E&O Insurance FAQ - Mortgage Brokering Industry

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  1. Does a mortgage brokerage require errors and omissions insurance?
  2.  
  3. Where does it say that a mortgage brokerage must have errors and omissions insurance?
  4.  
  5. Do mortgage agents and brokers require separate errors and omissions insurance from their mortgage brokerage?
  6.  
  7. My mortgage brokerage also holds a mortgage administrator licence. Do I need two errors and omissions insurance policies?
  8.  
  9. I already have errors and omissions insurance under another licence/registration that I hold. Will this insurance cover me for mortgage brokering?
  10.  
  11. Why does FSCO impose administrative monetary penalties?
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  13. My mortgage brokerage is currently not conducting mortgage business. Why is errors and omissions insurance necessary?
  14.  
  15. Does FSCO post information on its enforcement activities online?

 
 
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1. Does a mortgage brokerage require errors and omissions insurance?

 
Yes. Each mortgage brokerage requires errors and omissions (E&O) insurance with extended coverage for fraudulent acts. By law, the E&O insurance must provide a minimum of $500,000 coverage in respect of any one occurrence and $1 million in respect of all occurrences in a given year, involving the brokerage and any mortgage broker or agent authorized to deal or trade in mortgages on its behalf. If the brokerage is also applying for an administrator licence, the administrator must also have E&O insurance in the amounts noted above to separately cover losses involving administrator activities.
 
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2. Where does it say that a mortgage brokerage must have errors and omissions insurance?

 
Subsection 7(4) of the Mortgage Brokerages, Lenders and Administrators Act, 2006 [New Window] (MBLAA), together with section 42 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice [New Window], establish the requirement for licensed mortgage brokerages to have errors and omissions insurance with extended coverage for fraudulent acts.
 
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3. Do mortgage agents and brokers require separate errors and omissions insurance from their mortgage brokerage?

 
No. Mortgage agents and brokers do not require separate E&O insurance from their mortgage brokerage, as they are covered under the mortgage brokerage's errors and omissions insurance policy.
 
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4. My mortgage brokerage also holds a mortgage administrator licence. Do I need two errors and omissions insurance policies?

 
Businesses that are dually licensed as both a mortgage brokerage and administrator have the flexibility of choosing either one of the following options in arranging their E&O insurance coverage:
 
a) Obtain separate E&O insurance policies for their mortgage brokerage and administrator activities. Each policy must provide coverage of at least $500,000 in respect of any one occurrence and $1 million in respect of all occurrences in a given year.
 
OR
 
b) Obtain one E&O insurance policy that covers business activities of both the mortgage brokerage and administrator. This policy must provide coverage of at least $1 million in respect of any one occurrence and $2 million in respect of all occurrences in a given year. The combined policy may, but is not required, to allocate these limits between the mortgage brokerage and administrator. If there is no separation of limits between the two types of business, the total amount of coverage may be available to pay claims as needed, regardless of whether they arise from the brokerage's or administrator's activities.
 
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5. I already have errors and omissions insurance under another licence/registration that I hold. Will this insurance cover me for mortgage brokering?

 
No. Your errors and omissions insurance policy must be with an approved insurer that covers mortgage brokering activities. See FSCO's list of insurance providers.
 
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6. Why does FSCO impose administrative monetary penalties?

 
An administrative monetary penalty may be imposed under section 39 of the Mortgage Brokerages, Lenders and Administrators Act, 2006 [New Window] (MBLAA), and in accordance with Ontario Regulation 192/08, in order to:
 
  • promote compliance with the requirements under the MBLAA; and
  • prevent a person or entity from deriving - either directly or indirectly - any economic benefit as a result of contravening or failing to comply with a requirement established under the MBLAA. 

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7. My mortgage brokerage is currently not conducting mortgage business. Why is errors and omissions insurance necessary?

 
This requirement applies to all licensed mortgage brokerages and is not dependent on whether or not your mortgage brokerage is conducting mortgage business. Having errors and omissions insurance is a condition of having a mortgage brokerage licence, effect on July 1, 2008.
 
Subsection 7(4) of the Mortgage Brokerages, Lenders and Administrators Act, 2006 [New Window] (MBLAA), together with section 42 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice [New Window], requires licensed mortgage brokerages to have errors and omissions insurance with extended coverage for fraudulent acts, as a condition of holding a licence.
 
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8. Does FSCO post information on its enforcement activities online?

 
Yes. Enforcement Online provides information on FSCO's prosecution activities, the decisions arising out of the hearings conducted by the Financial Services Tribunal, and other regulatory activities that help ensure consumer confidence in the financial services sectors that FSCO regulates.
 
If a mortgage brokerage has its licence suspended, FSCO will also update the information on Licensing Link – FSCO's online registry of licensed mortgage brokerages. Licensing Link should always be checked for current information.
 

 
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