Welcome to RGIB's Estate Executor Insurance
Estate Trustee Errors and Omissions Liability Insurance
RGIB Insurance Broking is proud to facilitate the first errors and omissions insurance cover available for Estate Executors in Australia.
Protection for a complex role
An Estate Executor has many important responsibilities to ensure the smooth transition of the estate in accordance with the wishes of the deceased, the ‘testator’.
It’s an important role – and one that can be challenging.
Naturally, the disposition of an estate is a highly stressful and emotional time for everyone involved, especially when considerations of money and family relationships factor in.
Sometimes, despite the best intentions and efforts of the estate executor, the expectations of the beneficiaries are not – or, possibly, cannot be – met.
That can put an estate executor in a difficult situation; it could even mean legal action from a beneficiary or a creditor which could expose the executor’s own family’s assets to potentially large and expensive claims for something he or she may, or may not have, done.
While in some cases defense costs can be paid out of the estate, that is not always possible and certainly not after the estate is distributed – basically, the executor’s on their own by that point.
That’s why RGIB’s estate trustee errors and omissions insurance makes good sense, it can protect both the estate and estate executors from liability and defense costs.
What does Executor liability insurance cover?
The insurance is an ‘errors and omissions’ cover which is quiet common in the commercial world; often called malpractice insurance and favoured by the professional community who provide professional services but, not financial advice such as the medical professional and architects.
While an executor’s duties will most likely not include providing professional services in the commercial sense, the fact is that the executor will be making financial decisions on behalf of others which may include the selling of property and investment/divestment of other assets.
For example, it could be argued that, an executor selling shares owned by the estate on a ‘down day’, could have been negligent in not waiting to another time when the market had risen; of course the counter argument of waiting too long and the market going down further is also available to an aggrieved party.
Thus, the executor’s decisions, even if based on sound legal and financial advice could expose themselves to a claim for loss of asset value and distribution value for the beneficiaries and/or creditors of the estate.
The cover’s key commitment clause is as follows;
To pay on behalf of the INSURED(S) all sums which the INSURED(S) shall become legally obligated to pay as DAMAGES arising out of a CLAIM, provided the liability of the INSURED(S) is the result of an error, omission or negligent act in the performance of, or the failure to perform, by an INSURED, the DUTIES OF THE ESTATE EXECUTOR related to ESTATE of the DECEDENT.
When you take out executor liability insurance, you are insuring for your personal liability and defense costs should you face litigation regarding many of the decisions you make in the course of administering the estate; which concurrently exposes the estate to potential legal expense.
Typical claims for damages that can arise out of the activities of estate executors include:
- Preferential or prejudicial treatment of certain beneficiaries resulting in loss of entitlement by other beneficiaries
- Timing issues related to the sale of real property or financial instruments that potentially result in diminished value of the asset
- Conflicts of interest, whether the estate trustee is a beneficiary or not
- Improper valuation or failing to value assets prior to sale or distribution resulting in allegations of diminished value
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.
Terms & limitations of this Estate Executor coverage
Just like any insurance product there are terms, limitations and exclusions that apply to the cover which could if not properly understood render the cover void in certain circumstances; that’s why it this estate executor insurance product can only be purchased in conjunction with a solicitor acting for the estate – because getting it right is fundamental to the effect of the cover.
Estates often take a longer period of time to fully administer than initially expected, especially where there are disputing parties involved and/or where assets of the estate can not be realized as quickly as the testator had willed thus, this estate executor insurance product has a standard operative period of 24 months from the time of death. [subject to the circumstances of when the cover was applied for and at what point the administration of the estate is at]
It’s not like taking out car insurance over the phone, that’s why an executor can’t purchase a policy directly; instead, law firms have to register with RGIB and then apply for coverage for their executor client.
The executor estate insurance policy’s underwriter in-turn waives any right to subrogation against the estate solicitor, provided that the solicitor wasn’t involved in fraud or disciplined by the law society in relation to the matter and cooperates in the investigation of the claim.
Depending on the nature and complexity of the estate, and the number of executors & trustees involved will dictate the particular level of insurance cover available. If you would like to obtain a copy of the standard policy wording please contact us by clicking on this link. Sample Estate Executor Policy
Some of the insurance cover’s exclusion highlights
- Claims arising out of the estate trustee providing professional services for a fee and/or other type compensation (including mortgage brokers, insurance brokers or agents, financial advisors, solicitors or public accountants) to the estate, concurrent with being an estate executor.
- Tax liabilities are not covered by the policy. Amounts due as tax owed in any respect are obligated to be paid out of the proceeds of the estate.
- Failure to arrange and maintain direct damage and third party liability insurance on the estate assets is not covered by the policy.
- Fraud, dishonesty and malicious acts or activities are excluded from coverage under the policy.
- Actions brought solely to remove the trustee are not covered.
What does Executor Estate Liability Insurance cost?
Because the cover extends to indemnity the estate as the first insured party inclusive of beneficiaries, where legal costs are incurred, premiums can usually be paid out of the estate’s assets; but, this is not always the case.
The amount of premium required depends on the estimated value of the estate and amount and complexity of the coverage. For instance, a typical non-complex estate valued at less than $1 million, the approximate cost would be $1,700 plus, statutory charges.
However, while underwriters typically have premium rating guides there can be substantial variables in premium charges from one estate executor to another; always depending on the complexity of the estate and will decrees.
It costs nothing to obtain a quote and is an obligation free process however, a solicitor may charge an executor a fee for their specific services provided in arranging the insurance cover. However, in most circumstances, where the process of taking out this insurance is simplistic and standard, your solicitor may not charge you a fee at all; but, receiving a referral fee from equivalent to 20% of the premium cost.
Talk to your solicitor for more information about executor estate liability insurance.
More about RGIB’s Estate Executor Insurance
RGIB’s Executor Liability insurance is arranged by Rural & General Insurance Broking Pty Ltd which is an Australian licenced and authorised insurance brokerage. At this time, RGIB’s executor estate liability insurance is only available from Global Best Insurance Limited which is a overseas insurance company licenced and regulated in The Republic of Vanuatu.
Global Best Insurance Limited is not an Australian licenced insurance underwriting company however, under the laws of Australia there are certain circumstances in which its insurance products can be provided to Australian residents. Executor estate liability insurance is one of them as the cover is not at this time otherwise readily available from an Australian licenced insurance company. To learn more about Global Best Insurance Limited click here
RGIB Insurance Broking is proud to facilitate the first errors and omissions insurance cover available for Estate Executors in Australia. The cover can indemnify the estate and beneficiaries for legal costs incurred, and premiums can usually be paid out of the estate's assets; but, this is not always the case. Quotes are free with no obligation. RGIB's Executor Liability insurance is arranged by Rural & General Insurance Broking Pty Ltd which is an Australian licenced and authorised insurance brokerage.