Dispelling Myths about Errors & Omissions Insurance March 31, 2022 / Notary Association of America
As you know, notaries are human and can make mistakes. Unfortunately, those mistakes can sometimes result in the loss of the savings in your bank. Errors and Omissions (E&O) insurance can give you peace of mind by covering any inconsistencies or oversights that could occur during the notarization process, as well as even protect you from any false claims made against your bond.
However, there are a few misconceptions as to how E&O insurance works for notaries. When deciding on coverage for your notarial business, consider the following:
Myth #1: E&O insurance covers cases of fraud.
E&O insurance does not cover any intentional mistakes on your part or fraudulent activity. However, if a client files a claim against you for a mistake you made during notarization, your insurance will support your legal defense and pay any damages caused by the error. For example, if you notarized a power-of-attorney document for someone who is later found to be negligent or incompetent in handling their responsibilities, you would be covered by E&O insurance; while this person did not claim a false identity, their negligence can still have financial and emotional consequences for those affected by your authorization.
Myth #2: If you buy a surety bond, you don’t need E&O insurance.
A surety bond protects your clients—not you as their notary—and is often required by state law. If you make an error that affects your clients, the clients may make a claim against your surety bond. However, you will need to reimburse the bond company for that claim and endure steep consequences, including court fees, a legal defense, and any damages paid to the suing party. Therefore, E&O insurance is good to have as protection for yourself to recover any financial losses from a claim.
Myth #3: There is only one type of E&O insurance.
There are three main levels of E&O insurance based on your needs. Regular (up to $100,000 in coverage) and high-limit (up to $2 million in coverage) E&O insurance are common for notaries who do not have a contract with a company. These two types of E&O insurance are considered traditional and only cover mistakes you made in the notarization itself.
If you are contractor who is hired to perform notarization for high-risk documents, such as loans, you may be required to have signing agent E&O insurance. Signing agent E&O insurance provides a bit more coverage for notaries, including:
- incorrect dates,
- completing or submitting notarizations past the deadline,
- missed notarization on signatures,
- missing initials, and
- incorrect changes.
Myth #4: E&O insurance will always cover you, even after you have retired.
If you have an occurrence-based policy, you will be covered for any mistakes that occur within your period of insurance coverage; this coverage lasts after your policy has expired. However, if you or your employer chooses claims-based E&O insurance, you will not be covered after the end of the policy term—even if the mistake happened when the policy was still active. It is therefore important to research your E&O insurance policy’s terms and conditions and apply for extended coverage as needed should you leave the business.