Combining Lawyer and Title Agent Policies on Behalf of a Closing Attorney: by Andrew J. Kelly, RPLU
The closing attorney exposure is one that is normally misunderstood throughout the insurance industry. It is a risk that should be treated carefully so that the exposure is covered properly in the event of a claim. Understanding the risk properly begins with assumption that a closing attorney can potentially provide multiple services to their clients for the same transaction. First and foremost, providing the legal services that function to close the real estate transaction is the principal exposure of any closing attorney. In addition to legal services, however, a closing attorney can also act as a title insurance agent, escrow agent, or abstractor on behalf of their clients.
A closing attorney has a unique professional liability exposure that is normally dealt with by procuring two professional liability insurance policies. There are insurance carriers that will consider underwriting an exposure for a lawyer, but will not be interested in title agents, abstractors, or escrow agents for a variety of reasons. Many closing attorneys are not aware of the fact that by providing multiple sets of services to their clients they are in fact opening their practice up to a potential unknown exposure. The area of concern arises in the event of what is traditionally known as a “grey area” claim. Most dedicated lawyer’s professional liability policies have absolute exclusions in them that will exclude any claim that is connected to or arising out of any title, abstracting, or escrow work. As a corollary, most policies that specialize in the title agent industry will also have a similar exclusion for any services provided by a lawyer for a fee.
The issue arises, in my experience, if a claim is brought against an insured where the policy holder is being pursued for damages as a lawyer and title professional. Potential problems can (and often do arise) when the title and lawyer insurance companies are unware of each other, are not comfortable with the dual services being provided, and also have the aforementioned absolute exclusions attached to both policies. Legal disputes, coverage denials, and potential policy cancellations are all potential consequences when this exposure is not accounted for and handled in each policy’s wording.
In my handling of the class this past year, I have come across an insurance company that has the ability to consolidate the lawyer and title insurance agent’s exposure into one policy. Maintaining the prior acts of both policies can be done via endorsement. Additional endorsements for independent contractors and defense in addition to the limit are also available. The key issue with consolidating both policies into one form is one of practicality. Instead of submitting a claim to two carriers, the claim is now only sent to one insurance company that covers both exposures. This eliminates the possibility of a grey area claim and can also even lead to a premium savings in many circumstances.
Every closing attorney will not be able to consolidate their policy as mentioned above, but it is always worth asking the question to see if the consolidated coverage is available, whether it makes sense for the applicant, and under what conditions it should be procured for the best interest of the insured.
Andrew J.Kelly, RPLU
Vice President
Alexander J. Wayne & Associates, Inc.
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