Product insures executors against claims for damages as a result of errors made during the administration of an estate

By IE Staff |

A new insurance product for executors aims to provide protection and peace of mind as they face a greater risk of litigation and personal liability than ever before.

Serving as the executor of an estate is a challenging responsibility that many advisors and clients are asked to fulfill, for which they are personally liable and have no personal insurance protection.

Kitchener, Ont.-based Estate Risk Protection Plan Inc. says its ERAssure Executor Errors and Omissions Insurance protects executors and estate trustees from personal liability incurred in the process of estate administration.

This insurance is exclusively available with the counsel of a lawyer for the estate. It is available nationally, excluding Quebec, with plans to expand in the future.

Premium costs depend on the estimated value and complexity of the estate and amount of coverage, but are “inexpensive” for the three-year coverage period, the firm says.

“Our ERAssure products respond to the convergence of a growing number of economic and social factors that create a perfect storm of risk for estate executors,” says Scot Dalton, CEO, adding that second marriages and blended families can create antagonistic relationships among beneficiaries with the executor.

“Added to that, society in general is more litigious today than in past. Individuals no longer look at a lawsuit as a dispute resolution of last resort,” Dalton says.

Conflicts with beneficiaries generally involve errors – or the perception of errors – in any or all of the following areas in the administration of an estate:

> Favoritism
Preferential or prejudicial treatment of certain beneficiaries resulting in a loss of entitlement by another beneficiary.

Loss of money or value:
Timing issues related to the sale of real property or various types of financial instruments that results in diminished value of the asset.

Conflict of interest:
Allegation of conflict of interest on the part of the executor whether or not the executor is also a beneficiary.

Error in value:
Failure to valuate or improper valuation of assets.

Individuals can provide protection for their executors by specifying executor insurance in their will. Newly appointed executors can obtain insurance provided the estate is represented by legal counsel, and for a limited time only, executors of estates that have been open and active for longer than the standard 60-day eligibility period following creation of the estate are also eligible for coverage.

While the policy directly protects the executor, says Dalton, it also protects the estate, “since, in the absence of insurance, the assets of the estate may need to be liquidated in whole or in part to fund litigation arising out of estate administration.”