ENCOURAGE CLIENTS TO READ THEIR POLICY
by Curtis Pearsall
Although E&O claims happen with regularity, there’s no doubt that agencies play a significant role in the direction that the E&O claim takes.
One strategy that E&O carriers often use to defend their agent customers involves the duty of the insured to read their policy. Although this duty does not apply in every state, it makes sense for the agency to take the initiative in this area.
Almost all states require the insured to read and understand the policy content, provisions, duties and exclusions. If the insured discovers that the coverage isn’t what they thought they requested, they should contact the agency to make any needed additions, alterations, and/or modifications. If the policy terms are unacceptable, some states actually require the insured to reject the policy.
To reinforce this responsibility, the agent/broker should send the complete policy to the insured promptly, with a cover letter that urges them to review the policy fully for accuracy, including the declarations and endorsements. If the insured has any questions on the policy contents, they should contact the producer immediately
Bear in mind that that the insured’s ignorance of this requirement or a statement that they didn’t have the time to do the review is not a valid defense for them.
Here’s a sample letter:
Dear Client:
Enclosed please find the renewal of your Businessowners package written with XYZ Insurance Co. You will be receiving your premium invoice shortly.
To ensure your understanding of the limits and the coverages, please take the time to read this policy. If you have any questions or wish to make any changes to the policy, please contact our agency promptly. You have selected the limits of insurance: and we can’t guarantee that the amount you have selected will be adequate in the event of a major loss. We can add or increase coverage at any time.
Thank you for your confidence in our agency
We appreciate your business.
Sincerely,
Keep this letter general without restating the limits and coverages. The reason: If you “recap” the limits and coverages in the letter, you’re essentially telling the insured that they don’t need to read the policy because you’re telling them what’s in it.
Even if you choose to have the policy delivered in person, include the cover letter and bring it to the attention of the insured.
Providing the letter will help uncover any areas of concern, making sure both you and your insured understand exactly what the policy does – and does not – cover. It’s far better to resolve any potential problems before an E&O claim occurs.
Curtis Pearsall, CPCU, AIAF, ARM, CPIA, is president of Pearsall Associates, Inc. (Whitesboro, NY), a risk management consulting firm that specializes in helping agents protect themselves against E&O claims. To contact him, call (315) 768-1534; e-mail: [email protected]; visit www.pearsallassociates.com; or blog: www.agentseotips.com.