Dispelling Myths About Referral Practices in the Trust/Escrow Space
Misconceptions About Multiple Referrals
Many agencies believe that providing a list of three or more referral options protects them from liability. This is not only a myth, it is legally unsound. In reality, listing multiple referral sources actually increases exposure to negligent referral claims because agencies will necessarily list trust/escrow companies that have subpar practices, reputations, and/or security protocols as compared to SeedTrust. An all too real example of this occurred when agencies included SEAM in their referral lists to satisfy the “three-referral” threshold. The best way and only way to mitigate liability is by recommending only qualified, vetted providers that meet the highest safety and security standards.
No Legal Requirement for Multiple Referrals
Contrary to popular belief, there is no legal obligation to provide three or more referral options. What the law does require is that referrals are made responsibly and with due diligence. Neglecting this responsibility could result in claims of recklessness or negligence and potentially exposing you to civil liability and claims of monetary damages.
Understanding Negligent Referral Liability Claims
Agencies face negligent referral liability claims from their clients when they direct Intended Parents to substandard or unvetted trust/escrow companies, IVF clinics, doctors, psychologists, or attorneys who later cause harm. Liability can arise even if you yourself have done nothing improper or wrong! The simple act of making a negligent referral without having conducted proper due diligence or ignoring warning signs exposes you to risk. Among other things to be aware of are:
- Prior claims or investigations against the entity.
- Inadequate expertise, systems, and security protocols.
- Lack of independent oversight and audits.
- Lack of sufficient insurance or financial protections, including cyber crime, liability, and bonds.
- Negative—or nonexistent— reputation within the ART community.
- Conflicts of interest with a greater loyalty or responsibility to one party over the other.
How Agencies Can Protect Themselves
To minimize liability, agencies should:
- Conduct Extensive Due Diligence
Perform thorough investigations of each trust/escrow provider, ensuring they meet essential criteria for client fund security. Recommending unqualified providers creates unnecessary risk; and - Limit Referrals to Proven Providers
Recommend only companies with a strong, proven track record of reliability, compliance, and protection. Even if this means offering a single recommendation, it is far safer than risking liability by endorsing multiple providers of unknown quality.
Key Considerations When Evaluating Escrow Providers
- Qualified Leadership and Expertise
The provider should have a team of professionals with expertise in legal, financial, and business management, including a full-time CPA and an attorney experienced in surrogacy and escrow. - Checks and Balances
Effective controls, such as multi-step payment approvals and transparent review processes, are critical to prevent errors and fraud. - Audits
Regular internal and external audits by reputable, independent CPA firms help ensure compliance and financial accuracy. It is essential that the escrow company provides annual proof of a clean audit from a recognized CPA firm. - Insurance and Bonding
Providers must maintain adequate bonding and insurance, including a minimum $10 million bond, $1 million in general liability coverage, $1 million in errors and omissions, and $1 million in cyber protection coverage. It is essential that the escrow company provides proof of insurance, which must be kept on file and updated annually.
- Oversight
Regulatory oversight by state bar associations, CPA boards, and bonding companies ensures compliance with legal and industry standards - Reputation
A strong industry reputation is essential. Research feedback from professionals and review the provider’s track record for reliability.
Why SeedTrust Is the Most Trusted Choice
Currently, SeedTrust stands alone as the provider that meets and exceeds all of the criteria for ensuring client safety. Rather than listing multiple providers—some of whom may not be qualified—agencies should focus exclusively on vetted and trusted options. This approach protects both their clients and their own reputation.
Example Recommendation Wording:
“At this time, we are only comfortable recommending SeedTrust due to its proven expertise, proper checks and balances, oversight, insurance and bonding. While clients are welcome to choose another provider on their own, we strongly advise against working with any escrow/trust company that cannot prove they meet or exceed these critical standards to safeguard your journey. At this time, there is no other provider we would feel comfortable recommending.”
A Commitment to Industry Excellence
You may be inclined to disregard this as nothing more than a marketing pitch, but this is a fact-based recommendation supported by legal and industry expertise. SeedTrust has repeatedly stepped in to assist clients affected by the failures of less secure providers such as SEAM. Our goal is to end the unnecessary and damaging trend of escrow companies failing, and protecting Intended Parents and the industry as a whole.
While we currently see no other providers meeting the necessary standards, we hope others will follow the roadmap we have established. SeedTrust remains committed to evolving and reinvesting in the financial infrastructure our industry deserves.
By choosing the most reputable trust/escrow provider, agencies can protect themselves from liability, while also safeguarding their clients, their business, and the entire ART community.
