you have thousands of dollars to defend yourself in a lawsuit, even if you are ultimately successful? If not, get the insurance.

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