Mortgage Errors and Omissions Insurance - FAQs

  1. Where does it say that all Alberta mortgage brokerages need errors and omissions insurance? The errors and omissions insurance requirements for Alberta mortgage brokerages are found in sections 117 and 118 of the Real Estate Act Rules. Click here to read them.
  2. What kind of coverage do I need for my brokerage? You need to obtain errors and omissions insurance, with additional coverage for fraudulent acts. The specifics of each brokerage’s policy will vary, but in all cases, at a minimum, the RECA Errors and Omissions Insurance Guidelines must be met. Coverage levels may vary as well, but it must be sufficient to pay a minimum of $500,000 in respect of any one occurrence involving an insured and $1,000,000 in respect of all occurrences during a 365 day period involving the insured brokerage for both errors and omissions and fraud.
  3. What is meant by the "insured"? In the RECA Errors and Omissions Insurance Guidelines for mortgage brokerages, “insured” refers to the mortgage brokerage, and is meant to include licensed brokers and associates who the brokerage authorizes to deal in mortgages on the brokerage’s behalf, employees, and former industry members and former employees.
  4. What activities does the policy cover? The policy covers an insured Alberta licensed mortgage brokerage/broker for all acts arising from the business of a mortgage broker and dealing in mortgages as defined under the Real Estate Act of Alberta.
  5. What does the policy cover? The policy covers all claims, subject to standard exclusions, made during the term of the policy for acts occurring at any previous time, providing the insured had no previous knowledge.
  6. Do mortgage associates and brokers require errors and omissions insurance separate from their mortgage brokerage? No. Mortgage associates and brokers do not require errors and omissions insurance separate from their mortgage brokerage, as they are covered under the mortgage brokerage's policy.
  7. Are the insurance premiums the same for each brokerage? No. Each brokerage’s insurance premiums are based on the risk assessment for each brokerage and are set by the insurer(s).
  8. My insurer has notified me that it will not be renewing my policy. I have not been able to secure insurance from new insurer. What happens if I find out about a claim at a later time for an incident that occurred when I was insured? An automatic minimum 12-month extended reporting period (ERP) will be provided if the insurer cancels or refuses to renew the policy. If an ERP is triggered, however, it will be provided at no extra charge to the named insured.
  9. My insurer has notified me that it will not be renewing my policy. I have secured insurance from a new insurer. Am I covered under my current insurer’s policy for claims that come forward during my current policy for activities that occurred during the time of the previous policy? Yes you are covered by your current policy, as long as your brokerage had no previous knowledge with respect to those claims. Additionally, as long as the brokerage has entered into a policy with a new insurance provider, the original insurer is relieved of any obligation to provide an ERP.
  10. I am closing my brokerage. Do I have errors and omissions insurance after I close my brokerage for the activities of the brokerage during the policy period? An automatic minimum extended reporting period (ERP) of 60 days will be provided if you cancel or do not renew and do not replace the policy with another. It is recommended that you purchase extended reporting period coverage from your insurer for the period after you have closed your brokerage. The lower premiums for this coverage are as a result of the brokerage no longer being active.
  11. I just found out about a claim from an incident that occurred 12 months ago, before I had an E&O insurance policy with my insurer, now what? According to the RECA Guidelines agreed to by your current insurer, your current policy covers all claims, subject to standard exclusions, made during the term of the policy for acts occurring at any previous time, providing you, as the insured, had no prior knowledge. Your policy does not impose a retroactive date exclusion.
  12. What is the minimum coverage needed? The insurance coverage must be sufficient to pay a minimum of $500,000 in respect of any one occurrence involving an insured and $1,000,000 in respect of all occurrences during a 365 day period involving the insured brokerage.
  13. I’m the broker; do I have to tell my insurer if I think a claim is going to be filed but the individual has not filed yet? As the broker, you are responsible for notifying the insurer of every incident that might lead to a claim during the term of the policy.
  14. I’m a mortgage associate and I have reason to believe one of my past clients is going to file a claim against me. Is this something I have to tell someone? You are responsible for notifying your broker of the potential claim, and your broker will notify the brokerage’s insurer.
  15. An individual has filed a claim against my brokerage, but his allegations are without merit. What do I have to do? Your insurer will undertake to provide a defence for all claims covered by your policy, including groundless allegations.
  16. I’m a mortgage broker and a real estate broker and I have errors and omissions insurance for my real estate brokerage through the Real Estate Insurance Exchange program (REIX), does this insurance cover my mortgage brokerage? No. Your REIX errors and omissions insurance policy only covers you for your trades in real estate. You must obtain insurance coverage for your deals in mortgages through a RECA approved insurer that covers mortgage brokering activities.
  17. My mortgage brokerage is currently not conducting mortgage business. Why is errors and omissions insurance necessary? This is a licensing requirement that went into effect on September 1, 2011. This requirement applies to all licensed mortgage brokerages and is not dependent on whether or not your mortgage brokerage is conducting mortgage business. Having errors and omissions insurance is a condition of having a mortgage brokerage licence.

 

home