If you answered 'Yes' to the above question, or 'I don't think so,' please read on. If you answered 'No,' congratulations! (I certainly hope you're being honest.)
From 1986 to 1998, the No. 1 cause of E&O claims was failure to obtain the proper coverage. Auto claims account for one in every four E&O claims-and more than half of these deal with Uninsured/Underinsured Motorist (UM) coverage.
What can go wrong with Uninsured Motorist coverage? Take a closer look:
- Is it standard operating procedure in your agency to offer clients UM coverage equal to the limits of Liability? The price differential is only an extra $50 to $75 per vehicle and is well worth it. Some states are now requiring that limits for Bodily Injury/Property Damage (BI/PD) and Uninsured Motorist be the same.
- If you feel that you don't have to offer higher UM limits because an Umbrella is in place that will drop down in the event of a claim, be careful. Personal and Commercial Umbrellas vary widely, so make sure that your company doesn't exclude UM on the policy.
- If an insured refuses the higher UM limits, many states and companies require that they complete a sign-off form. Even if prospects tell you verbally that they don't want the coverage, never sign the form on their behalf. You may want to check with the company to see if all Named Insureds should sign, or just the first Named Insured.
Here's an example of an Uninsured Motorist claim that illustrates many of these points. The case involves allegations that an agent failed to advise a client properly of the availability of higher limits of UM coverage and that the agent failed to obtain a written waiver of UM benefits equal to Liability limits as required by the state's Financial Responsibility Act.
An ambulance owned and operated by one of the agency's clients was struck head on by an uninsured vehicle that had crossed the centerline of the highway. A nurse and patient were killed, and the driver was seriously injured. The insured's Business Auto policy had Liability limits of $500,000 but UM limits of only $35,000. The nurse's estate sued the insurance agency, contending that the Uninsured/Underinsured coverage should have been $500,000 and that the agent was negligent in not providing it.
Each policy year, the client had been advised that the limits for Uninsured/Underinsured Motorist coverage would be equal to that of Liability coverage unless he chose a lower option. His priorities were to maintain high Liability limits but to keep premium costs down. He reasoned that his employees were covered by Workers' Comp while operating the ambulance, so they wouldn't need the added protection of higher UM coverage. When renewal time came, the client selected the lesser UM coverage and executed the appropriate waivers as required by state law.
The testimony of the client, together with an affidavit executed by the agent, persuaded the third-party plaintiff that the waiver was a 'knowing and intelligent waiver.' The agent was dismissed by way of an agreed order with minimal defense costs. In this case, good documentation was key to a good defense.
Don't take Uninsured Motorist coverage for granted. Do the right thing: Provide your clients with the coverage they need and defend yourself against E&O claims. Your customers are looking to you for expert advice-don't disappoint them!