Generally speaking you need to both incorporate/form an LLC and carry adequate e&o insurance the corporate shield and the insurance protect you against different liabilities to which a title abstractor is exposed. Most e&o insurance policies protect you against claims for negligence but not against contract breach or intentional torts.

Honest mistakes made by a title abstractor will probably be covered by their insurance policy, and claims should be submitted to the insurance company immediately. However, when the title abstractor accepts a search order from a client he/she enters into a contract with the client. If the abstractor misses something in the search the client can sue the abstractor for negligence or in the alternative for contract breach. This is very often an option used when the statute of limitations has run out on a negligence claim. Contract breach statutes of limitations are usually longer. While the e&o insurance may not protect the abstractor against contract breach claims the corporate shield will protect him/her if he/she has observed all the proper formalities with respect to executing and performing the contract. The same is true for LLC's. As such his/her personal assets are not at risk. Only the corporate assets are subject to the claim. The corporate shield is a very well thought out defense with several centuries of English common law to back it up. The purpose of the corporation (and more recently the LLC) is to limit liability. The nomenclature "Inc." after the corporate name is supposted to give notice to clients that they are dealing with an entity that has a limited liability.

In many states such as Connecticut neither the insurance nor the corporate shield will protect an individual who involves himself in intentional torts. If the individual is an employee of the abstractor, both the abstractor and the emploee could be sued. The abstractor's liability would be based on a vicarious liability for the conduct of his employee. The employee could be sued as a co-defendant because his tortious conduct has exceded the scope of his employment. If the individual engaging in the intentional tort is a corporate officer or director, Connecticut law provides that he is liable for his/her tortious conduct regardless of whether he acted in his personal capacity or in his representative capacity for the corporation

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