What if a notary does not realize that identification, like a driver’s license, is fake, and inadvertently enables a costly act of fraud? Who is responsible for the lost funds—the notary? In a recent such case, an appeals court in California determined that no, the notary was not liable for the losses. Here are the facts, along with insights on the important role of notary publics.
Civic Duty: Verifying Identity
Interestingly, Google has found that with many people searching for flexible new careers and a chance to help others, the notary profession has been attracting a lot of interest. Indeed, notaries carry out an important civic role that dates back to ancient times: witnessing sign-off on our most important decisions and commitments. As Legal Zoom explains: “A notary public serves the public by acting as an impartial witness to the signing of documents. A notary public is responsible for verifying the identities of each person signing a particular document, confirming their willingness and mental capacity to sign the document, and ensuring that the signer understands the nature and significance of the document being executed.”
Because notaries provide a critical public service, states typically require them to secure a notary bond. Essentially a form of protection to the public, a notary bond serves as a guarantee that all duties will be performed in accordance with regulations. As a leading, national, direct bond provider, Colonial Surety makes it easy and speedy for notaries across the country to obtain or renew notary bonds that meet the specific “obligee requirements” in their states. With Colonial’s direct, digital service, notary bonds can be obtained anytime, from anywhere. The steps are easy—get a quote online, fill out the information, and enter a payment method. Bonds can then be e-filed or printed instantly. Obtain Notary Bond Here.
Real Estate Transactions
Notaries across the country have been exceptionally busy with business openings and closings and other life changes spurred on by the pandemic, including, of course the hopping real estate market. As First Tuesday Journal reports, an undetected act of fraud during a real estate transaction, recently led to the case of North American Title Company Inc. versus Gugasyan in California, in which:
A title company acting as the individual’s escrow holder selects a notary public to notarize the trust deeds for the funds to be disbursed. The notary obtains a California driver’s license from the individual to confirm their identity. Unknown to the notary, the driver’s license is fake. The fake license and signature match the signature entered and acknowledged by the individual. The notary notarizes the trust deed. The funds are disbursed to the individual on recording the trust deed. The title company incurs money losses due to the fraudulent trust deeds… and claims the notary was negligent when checking the California driver’s license since the notary failed to observe the license was fake.
Because the driver’s license appeared to be issued by the Department of Motor Vehicles, and the signature on it matched that of the documents being signed, the notary countered the claim, indicating there was no reason to question the authenticity of the license. The California appeals court agreed, finding: “the notary is not negligent and thus not liable for the title company’s losses since the notary complied with the safe harbor requirements as the individual presented a seemingly valid California driver’s license from the DMV which the notary had no legitimate reason to doubt.”
Good To Know
The role of notaries is often misunderstood: people tend to think that a notary somehow authenticates the documents involved in a transaction. While notaries do validate the identities of individuals signing documents, they do not verify the accuracy or legitimacy of the documents themselves. Mental Floss offers this important clarifier:
A notary acts as a human fraud deterrent by validating the identity of the individual signing a legal document. Notaries also confirm that the parties to a contract are signing it freely and without duress, and that they understand what it is they’re signing. The practice of employing a notary public to prepare and certify official documents originated in the Roman Empire.
The notary makes sure any life-changing document—a will, power of attorney, a prenuptial agreement—has a valid signature by confirming a person’s identity with a driver’s license or other government-issued ID and being a physical witness to the signing. They will also sign their own name and provide a stamp or seal affirming their impartial observation of the signing.
The past year has seen a huge shift and disruption in the notary profession. The rise in demand for mobile and online services shows no sign of stopping. New regulations in many states allow for more digital options and with so many people making changes in their lives, homes and work, business for notaries is booming. Given the churn, it’s an important time for notaries to ensure that state mandated notary bonds are current. Colonial Surety is here to help: Notary Bonds Here.
Coming Soon: Protection For Notaries
Though notary bonds are an important protection for the public, they do not protect notaries from lawsuits alleging mistakes or oversights. Even defense against allegations is costly. To help, Colonial will soon roll out affordable professional liabiity insurance also known as Errors and Omissions (E&O) insurance. This protects notaries from the everyday risks involved in providing professional services, such as claims of negligence, work mistakes and oversights, missed deadlines and omissions. Armed with professional liability coverage, notaries have coverage for legal defense expenses, as well as the cost of settlements and judgments. Watch for professional liability coverage HERE.
Founded in 1930, Colonial Surety Company is a reliable, affordable and dependable source of insurance and surety bonds for working people and their businesses all across the country. Our direct, digital portfolio of 4,000 license and permit bonds and liability protections cover a wide range of interests, professions and businesses.
Colonial Surety Company is listed by the U.S. Treasury as an approved surety, and rated “A” (Excellent) by A.M. Best—an accolade of which we are extremely proud.