Read the
following Case Study, then answer the following multiple choice questions in
the Comments Section Below.
Annalise has gone through all the proper steps to obtain
her mortgage license in Colorado. She is
very excited to get to work and is even more thrilled when she gets a call from
an acquaintance, Frank, who has started his very own brand new mortgage company
“Absolute Mortgage”. Frank assures
Annalise that he has taken all of the proper steps to get the company up and
running and now just needs some go-getters to help start bringing in the money. The first week on the new job Annalise is
approached by Bonnie. Bonnie is trying
to get a second mortgage on her home to pay off credit card debt. Annalise was thrilled to have a client and
worked very hard, even stretching the limits by begging her underwriter to make
an exception on Bonnies high debt ratio because she really needed the
loan. After much hard work, Annalise is
able to close Bonnie’s loan. Months
later, Frank tells Annalise that he made a mistake and had initially forgotten
to cover the business with E & O Insurance, but fortunately this would no
longer be a problem because he just obtained a policy for coverage of
$1,000,000 per covered claim with an annual aggregate limit of $1,000,000 for
their entire office of 30 people.
Problem solved!
A little over a year later Annalise receives a letter that
she is being sued by Bonnie. You see,
Bonnie had fallen back into debt and could not pay her first or second
mortgage. She sought the advice of a
credit counselor who advised her that Annalise acted in bad faith because she
should have known that Bonnie wouldn’t be able to repay the loan. Annalise takes the letter to Frank and
explains the situation. Frank tells her
not to worry too much because this is what E & O Insurance is for. After the judge reviews Bonnie’s case he
awards her $27,000 plus legal damages to be paid by Absolute Mortgage. There are a few questions to be asked here.
1. Were
there any problems with the E & O policy that Frank got for Absolute
Mortgage?
A. Yes,
the policy of coverage he chose only covers offices of 20 people or less
B. No,
the policy of coverage he chose is exactly what an office of 30 people needs
C. Yes,
the policy of coverage he chose only covers offices of 30 people or less
D. None
of the above
2. Why is
Annalise/Absolute Mortgage liable for paying damages to Bonnie?
A. She
isn’t liable and isn’t legally required to pay damages to Bonnie
B. Absolute
Mortgage and Annalise were not covered by E & O insurance at the time of
the event
C. Annalise
isn’t liable, in fact she could sue Bonnie for slander
D. None
of the above
3. What
could have Frank done to prevent this from happening when he applied for E
& O Insurance?
A. There
isn’t anything Frank could have done differently
B. Frank
could have told Annalise to tell Bonnie that they weren’t required to carry E
& O Insurance
C. Frank
could have retroactively set the date of their policy to cover them at the time
the mortgage company opened
D. None
of the Above
4. What
type of coverage should Absolute Mortgage have?
A. Covered
claim with an annual aggregate limit of not less $2,000,000, with a deductible
no greater than $100,000.
B. Covered
claim with an annual aggregate limit of not less $1,000,000, with a deductible
no greater than $75,000.
C. Covered
claim with an annual aggregate limit of not less $500,000, with a deductible no
greater than $100,000.
D. None of the above
No comments:
Post a Comment