E&O: E-MAILS AND BINDING COVERAGE

by Curt Pearsall

E-mail between agents and their clients is becoming increasingly common. Curt Pearsall recommends that you and your staff develop and implement procedures for minimizing your E&O exposures.

One area of concern involves binding coverage. There are two basic scenarios, with quite different implications.

In the first example, your client has advised you that they’re buying an item (let’s say a boat) that needs insurance and then sends you an e-mail saying to go ahead and bind coverage. Because it’s clear that the insurer is willing to take the risk and the client knows the terms and conditions, binding becomes more or less a formality — and there’s minimal, if any, E&O exposure.

In the second scenario, a client e-mails your agency notifying you of their need for insurance and asking you to bind coverage. Depending on the type of risk, there’s a chance that you might not have any of the necessary underwriting details, and thus wouldn’t know if you have a company that would write the exposure. In this example, believe it or not, you could face an E&O claim.

However, you can significantly minimize your exposure by implementing the proper safeguards and controls. The possibility of a time lapse is the most critical issue here.

To minimize potential problems, make it a priority for everyone in the agency to check and deal with their e-mails every morning, giving them the same handling as incoming calls. If an e-mail deals with binding an exposure over which your agency might not have any control, the employee should explain to the client (by return e-mail, a documented phone call, or electronically date-stamping a letter from their system) that no coverage be will be bound until the matter is taken care of.

As long as employees handle e-mail requests for coverage within a reasonable timeframe — this really means “immediately” — you can feel comfortable that they’ve reduced the agency’s exposure. Not responding to these requests promptly (by failing to check their e-mails daily or communicating with clients about coverages not bound) raises the possibility of your client saying, “No news was good news; I am covered because no one told me that I wasn’t!”

When designing your system, it’s essential to factor in the possibility of staff being out due to vacation, illness etc. by arranging to have their e-mails forwarded to a colleague for handling.

You need to do business with your clients in the way that they want you to. Because e-mail so popular, make certain that everyone on your staff knows the agency policy on handling this method of communication.