In Need Of E&O Advice

[Katt]

It appears there may be a chance we will be filing an E&O claim. We're pretty sure we are at fault. We are small business owners (no employees) . This will be the first claim made against us. This could be a sizable claim - between $10k-$20k. We are assuming our current E&O provider will drop us. Will we be able to get coverage from a different company? It's understood we'll be considered "high risk" and have high rates.

If it's financially feasible, should we just settle the matter with the client or should we file the claim, pay the deductible, and be dropped?

Any advice would be greatly appreciated.

 

[fed up]

Why would you be dropped? E&O is for mistakes and apparently your office made one. Expect your rates to increase in a similar manner as the premium on any insurance policy. How long have you used the carrier? $20K is not a sizable claim when you consider a mistake on a homeowners could cost hundreds of thousands of dollars. Let your carrier defend you

 

[Katt]

Thank you, Guru, for you quick response.

We've used this carrier for about three years. We've heard of other inspectors who have been dropped when a claim was settled against them.

 

[Markthebroker]

Why would you be dropped? E&O is for mistakes and apparently your office made one. Expect your rates to increase in a similar manner as the premium on any insurance policy. How long have you used the carrier? $20K is not a sizable claim when you consider a mistake on a homeowners could cost hundreds of thousands of dollars. Let your carrier defend you

Fed up speaks the truth. $10k to $20k is not that much. They probably won't drop you over this either. To expand on what he said a little bit, it's a good idea to have them defend you, that's their job. I don't know the details, but I've seen a claims start as a small amount like this, then spiral into the hundreds of thousands, often on attorneys fees. You aren't going to want to take that on alone.

 

[Katt]

Thank you Mark. A brief overview: We missed that there was dry rot under the facade of a garage. When we reviewed the photo's, we could see a sag and a 1/4 inch gap in a small area between the top of the garage door and the stone facade. When you press on the facade, there is give. This should have been noted in the report and we failed to do so. The client is getting estimates and will let us know when they come in.

Here's the rub, though. It is to the carrier's benefit to fight the claim. So, as you stated, the costs are going to spiral way past whatever the estimate might be. So if we show our E & O we were negligent, will they still try to "win" or will they drop us after paying the claim?

 

[adjusterjack]

So if we show our E & O we were negligent,

Never admit negligence to anybody. Any time a client accuses you of wrong, the only thing you say is "I'll report that to my insurance and you'll be contacted."

You have knowledge of a potential claim. Your policy requires that you notify your carrier NOW, while an investigation is still possible. Your carrier will send out experts to inspect the condition, make the determination and handle the claim accordingly.

The homeowner is unlikely to file a lawsuit if he gets paid so there isn't likely to be much by way of defense costs.

Did you have a written contract with the client? Provide a copy to your claim rep.

The possibility of losing your insurance is greater if you don't report this immediately and your carrier's right to investigate is prejudiced.

 

[fed up]

How long has the policy been active? Has a claim been denied by the insurance carrier on the property? Do the terms "sudden and accidental" mean that the roof condition has changed since the policy inception? You might be jumping the gun just a bit

 

[Markthebroker]

Thank you Mark. A brief overview: We missed that there was dry rot under the facade of a garage. When we reviewed the photo's, we could see a sag and a 1/4 inch gap in a small area between the top of the garage door and the stone facade. When you press on the facade, there is give. This should have been noted in the report and we failed to do so. The client is getting estimates and will let us know when they come in.

Here's the rub, though. It is to the carrier's benefit to fight the claim. So, as you stated, the costs are going to spiral way past whatever the estimate might be. So if we show our E & O we were negligent, will they still try to "win" or will they drop us after paying the claim?

I feel like you may be focused on the wrong things. Let the carrier handle this. If they cancel you, they cancel you. Life happens, people have claims, and the carriers understand that, and you may not even see a rate increase. If need be, you'll be able to get coverage elsewhere, but that is unlikely, and should not be your focus right now. Now, if you have a relatively small operation and have many claims, THEN you have a good chance of getting dropped, and will have a tough time finding new insurance, which will be expensive.

 

[Katt]

Thank you Adjuster, Mark and Fedup for your responses. This is our first time with having a potential claim. We did notify our carrier, per our carrier's requirements (as Adjuster stated). As of this posting, we have yet to hear anything from the client. Fedup said I may be jumping the gun. That is possible, but I don't feel like this has "gone away" and it's lurking. Adjuster, we do have a written contract with all clients and I believe that my husband has supplied that.
I suppose at this point it's a waiting game. I do appreciate all of you for answering this newbie's questions and helping to center me so I won't spin out of control and make an unfortunate situation worse. You all are amazing. Thank you again!

 

[marindependent]

This could be a sizable claim - between $10k-$20k.

could be a sizable claim - between $10k-$20k

- I don't think that this is a large claim.