Knowledge = Action

by Curtis Pearsall

The other day I was travelling with a good friend who happens to be an extremely professional insurance agent. On the way to lunch, we passed a funeral home - one of his Commercial clients. This funeral home happened to be putting on a significant addition to its main building. My friend said the owner had yet to tell him about the renovation. What should he have done and what would you do in the same situation?

One option is to do nothing and wait for the client to call you. I would hope that this wouldn't be your first choice. It's exactly what you shouldn't do.

By contacting your client and noting the addition to the building, you demonstrate that you're a professional agent who has the client's best interests in mind. Insuring your client's assets properly should be one of your main objectives. You may benefit as well by selling additional insurance.

There's also the E&O perspective. Let's say that some building materials are stolen or there's a fire that causes serious damage to the addition. If the additional exposure was never endorsed on the policy, the Insurer will probably deny the claim. It's true that it's the client's responsibility to contact you to secure the proper coverage. But even if you won a case brought against you, the defense dollars could be significant. Juries usually conclude that the knowledge of an exposure should prompt the agent to take some action.

Does this mean you're on call 24 hours a day? To a degree, you are! Let's say you went to a party at the home of a client and noticed they have a pool that's not covered in their Homeowners policy. You disregard what you've seen. A neighborhood child then drowns in the pool and your client is sued for a $1 million. The only available limit is the Homeowners limit, which isn't enough in this case. The client brings a claim against your agency. You can certainly expect the plaintiff's attorney to ask why you didn't advise your client to purchase an Umbrella Liability policy.

Unfortunately, these stories happen all too often. One that comes to mind involves an agent who stopped in a client's convenience store and noticed that the business had begun selling beer. But the agent never talked to the owner about liquor liability. Unfortunately, there was a fatality involving customers that bought beer at the store. The client sued the agent and the case was settled.

Let's face it - you can't go around with blinders on! Be on the lookout for changes in exposures and contact the client - it's the right thing to do.