I'm a 1099 with a broker dealer for securities, and run my own insurance brokerage. I carry plenty of errors and ommission insurance. The broker dealer is also saying that I must purchase E&O insurance through them and through their broker, their company, etc..... this doesn't sound right.
Is this legit, or is this a conflict of interest as the BD may be profiting from making its reps purchase a specific E&O from a specifc person / company.
This is up to your broker dealer, and nobody else.
We are a small "Indie" BD, and would agree with your BD. You see, your personal E&O carrier has no duty to defend your BD. If there is an occurance on the insurance side (especially in a "grey" product such as an indexed annuity) any decent attorney is going to name everyone (including my BD). Unless you have been involved in a few attorney matters, you perhaps don't understand that it can cost $30-60k just to make something "go away" even if you are not at fault in any way!
Thanks for the response. Why should I have to pay for insurance that protects the BD? Shouldn't the BD pay for insurance for itself?
Also, isn't that in violation of 1099 laws? I am a 1099 contractor.... forcing a 1099 to buy insurance to defend the BD is no longer in 1099 territory.
How about a policy from someone else that also names the BD on the policy? My concern is that the BD's owner's cousin is the insurance broker selling the E&O to the BD.... or something like that.
I have no idea what 1099 "laws" may or may not be from one state to another. That said, we are in a unique regulated business. Basically, one must do what the particular BD says, or go elsewhere.
That said, you make an excellent point about the BD owner's cousin. We carry very substantial E&O and Fidelity bond insurance, it is not something which is available just anywhere. In fact for small firms like ours there are probably less than ten sources here in U.S.. Ask your BD who the carrier is, what the limit and deductables are, and what the product coverage is. These are completely ligitimate questions. We have, more tahn once, adjusted our coverage to accomodate outside insurance business (the cost in those cases has been little or nothing). Finally, many small BDs these days find it difficult or extreemly costly to obtain coverage due to prior regulatory and / or arbitration problems.
If you need more help call me (Mike Jordan 218-681-7344)