Worried About Being an Executor? Then Buy Insurance!

I recently came across the website for ERAssure, an Ontario-based company which bills itself as the “only errors and omissions insurance available for estate trustees.”  The purpose of the insurance is to insure executors from personal liability and legal fees that might arise as a result of their negligent administration of an estate.

The coverage territory in Canada and the insurance will cover estates with a value of up to $5 million.  The premiums for the policy will depend on the size of the estate and the extent of the coverage.  While the policy will cover most negligent acts by an executor, there are limits – fraudulent, dishonest, and malicious acts are excluded from coverage. 

The policy is available for estates with more than one executor.  However, it must cover all of them – and it will not cover cross-claims between executors.  

It’s notable that an executor can’t purchase a policy directly.  Instead, law firms have to register with ERAssure and then apply for coverage for an executor client.  However, the website specifies that the company waives any right to subrogation against the estate solicitor, provided that the lawyer wasn’t involved in fraud or disciplined by the law society in relation to the matter and cooperates in the investigation of the claim.  I would be interested to know many lawyers have registered with this service.

I noticed that in a couple of places on the ERAssure website, it says that executors can usually pay for a policy of this nature from the estate assets. Personally, I would warn an executor against doing that.  Given the purpose of the policy is to insure the executor from personal liability for negligence, I think it would be difficult to justify why it is properly an expense of the estate. 

Comments (1)

Read through and enter the discussion by using the form at the end
Jennifer Moss - May 18, 2011 5:03 PM

The question of who benefits under the terms of an estate trustee insurance policy is an interesting one.

The trustee is afforded primary coverage subject to the policy terms but the estate, too, is beneficially protected along with the trustee since estate assets may be used to pay legal expenses and other costs on behalf of the trustee(s) unless insurance is available.

Like many estate expenses, it may ultimately be decided during the passing of accounts whether the payment of a premium is an appropriate expense of the estate, a matter of trustee compensation, or a combination of both.