E & O Deductible Sharing

Dec 31, 2015

  1. agentonline
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    agentonline New Member

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    ok..been reading for some time and appreciate any feed back.

    So, I have been a commercial agent for over ten years and have a good book of business. I have been with a 'mom and pop' independent agency for the entire time.

    I have NO ownership in the business and I have NO say in the business decisions being made for the agency. I am a w-2 employee and my commission split is less than what the competition offers and I have no other benefits. Just setting the stage here.

    Today, I am informed that, moving forward, if an E&O claim is presented to the agency that involves me - I will be responsible for a $1000 deductible.

    Question: Is this appropriate? normal? legal?

    What say you?
     
  2. mmdz33018
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    mmdz33018 Expert

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    What state do you work from?
     
  3. agentonline
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    agentonline New Member

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    work in FL.

    Thanks
     
  4. GreenSky
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    GreenSky Guru

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    While I'm not a lawyer, I believe this is illegal.

    In the early 80's I worked for a very small P&C agency. Although I really was student of insurance I made a mistake on a commercial assigned risk where the client decided he didn't want the policy.

    I didn't realize it was different than personal auto in that the carrier did not have to cancel flat. It might have cost us $150 because of my mistake. (And to be honest it really was the 1st one I made in 7 years).

    Anyway, the owner to me that if it cost us the $150 he'd take it out of my salary. My response, "Max, it you will do this I quit." He didn't back down and I found a better job in about 10 days.

    Even his lawyer said that was illegal but the damage was done.

    We buried the hatchet a month or two later and he ever referred me to someone a couple of years later.

    Give them 30 days notice and work for someone honest.

    Rick
     
    GreenSky, Dec 31, 2015
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  5. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    You are a licensed agent. Licensing has nothing to do with ownership of your book, in your compensation arrangements, or how your compensation compared to any other firm. Licensing is all about being held accountable for your actions.

    In the B/D world, you normally work FOR another firm. (Very rarely do registered reps open up their own B/D.) If an E&O claim comes up, the registered rep is responsible for their deductible.

    Since you do earn commissions, I think it's still appropriate. If you were a salaried or hourly employee ONLY that happened to be licensed, I would think that the supervising agent would need to share in the deductible.

    That doesn't mean you shouldn't look elsewhere, but I think it's still appropriate and legal.

    Just my thoughts.
     
    DHK, Dec 31, 2015
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  6. djs
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    djs Super Moderator Moderator

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    Interesting question. I'll check with an HR director that I know, but I think it is technically legal as long as you sign an authorization for them to deduct it from your paycheck and the resulting check gives you at least a minimum wage (in your area) payment. Yes, there is weird rules on this.

    Now, if I have to pay the deductible, then I get to say if the case is settled or goes to court. E&O companies tend to pay quickly if there is any chance it will result in a settlement in the future. I've seen it a few times where insurance companies are completely right, but they still lose in court.

    If its only going to cost me the deductible, then I'm dragging it out and going to court. I'll pay in a few years......

    On the flip side of this, several companies will make employees pay for lost tools / equipment, deductibles for auto accidents in company cars, etc. Its not out of the realm of normal, but I think E&O deductibles is pushing it. I'm wondering how many E&O claims the office has had where this is a real issue.

    I also assume their E&O deductible is more like $5K-10K, so they are probably taking on a large share already.

    Dan
     
    djs, Dec 31, 2015
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  7. mmdz33018
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    mmdz33018 Expert

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    FS 626.0428

    An insurance agency and each branch place of business of an insurance agency shall designate an agent in charge and file the name and license number of the agent in charge and the physical address of the insurance agency location with the department at the department’s designated website. The designation of the agent in charge may be changed at the option of the agency. A change of the designated agent in charge is effective upon notification to the department, which shall be provided within 30 days after such change.
    (d) For the purposes of this subsection, an “agent in charge” is the licensed and appointed agent who is responsible for the supervision of all individuals within an insurance agency location, regardless of whether the agent in charge handles a specific transaction or deals with the general public in the solicitation or negotiation of insurance contracts or the collection or accounting of moneys.
    (e) An agent in charge of an insurance agency is accountable for misconduct or violations of this code committed by the licensee or agent or by any person under his or her supervision while acting on behalf of the agency. This section does not render an agent in charge criminally liable for an act unless the agent in charge personally committed the act or knew or should have known of the act and of the facts constituting a violation of this chapter.

    In other words every agency has a designated an "agent in charge". If you look up an agency by name or license it will state the "agent in charge" sometimes referred to as the principal agent. This agent which is not you, is responsible for supervising all the work bound and processed through that agency even if that person is not directly involved. They should review(similar to an underwriter) and examine every policy you bring into the business and the agent in charge is responsible; not necessarily the agency, or any agent/CSR under him.

    Now in my opinion, if you are the person that is responsible for an agency having to touch their E&O policy you are going to set them back thousands of dollars every year for a few years. I know of a case where an agent forgot to add comp and coll to an auto policy and for that claim alone(around 9k) their policy shot up from $1.5k per year to $5.5k. The least I would do is pay for the deductible. But that's just me.
     
  8. agentonline
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    agentonline New Member

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    appreciate all the replies...keep em coming.

    Thanks DJS.

    This is a 40 year old agency - so yes there has been a handful of e&o claims over the years. And we all know our society is becoming increasingly litigious.

    The deductible on their policy is 5k.

    As an employee - I just have a hard time being made more responsible for their business while at the same time being more restricted in my actions by the employer.
     
  9. donamese
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    donamese Guru

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    The agent of record on the E&O is responsible for it.

    Now if you had a contract with him and it says you owe $1,000 for every claim that came in you were responsible for, then that is part of that agreement and you should have to pay. I do not see where they can just say from here on out you are responsible....that would have to be agreed to in writing to hold up anywhere. They may just say you are fired if you do not agree.
     
    donamese, Dec 31, 2015
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  10. agentonline
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    agentonline New Member

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    I am not one to dodge responsibility with respect to a wrongful act. If I legitimately caused an e&o claim - ok, i'll pay the $1000. But, if the claim is frivolous, like a good deal of liability claims are, then I do not feel responsible for that.

    Oddly, I have been at this agency for 10 + years...we have NO written contracts between us with regard to employment whatsoever.

    ----------

    I guess I am really just curious if this is a regular situation in independent agencies.
     
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