Insurance agency managers may believe that employees who are key to causing an Errors & Omissions (E&O) claim should reimburse the agency for its deductible-but such a reimbursement policy can be detrimental to the agency.
A reimbursement policy may increase the difficulty of hiring new clerical or production personnel. Newly hired personnel would be faced with the threat of monetary punishment for any mistakes-not the best way to learn a new job! And certainly not good for employee morale.
Consider the ethical implications of the situation. Is it fair to compel employees to pay back a deductible when they have no opportunity to select the E&O carrier, limits, or deductible?
Employees who fear paying an E&O deductible are more likely to cover up a mistake, or may attempt to falsify records to obscure the mistake. This can destroy the agency's coverage and can be considered fraud.
Finally, a reimbursement policy seems to make employees an enemy of their employer. They may become a reluctant or adverse witness in a trial, and may even file their own claim against the agency. This would probably invalidate coverage, since most E&O policies don't respond to cross claims involving two insureds.
What can an agency do? When an employee is at fault in an E&O claim and the problem is not correctable, fire that employee after the claim is settled. If the E&O claim was caused by an honest one-time mistake, write it off as another cost of doing business, subtract the deductible's cost from agency's income tax, and forget it.
The best remedy is to prevent such claims from occurring in the first place-best achieved by training employees well, monitoring agency systems, and using standard operating procedures.