Errors and omissions insurance for abstractors is very expensive, at least in relation to the depressed fees that are prevalent in the industry.  Unfortunately, working without it is not an option for many abstractors.  Some states require abstractors to carry E&O insurance, and even if the state does not, many clients do.  Beyond that, it is rather foolish to incur the amount of potential liability that we do without some form of protection.

Recently, I was informed of an abstractor that crossed the line from foolish to criminal.  As ill-advised as it is to operate without E&O insurance, it is far worse to represent to clients that you have coverage when you don't.  Especially when in the process you forge a declarations page and pass it off as your own.  Issuing false certificates or proofs of insurance is insurance fraud.

An abstractor in Kentucky apparently contacted another abstractor in Illinois and told her that she had a couple of orders for her, but first she needed a copy of her E&O insurance.  Like most of us would, the Illinois abstractor sent a copy of her declarations page to the Kentucky abstractor.  The orders never materialized.

At some point, the Kentucky abstractor was asked for proof of insurance by one of their clients, a Vendor Management Company (VMC) in Kentucky.  She sent a copy of a declarations page that showed a different company as the insured and when the VMC inquired about the apparent discrepancy, she told them that she was covered under this named insured's policy.  The VMC contacted the named insured and was told that this was not the case.  When confronted, the Kentucky abstractor said that she had sent the wrong certificate by mistake and promptly sent a new declarations page.

Though the new declarations page showed the correct information, the diligent VMC contacted the agent who purportedly issued the policy to verify the coverage.  The agent found no record of issuing insurance to the Kentucky abstractor.  After an investigation, the agent discovered that it had only issued one policy that matched the limit of liability and expiration date shown on the declarations page and it was issued to the Illinois abstractor.  Upon speaking with the Illinois abstractor, the agent found out that the Kentucky abstractor had requested her declarations page under the guise of sending her work. 

It soon became apparent that the Kentucky abstractor had cut and pasted her company name onto the declarations page as the named insured, and that she changed the policy number to attempt to hide their forgery. 

The agent has reported the fraud to the Kentucky Department of Insurance.  Until some official action is taken, I won't mention any names.  However, I think this is an important warning for clients who routinely require proof of E&O insurance.  When there is any doubt about the authenticity, it would be wise to verify the coverage with the issuing agent.

Nobody knows how many other clients have received bogus declarations pages from this Kentucky abstractor... or how many other abstractors may have purpetrated a similar scheme in an attempt to avoid paying for E&O insurance.  Let this serve as a warning to everyone how easy it is forge proofs of insurance... and how easy it is to get caught.  Make no mistake about it - this is insurance fraud!

There is no evidence here that any claim has been filed on the abstractor's work. However, a claim can surface at any time.  What a mess that would be.  There would be no coverage on the forged E&O policy and the abstractor would most likely be personally liable for the claim.  Unfortunately, that will be of little help to the client who was duped - an abstractor who couldn't afford to pay for their own E&O policy won't likely have any assets to pay restitution. 

Personally, I hope the Kentucky Department of Insurance takes this matter very seriously and seeks to prosecute the Kentucky abstractor for insurance fraud. 

Robert A. Franco
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