E & O Insurance....

Sales71

Guru
1000 Post Club
1,473
Here is some help for the new guys..Lots of Information:idea:

[FONT=Arial, sans-serif]For years, E&O seminars have focused on the issue of documentation. This is primarily due to the premise that the quality and depth of file documentation is a major factor in determining which direction an E&O claim goes. Solid documentation can literally stop a potential claim in its tracks while poor documentation may hurt your agency defense more than you can imagine. [/FONT]

[FONT=Arial, sans-serif]Most agencies have an expectation for documentation. Is this expectation actually documented and thoroughly known by all staff? It should be if you truly want to instill in your agency the importance of documentation.[/FONT]

[FONT=Arial, sans-serif]Some of the areas where agencies can fall down on critical documentation include:[/FONT]

[FONT=Arial, sans-serif]1.[FONT=Arial, sans-serif] Phone conversations. The issue isn’t whether agency staff are aware that phone messages need to documented in the paper file or in the agency management system; most staff are well on board on that issue. The primary issue deals with the depth of the documentation and the timeliness of when the conversation is memorialized. Is the documentation along the lines of “Spoke with Curt regarding his homeowners”? If so, this is definitely not acceptable. The documentation should be so detailed that if someone else picked up the file that they would understand the essence of the conversation. In addition, agency staff that utilize cell phones to interact with customers, carriers and others need to understand that these conversations must be documented as well. [/FONT][/FONT]

[FONT=Arial, sans-serif]2.[FONT=Arial, sans-serif] Potential verbal misunderstandings. Simply documenting in the agency system what the customer told you (or thought they told you) is not enough. It could very well be at the time of a claim when it becomes apparent that there was a misunderstanding in the file. How do you resolve this? The most effective means is to document back to the customer your understanding of the conversation. This should be in writing and for many agencies that have adopted this approach, a quick email or letter is doing the job.[/FONT][/FONT]

[FONT=Arial, sans-serif]An example of this is:[/FONT]

[FONT=Arial, sans-serif]Mr. Jones, per your request, we have deleted the physical damage coverage on your 2005 Honda. If this is contrary to your understanding, please contact the agency as soon as possible.[/FONT]
[FONT=Arial, sans-serif]Maybe they really only wanted the collision to be deleted.[/FONT]

[FONT=Arial, sans-serif]This puts the responsibility on the customer to advise you if what you heard is not what they requested. The goal is to identify any misunderstanding before the claim occurs, not after it.[/FONT]

[FONT=Arial, sans-serif]3.[FONT=Arial, sans-serif] Failure to offer and document options. Virtually every day, agency staff interact with customers on key insurance issues. The issues are plentiful and varied. Just as you provide proposals for your customers, be sure to provide options for them to consider as well. Don’t just offer a proposal for a $1 million umbrella; provide options for greater limits as well. This lets the customer know that higher limits are available and that you not “recommending” a specific limit. In addition, requesting their signoff on the options they don’t want to pursue is extremely valuable and highly recommended.[/FONT][/FONT]


[FONT=Arial, sans-serif]4.[FONT=Arial, sans-serif] Not tracking the “what if” questions. If the discussion deals with the multitude of “what if” questions--like which dogs are insurable, what to do if a customer’s child is taking a car to college, or the host of other possible scenarios--these need to be thoroughly and promptly documented, not only in the agency file but with a letter back to the customer. If you knew that the customer was documenting the conversation, would you approach it any differently? Good, because they probably are. [/FONT][/FONT]

[FONT=Arial, sans-serif]To ensure that the staff knows the importance of documentation, there are a couple of approaches to consider:[/FONT]
[FONT=Arial, sans-serif]Your staff needs to know that you are extremely serious about this issue, so bring it up at virtually every staff meeting.[/FONT]

[FONT=Arial, sans-serif]Conduct periodic quality control of each employee, focusing on quality and timeliness. Most of the agency management systems provide great tools for management to view the work product of the staff.[/FONT]

[FONT=Arial, sans-serif]The documentation should be professional; it should not read like a social media message. While abbreviations may be in order, the agency should develop a list of acceptable abbreviations to avoid confusion.[/FONT]

[FONT=Arial, sans-serif]Establish guidelines for when to enter the documentation. The greater the time between the conversation and the documentation, the greater the chance that the information is not as complete or as accurate.[/FONT]

[FONT=Arial, sans-serif]Although the main aspect of this discussion dealt with documentation with your customers, it is equally important to document conversations with your carriers, wholesalers and others.[/FONT]

[FONT=Arial, sans-serif]Building a file that speaks to all the discussions that take place in your agency will be extremely valuable at claim time. Without documentation, it will be your word against theirs and it is hard to say who is going to win that.[/FONT]

[FONT=Arial, sans-serif]While quality and timely documentation may not prevent you from an E&O claim, there is nothing as important that will determine the direction that the claim goes more than documentation. Become a fanatic about it; you’ll be glad you did[/FONT]
 
Wow, you really stepped up. At the risk of being snide, that is the most useful post you've made yet.

That looks like some really useful information to help P&C agents avoid E&O issues down the road, and more importantly, step up the level of service provided to clients.
 
Great info. We recently dodged a bullet on a young lady with a 1995 Acura where she claimed she requested full coverage. Thankfully our agent had full documentation including pictures, sign off accepting coverage plus email and call logs. The young ladies attorney friend reviewed the file and advised her to drop the issue. I have no idea how somebody can have a $5700 loan on a 16 year old car but she did and I would have been on the hook for it if my agent didn't do everything right.
 
My most claim complain is when they refuse to buy rental car coverage and a claim happens and they find out no rental car..

The thing is you must document everything and have the client sign or Email.
 
Any help for the L&H agent? Nice post. Is it the same for E&O in the L&H sector?

I think on health and life is the same idea. You have to document the file maybe do a yearly review when the annual statement comes in or at least call the client to see if they want a review.

Health is a little easier once the policy is sold its sort of automatic they deal with the health ins company.
:yes::)
 
Wow, you really stepped up. At the risk of being snide, that is the most useful post you've made yet.

That looks like some really useful information to help P&C agents avoid E&O issues down the road, and more importantly, step up the level of service provided to clients.

Anytime Volagent. I am the real deal baby. ;)
 
[FONT=Arial, sans-serif]Agents: Guess the Real E&O Claim[/FONT]

More Reading abouth the most Important Topic:

[FONT=Arial, sans-serif]Insurance agents today must understand the reality of being sued. In the past, it was unusual that an agent was subjected to an E&O claim. We are in a new era in which an agent who has not been sued is the exception. It’s like termites in Arizona: If you haven’t had them, you will. Commercial insurance agents are becoming more susceptible to this disturbing trend. [/FONT]
[FONT=Arial, sans-serif]Which of the following are real cases brought against a commercial insurance agent?[/FONT]

[FONT=Arial, sans-serif]An insured suffers an uncovered loss and later sues the agent, stating he had wanted a certain coverage he did not have, claiming he told the agent he wanted that coverage during a meeting that never occurred.[/FONT]

[FONT=Arial, sans-serif]The employee of a client business is severely injured on the job. The insurance carrier sues the agent, claiming there was insufficient information on the application, causing the carrier to pay a large claim due to an unexpected exposure, even though the carrier was in the second year of coverage.[/FONT]

[FONT=Arial, sans-serif]A contractor who was not a client, but his client’s client, sues an agent for an inappropriate additional insured endorsement, even though the agent had sent his client a copy of the endorsement.[/FONT]

[FONT=Arial, sans-serif]A client sustains a loss which could have been covered by either the CGL or auto policy, but each had exclusionary wording such that the main exposure of the insured was not covered.[/FONT]

[FONT=Arial, sans-serif]An agent sold a policy with inadequate limits to cover a loss; another agent who had sold other lines of coverage was sued for not recommending higher limits on that policy, even though he was unaware it existed.[/FONT]

[FONT=Arial, sans-serif]Although one or two situations may appear to be obvious failures on the part of the agent, sadly these are all real. And these cases don't just apply to young, inexperienced agents. Most agents had a decade or more in insurance and many had a professional designation. Small firms are sued as often as large ones. [/FONT]

[FONT=Arial, sans-serif]Courts across the country are interpreting the concepts of “duty,” “standard of care” and “fiduciary” in more and more cases, such that the responsibility on the agent is truly onerous.[/FONT]

[FONT=Arial, sans-serif]Unfortunately, this is just a small sampling. Whether or not the agent was found to have upheld the “standard of care” required of him, each case cost thousands of dollars to defend—not just by the E&O carrier, but by the agency. Hours spent searching for and producing required documents, legal conferences and sessions with attorneys, and in depositions and testifying can be very costly, not to mention the disruption to the agent and his business. These cases also take a toll on the agent’s emotional well being, whose reputation is potentially at stake.[/FONT]

[FONT=Arial, sans-serif]The agent’s E&O is the new “deep pocket” for losses. The latest trend is that of third parties pursuing claims against the agent’s E&O. Courts are finding that agents have duties not just to their direct insureds, but to third parties as well. Even those with claims that may be covered by some other form of insurance are now seeking reimbursement or additional limits from the agent’s E&O.[/FONT]

[FONT=Arial, sans-serif]So is the point of all this meant to scare insurance agents? Indeed it is! With the advent of advanced technology, the mechanical processes of writing insurance policies may have become more streamlined, but the duties and responsibilities owed to a client are no less. Following are top ten suggested “musts” for commercial insurance agents:[/FONT]

[FONT=Arial, sans-serif]1. Understand your clients’ business and their potential exposures to loss.[/FONT]
[FONT=Arial, sans-serif]2. Understand the coverages needed to best protect the client.[/FONT]
[FONT=Arial, sans-serif]3. Obtain all pertinent information and forward to the underwriter.[/FONT]
[FONT=Arial, sans-serif]4. Search for insurance policies that will provide the best protection.[/FONT]
[FONT=Arial, sans-serif]5. Present to the client in a format that is understandable.[/FONT]
[FONT=Arial, sans-serif]6. Present various options and different levels of limits.[/FONT]
[FONT=Arial, sans-serif]7. Make recommendations whenever feasible.[/FONT]
[FONT=Arial, sans-serif]8. Have the client review and sign all applications.[/FONT]
[FONT=Arial, sans-serif]9. Make sure the client signs off on recommendations not taken.[/FONT]
[FONT=Arial, sans-serif]10. Retain hard or electronic copies for 10 years.[/FONT]

[FONT=Arial, sans-serif]Document, document, document! It cannot be said enough. Does 10 years seem like too long to retain documents? Many states have requirements of 3, 5, even 7 years. Ten is suggested as complex cases in litigation often extend into the 7- to 10-year time frame. If good documentation can help exonerate an agent, having discarded it because the regulatory requirements did not require it is of no benefit. [/FONT]

[FONT=Arial, sans-serif]There is no solution to keeping an agent from getting sued. But the more difficult the agents can make it for those that sue to be successful, the less perhaps we will see of these suits.[/FONT]
 
Thanks Sam, thanks Sales71. This is useful info on Errors and omissions coverage. Obviously the auto example is not always the cut and dried type of example when handling E&O for businesses but the points remain the same.
 
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