As banks and other lending institutions grow and evolve in the digital age, more and more services are offered in order to keep pace in a fiercely competitive industry. Such diversification is good for business but carries along with it an unexpected byproduct–a heightened exposure to risks.
Like any other professional institution offering advice or services, banks can be the subject of litigation when customers feel a mistake leads to a financial loss. It is for this reason that all lending institutions should carry bankers professional liability insurance, also known as errors and omissions insurance (E&O).
Everyone makes mistakes, and the employees of banks are not immune. No matter how many safeguards are in place, an error or oversight may occur. Below are some of the more common claims of liability incurred by financial institutions:
- Typographical errors regarding deposits
- Inadequate counseling of prospective borrowers
- Inaccurate Truth in Lending Act disclosures
- Disputes concerning mortgage brokers/originators
- Rate lock-in disputes
- Wrongful eviction and foreclosure
Professional services covered by a bankers professional liability insurance policy include all parts of the loan process–from counseling to closing to warehousing to foreclosure. E&O insurance provides coverage of legal fees and payment of any settlement, up to the limits of the policy.
Bankers professional liability insurance can be purchased as a stand-alone policy or as an endorsement to a directors and officers policy. Coverage includes all employees of the financial institution and can be customized to fit specific coverage needs.