DO THESE TRENDS PERTAIN TO YOU?
by Curtis Pearsall
Do you know what makes your business vulnerable to an E&O claim? This document by Curtis Pearsall helps you see what might be right under your nose, and what you should do to keep yourself out of trouble.
Recently, I asked a Utica counselor for his perspective on any trends emerging in his specialty. After reviewing the information, I conclude that his observations probably don’t amount to trends. The errors that he pointed out have probably been around for years. In fact, the real trend is that some agents continue to do things the way they always have while expecting different results, which some say is a definition of 'insanity.'
A particularly troublesome area for large Commercial agencies is the delegation of policy reviews and proposal preparations to a CSR without verifying that the policy/proposal provides the requested coverage. This scenario reared its ugly head in a recent claim in which a carrier increased the co-insurance requirement from 80% to 100%, deleted the coverage amount, and changed the coverage from actual cash value to replacement cost. The agent failed to catch these actions, which were obviously to the detriment of the insured. The plaintiff is seeking more than $5 million in damages.
In my conversations with agents, it appears that the quality of service in the insurance industry has deteriorated significantly during the past couple of years. A word of caution: Establish a procedure for checking policies (new and renewal) to verify that they’re providing the correct coverages. Don’t assume that the policies are accurate. In fact, assume that they aren’t. You’ll be better off.
One recent notable trend is the evolution of the language that agents use on their proposals and Web sites. Agents attempt to impress the buying public by marketing themselves as 'experts.' They use words such as 'advise,' 'analyze,' and 'recommend.' If this language accurately describes what you do, fine. If not, don’t use it. A smart plaintiff’s lawyer will question it, as part of the discovery of an E&O claim. Your proposals and Web sites should reflect current legal precedents.
Last but by no means least, more and more agencies are 'going paperless' through computerization. Most agents diligently record phone call information in their systems. The problem is in the level of detail. Don’t just enter 'spoke with Curt regarding Business Income.' Enter 'spoke with Curt regarding Business Income, and he indicated that he can’t afford it and doesn’t want the coverage.'
Claims against agents happen. This isn’t necessarily a trend, but heed this advice if you’re faced with or think you’ll be faced with an E&O claim: Contact your E&O carrier first!
With an E&O policy, you have a right to more than just the policy. When someone makes a claim against you, you’re entitled to guidance and direction. It’s important not to speak with or produce documents for your customer’s and/or insurer’s attorney without the benefit of counsel provided by your E&O carrier. Your every action can influence the outcome of the E&O claim.
This article originally appeared in the Utica National Insurance Co. E&O Bulletin and is reproduced by permission. Curtis M. Pearsall, CPCU, AIAF is Vice President, E&O of the Utica National Insurance Group. He can be reached at Utica National Insurance Group, P.O. Box 530, Utica, NY 13503, (800) 274-1914, fax (315) 734-2807, or e-mail [email protected].