Coordinator agreement: cap liability at the fee, or carry E&O and price for it?

Question

I've been reading TC engagement letters for a few weeks because I'm structuring one for a small operation and I want the indemnity language right before anyone signs.

Two patterns show up. The first caps the coordinator's liability at the fee paid, disclaims responsibility for missed deadlines, and puts a line in saying the client remains responsible for reviewing all dates and documents. Fee sits at $300 to $400. The second has the coordinator carrying errors and omissions coverage, sometimes named as covering coordination services specifically, no cap at the fee, and the fee runs $500 to $650 with the premium priced in.

The case for the capped version. The coordinator has no authority over anyone in the deal. She can't make a lender fund or a seller sign. Pricing in liability for outcomes she can't control means every client pays for a risk that mostly lands on the agent's own E&O anyway, and the agent's carrier is the one that already covers the file. Capped agreements keep the fee low and the volume up.

The case for the insured version. A blown contingency can cost real money and the party who caused it should be reachable for some of it. A cap at the fee means a $400 recovery against a $15,000 loss, which is the same as no recovery. If the coordinator can't stand behind the date calendar then the date calendar isn't a product, it's a courtesy. And clients who've been burned once will pay the difference without arguing.

What the indemnity actually reaches depends on state law and on how the specific policy is worded, and that's a question for an attorney and a broker in the relevant state rather than a forum. I'm asking about the commercial choice, not the legal one. Which structure would you rather sign, from either side of the table.

mitchell_ray4 · Answer

In the trades every sub carries insurance and nobody argues about it, it's just a line in the bid. Odd to me that a service handling deadlines worth thousands would treat coverage as optional.

nicole_adeyemi · Answer

@solder the difference is that a sub can be shown to have installed the wrong thing. A missed deadline usually has four people who could have caught it and the contract already says the principal owns the review. Causation is muddy, which is why the cap survives.

luis_carrera · Answer

Voted for the third option. A defined credit is the version I'd actually collect on. Insurance means a claim and a claim means months, and for a $6,000 problem nobody files.

kevin_lombard · Answer

What does E&O stand for here? I've seen it three times in this room and assumed it was insurance for mistakes.

priya_n21 · Answer

@juniper errors and omissions. Professional liability coverage for getting something wrong in the course of the work rather than for someone getting hurt. Whether a given policy covers coordination work specifically is a wording question, which is the point @warrant is making.

devon_pierce · Answer

Practical objection to the insured version. A coordinator paying for coverage and pricing at $600 competes against one at $325 who does the same calendar, and most agents buying at volume choose on price. So the market picks the capped version whether or not it should. If I'm building the business I'd carry coverage and never lead with it, then price at $450 and let the agreement do the selling to the clients who read it.

marcus_hale41 · Answer

@bramble that matches what I've seen buying the service. I picked on responsiveness and on whether she'd done my document type before. I read the liability section, noticed the cap, and signed anyway, because the cap wasn't going to change and the alternative was doing it myself. The clause that would have made me walk isn't the cap. It's any language letting her act on funds or instructions without my written confirmation.

Coordinator agreement: cap liability at the fee, or carry E&O and price for it?

7 replies