I do agree that the insured should notify his insurance carrier of a potential claim as soon as he has been made aware of it. Most insurance policies require prompt and timely notification of claims as condition for coverage. I have seen insurance companies deny claims because an insured was late with notification.

The statute of limitations is intended to eliminate stale claims. While allowing a plaintiff to institute a suit during a reasonable period of time, the statute provides for repose when physical evidence is lost, misplaced or destroyed and witnesses' memories become unreliable with the passage of time.

The various statutes of limitations are not universal absolutes depending upon the language of the statute, its legislative intent and the court's interpretation of the facts of a case. Some states provide for an absolute cut off in time after which a claim can not be asserted. Others are more flexible. I think it is also important to keep in mind the nature of the claim asserted, the identity of the proper party defendant and who will be asserting the claim as a plaintiff.

The liability of the insurance carrier generally relates to the policy holding home owner. The liability of the abstractor usually relates to the party who has hired him/her to perform the title search. However, there may be exceptions...and there are many ways to skin a cat when the plaintiff is looking for a deep pocket to satisfy his claim. With respect to contract claims it is possible that the plaintiff may not have been a signatory to the contract, but rather a beneficiary of the services to be provided by the defendant. This is known as a third party beneficiary. However, it is more difficult for the plaintiff to prove because he would need to show that he was an "intended beneficiary" of the signatories to a contract rather than an "incidental beneficiary" to the contract. The court would generally inquire as to whether he was identified clearly in the contract as a beneficiary and whether the defendant's services were intended to benefit him.

In terms of tort claims it is conceivable that a plaintiff may try to assert a claim for negligent misrepresentation if he can show that it was foreseeable that he as a third party would rely to his detriment upon the work of the defendant. I have read cases in which plaintiff's have been successful against accountants who performed work for a party other than the plaintiff.

While the statute of limitations governs claims at law seeking money damages as a remedy...there is also the equitable counterpart for claims in equity seeking extraordinary remedies. This defense is known as the doctrine of  Laches. Pursuant to this doctrine the defendant may assert it as a defense if there has been delay in filing the suit,  and the defendant has suffered hardship due to the delay. The choice of whether to allow the defense is at the discretion of the court because the statute of limitations may not apply to claims in equity. The delay may be for a shorter period of time than the statute of limitations governing claims at law.

E & O policies are intended to provide tort claim coverage for negligence. Unless the policy in question is unusual it has been my experience that the policy generally does not cover liability arising from contract claims. Therefore, it is necessary to operate a business as a corporation or LLC to shield one's personal assets from contract claims while the insurance protects him against tort claims. In many states the statute of limitations on contract claims is longer than for tort claims. Neither the corporate shield nor the insurance is going to protect a defendant against intentional torts.