Why can't I get Errors and Omissions Insurance Coverages?

Question

I am about to read through and sign hundreds of documents to secure loans and purchase real eastate properties, which includes existing and proposed buildings, but I keep getting turned down for Errors and Omission's Insurance coverages. I have lots of money to invest, but am turned down for these protecive coverages, which makes me pull my offers off the tables. Why can't I get this error and omissions coverage?

Answer 1

**Sorry for the extreme length here.  I've lost people, I'm sure.  Bottom line:  E&O never pays the named insured.  It protects the named insured against lawsuits from third parties.  You're looking for FIRST party coverage.  **

Which type, exactly, are you trying to buy?  Typically, buying property via loans isn't an E&O exposure.  E&O is basically professional liability - like medical malpractice, Architects & Engineer's malpractice, etc.   Or are you asking them to invent a new kind of coverage?   If the standard Real Estate Professional Liability (E&O) isn't what you're looking for (it protects you, if you fill out a contract for either  a buyer or a seller incorrectly, and they sue you over the transaction), you'll have to explain exactly what you want.

Go talk to your broker.  Your broker should be explaining this to you.  If this is an already existing policy type, they should be telling you WHY you can't buy it.    If this is something YOU are making up, well, exactly what you want hasn't been invented yet.    In either case, no one here knows the answer.

**Mortgage fraud and property claims aren't errors and ommissions coverage.  That's what your problem is.  For the mortgage fraud, you basically need a mortgage protection policy; and forgery & alterations coverage.  Those are PROPERTY coverages.   You'll also need PROPERTY coverage, on a commercial property policy.   That's not errors and ommissions, either.   E&O doesn't cover YOUR fraudulent loan - it doesn't cover YOUR dishonest act.  Likewise, E&O doesn't cover your failure to purchase insurance.  Not even if you're one of the big guys - the banks do NOT have coverage, for "oops, I forgot to insure that location".   What they have is called MORTGAGE PROTECTION, for loans they hold, if the property owners let their insurance cancel for nonpayment.  It costs about 10X as much as the real property insurance would, AND, it only covers up to the loan amount (it only pays the bank).  PLUS, it requires a monthly reporting form, and is audited for additional premiums MONTHLY.

You're asking for an insurance company to cover things, without you buying the proper policies.  They won't do that.  You have to buy the PROPER policies.**

** and no fair for you, to call a property defective, because of a total loss.  That's not what defective means.  With investments, comes risk.  The greater the risk, the greater the return.  You can't insure your stock market purchases for a downturn on the market.  The real world doesn't work that way.

And if you're wrong, and think that it's a great insurance product, well, YOU can develop it, figure the rates, and sell it, and see how hard it is to make money, guarateeing that investors won't lose any.

Answer 2

Who are you trying to indemnify with the coverage?  You'll need to give more information.

If you're trying to protect yourself with a policy, then you have your answer: You can't purchase insurance to protect yourself from yourself. E & O is only available to businesses that produce documents for paying clients and meet insurer guildlines.

Answer 3

You can't purchase a policy for faulty workmanship which is what it sounds like you are looking for.  The only thing close may be a home warrantee but there are still exclusions involved.  You may want to be sure that all the people you are dealing with have their OWN E&O insurance to cover the things they do or don't do that causes you monetary damage.  Get certificates of E&O insurance for everyone involved.  If you can get it from them, then deal with them.  Another option you may want to try is to find the OLDEST yellow page book you can find, the older the better & look for the people you are dealing with in the phone book.  If they were listed in the phone book 20 yrs ago, they are probably quite reputable, if they weren't they wouldn't still be in business.

E&O coverage is a professional liability coverage that architects & realtors have to protect themselves against lawsuits arising from something they do or fail to do that causes a 3rd party damages, it could be monetary damage, property damage or bodily injury.

Answer 4

Eggster, The insurance policy you want does not exist. You want a policy that protects you from the risk of loss when you make an investment. The purpose of your signing hundreds of documents to secure loans and purchase real estate in Florida (or other hurricane prone areas) is to acknowledge to all of the concerned parties to the transaction that you have done the necessary due diligence and are knowingly willing to take the risk. If you guess right the rewards are yours. If you guess wrong there is no policy to protect you from market risk.