In Commercial P & C, What Are the Consequences of Improperly Written and Issued Coverage.

[CC1975]

During the course of my work I often come across commerical policies that have been written and issued with a variety of errors.

For example, just the past 3 weeks....I have found,

a BOP issued...covering a wood frame office building housing two different corps, one a real estate agency, the other a property management co, owned by the same businessperson, with two tenants. According to one carrier's underwriter I'm working a proposal for....a standard BOP...like this prospect now has....with not address the lessor's risk exposure of the tenants. Plus the current BOP only is for one of the corps..the property management co....there is no coverage issued for the real estate corp. Plus....the current BOP (the building is covered as well in addition to the contents since the owner, owns the building) was issued on the building being of solid non combust building material....this building is wood frame.

....also found a BOP issued on a business that is a combo cigar/and bar operation. 3/4s of the sales receipts are from cigar and tobacco sales....the other 1/4 food and alcohol sales (and 3/5s of this was alcohol). Yet ....the current coverage was written in a class of restaurant-american food-family style......LOL. The current dec pages also show it was written in a building built in 1999, when actually the building was built in 1979. Decs also list a central fire alarm, as well as on-site property managers...of which there are neither.

....found another restaurant BOP written showing the sales receipts only half of what the owner says there are...when I pointed this out to him and asked him why....he insisted he didn't know and that he told the other agent the correct amount the receipts were.

I'm not naive.....the lower the limits..the lower the sales receipts....the better the underwriting class ....the lower and more competitive the premium usually is....and unfortunately there are people out there that will intentionally do this to get the business. And there are some out there that just screw up....don't know any better, and are sloppy.

But, my question is......can any of you tell me what the consequences are ...COME CLAIM TIME....of the examples I have given above and in similar situations?

In general.... come claim time ....do companies' claims adjusters while settling claims....sometimes pay the claim according to coverage then back bill for higher premiums the insured should have been charged if the coverage had been written correctly in the beginning? Will they sometimes out right refuse to pay any of the claim and return all premiums?
Are there and what are the adjustments and consequences?
Do companies sometimes pay the claim for these types of errors, then fired the agent?

I would like to hear from any of you that have had real life experiences, or know of such experiences in these types of situations to share as to what happened and how the claim was settled when the coverages were written wrongly and /or with errors. Thanks.

 

[Guest]

SOME agents write things, just so they can get the business.

You NEVER count on a commercial policy being correct, Don't go by what they currently have. Sure, Look thru it and compare and show the client the holes or errors in coverage, but never match coverage for coverage,

 

[iiinycboi]

sounds like my area, every policy i get is wrong. i had the same questions when i started out.

I now, give a little education and hope they change their mind and purchase the new policy. I try to not sell by price, i tell them i can beat this price at any time because the coverage can be lower etc.... but i can not do that.

tell them its insurance company rules, so it's not "your" fault you wont give them the crappy coverage. If they dont care, move on.

For every 30 or so customers i had that didnt care and only cared about price, i found 1 really good client, who calls me for insurance advice, calls me and listens, sends me referrals etc....

so there are good clients out there? and leave the crappy ones out. unless you wanna play with their rules and just BOR everyone lol and sell yourself.

 

[benk622]

It really depends on how badly written the coverage is. I've heard of companies coming after back premium if the sales receipts were way under-reported but most of the time that would likely not impact a claim.

That BOP on the bar you describe seems like a claim waiting to get denied. Listing an alarm that doesn't exist or on-site property managers that don't exist could certainly invalidate coverage.

There are really two types of clients out there, the ones who want it done right and the ones who just want an expensive packet of paper that does nothing.

Starting out its hard to be selective but getting into the mindset of doing things right will save you a significant amount of time and money in the long run.

 

[CC1975]

SOME agents write things, just so they can get the business.

You NEVER count on a commercial policy being correct, Don't go by what they currently have. Sure, Look thru it and compare and show the client the holes or errors in coverage, but never match coverage for coverage,

I hear ya Red Blood.....I do it right or I don't do it at all....

I'm looking to hear about stories of how claims were settled when the coverage was written with errors and false information. Thanks for your input!
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sounds like my area, every policy i get is wrong. i had the same questions when i started out.

I now, give a little education and hope they change their mind and purchase the new policy. I try to not sell by price, i tell them i can beat this price at any time because the coverage can be lower etc.... but i can not do that.

tell them its insurance company rules, so it's not "your" fault you wont give them the crappy coverage. If they dont care, move on.

For every 30 or so customers i had that didnt care and only cared about price, i found 1 really good client, who calls me for insurance advice, calls me and listens, sends me referrals etc....

so there are good clients out there? and leave the crappy ones out. unless you wanna play with their rules and just BOR everyone lol and sell yourself.[/q

Thanks for your input iiinycboi....

I'm trying to be more selective when setting appointments....not always... but seems more obviously successful and profitable companies will be more value appreciative....than price oriented. However, it is frustrating to find so many clients that do not care about whether their coverage is correct or not.....just about price.....

that is until claims time.... which is why I posted my original question....I'm seeing this so much I wonder....hell... does it make any difference...come claims time....does the adjuster just shrug and pay it any way? I know it's not that simple....depends on the nature and how severe and fraudulent the misrepresentations were.

Guess I need to call up some of my carrier' 'claims adjusters and get it straight from the horses' mouths.
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It really depends on how badly written the coverage is. I've heard of companies coming after back premium if the sales receipts were way under-reported but most of the time that would likely not impact a claim.

That BOP on the bar you describe seems like a claim waiting to get denied. Listing an alarm that doesn't exist or on-site property managers that don't exist could certainly invalidate coverage.

There are really two types of clients out there, the ones who want it done right and the ones who just want an expensive packet of paper that does nothing.

Starting out its hard to be selective but getting into the mindset of doing things right will save you a significant amount of time and money in the long run.

Thanks benk....this is more of the type of reply and info I was looking for....

yeah .....the cigar/rest't client is presently written as an American style family rest't with an major......nationallu known admitted carrier.....and the business is really a cigar shop with a bar. It's liquor receipts being 3/5 s of the food and drink receipts makes it ineligible for coverage with all the admitted carriers I have found.....Hartford, Travelers, Allied, ...that will write cigar shops and rest'ts.

So..... I'm gonna have to find an unadmitted carrier in the specialty market whose premium will of course be much higher than his present.....

go explain all this to the client....

and have him sit there....say thanks .....see ya....and decide to.....even if I convince him of the risk he is taking of having incorrect written coverage....

take the risk....because he's thinking ....."I've been in business all these years and nothing bad has happened, and/or when I have had a claim it was settled ok......this guy's full of crap"

Sometimes I wonder why I'm in this business.....I need to focus more on personal lines.

LOL.....of course....they are just as bad I think when it comes to caring not about the difference in named perils and all risk.....good foundation coverage and little or none....good water coverage vs little or none...

"it's all the same......the cheapest price is all that counts".

 

[Soaringagent]

That cigar shop sounds like a claim waiting to happen. Have you called the customer to follow up?

 

[NCAgent]

I knew an agent who learned that a business was written similarly to yours in terms of inaccuracy.

What he ended up doing was learning the carrier and then contacted the company directly reporting what happened under the ethical reasoning of the claim might be denied under material misrepresentation or that the company might not have wanted the risk in the first place.

I wasn't a part of this but he said the carrier did audit the business and ended up dropping them due to a material change in business needs or something like that. Now this guy has been known to be full of sh*t but it seems likely.

I wouldn't be that guy BUT at the same point if it is horribly done wrong it might not be a bad thing to have the client PUT IN WRITING that they understand the policy was written incorrectly or their business is significantly different than what they really are. Something about signing their name on something makes them think twice.

Idunno, this is why I am in personal lines. If they have a well-maintained property that isn't coastal I can pretty much write it regardless of anything else...

 

[Matt37]

I've been writing commercial auto for 15 years now.

Happens all the time, they do it so they can get them into markets otherwise not accessible or get lower rates etc.

IE: I write a lot of Taxis and I know a ton of agents who write them on the apps so they sound like Limos.. Limos and Taxis are a TOTALLY different risk and exposure..

On long haul trucking accounts, they will make up the garaging location and cargo information.

And the classic is if an account has say 20 listed drivers they only put the top 5 or 10 MVRS on the app.

It is tough, because years ago in NJ/NY the market had so many shady characters to really be competitive you had to stoop to their level.

Never forgot, the agent who use to sit at the Atlantic City train station issuing bogus ID cards from his car for $500 bucks a pop.

You will see it in a hard market and with risks that are tough to place... Like taxi cabs, where as Limos are alittle easier to place.. so why not magically make a taxi a Limo..

 

[CC1975]

That cigar shop sounds like a claim waiting to happen. Have you called the customer to follow up?

Not yet, as I am trying to find a market for the risk when written truefully and correctly. I've already pointed out the errors on the current dec page to the owner during the initial meeting.
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As I was speaking with an underwriter today about the cigar/res't risk....and after she turned it down.....

I shared with her the way it was written...

she goes "you ARE KIDDING ME"...,BUT
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sorry ....typo....

but the underwriter went on to comment that the insured, unless proof of fraud was present....couldn't be held responsible for incorrectly written coverage....come claim time...(guess companies don't really expect customers to read their dec pages at least....and yeah.... 95 % probably don't)....

she sort of alluded to her belief that the company would just pay the claim...anyway...

'course she's just an underwriter...not an adjuster.

Got another dandy today.....auto body paint and repair shop paying 18G annually ....6 buildings...at 3 locations...

incorped business.....but problem is 3 of the buildings...aren't owned by the corp .....when you look up property records...these buildings are owned by the owner in his name as an individual...yet...

they are all listed on the one and only ...same policy...in the corporation's name.

Nice tax write off as well ...eh? LOL.

I thinking about just reading these owners "the riot act" when I find this stuff.....professionally and tactfully...of course...and if they don't respond to my offer to fix their problem.....they just want C H E A P .....just quit wasting my time and tell them I can't help em and move on.