Carrier denying claim

[Gina Lyn]

Not sure what I should do..
Jane (the insured) got into an accident a week after she purchased her policy. She was driving the vehicle at the time of the accident. Policy was still active at the time of accident. She filed the claim. Carrier asked her who lives in the home and she said my brother Jack and I live in the home. Carrier advised that they would have to investigate because she did not fill out the form disclosing household members basically excluding Jack from the policy since he lives there. When I wrote the policy I forgot to put on FSC Jacks name to be excluded. I was aware he lived in the home. When I submitted the application, Jacks name popped up and it created a drivers certification form basically stating that Jack does not live there and he is not covered on the policy. I assumed because a form was created with Jacks name, I thought it was the driver exclusion form. Anyways the claims department has now advised my insured that because I did not have her fill out a driver exclusion form, they will not be paying the claim. Any thoughts or advise? Should I have my E&O's number ready??

 

[adjusterjack]

Any thoughts or advise?

When I submitted the application, Jacks name popped up and it created a drivers certification form basically stating that Jack does not live there

An obvious misrepresentation that could be material to the underwriting of the policy. A misrepresentation is material if one or more of the following apply:

The policy would not have been written had Jack's membership in the household been known. Possibly due to bad driving record.

The coverage would have been modified. Possibly a named driver exclusion.

A higher premium would have been charged.

You haven't said why Jack's presence in the household was an underwriting issue. Reading between the lines, it's likely his driving record, but could be something else.

At any rate, the concealment of Jack's presence in the household (intentional or not) gives the insurance company the right to deny the claim and rescind the policy "ab initio" (back to inception as if it never existed) and refund any premium's paid.

Should I have my E&O's number ready??

I was aware he lived in the home.

Then you have negligently caused your client's problem. Unless you want to pay the claim out of your own pocket, I suggest you notify your E&O carrier ASAP. Failure to do so could end up getting your E&O policy cancelled or non-renewed.

 

[Gina Lyn]

Thank you. I appreciate your response.

 

[fed up]

Are you and Jack covered under a different policy?

 

[InsCommentary]

It depends on case law in your area. It appears that the error or omission was your’s, not the policyholder’s. If so, the insured has a reasonable expectation of coverage. That coverage can come from the insurer based on your apparent authority as its agent (in which case they may seek recovery from you) or your customer may seek it from you and your E&O policy. You need to report it to your E&O carrier yesterday.

 

[DonP]

So there denying the claim because they wouldn't have issued the policy with Jack in the household? So if the exclusion had never been signed the carrier would have cancelled the policy but the insured had a wreck first?So in reality there was never any coverage because the form was never signed?

 

[adjusterjack]

That's pretty much it, Don.