In last week’s post, I talked about how an insurance agent can create a duty to their customer that they would not otherwise have by what they say to the customer. The August 7 edition of the IIABA newsletter contained two articles on how an agent can create E&O liability exposure by what they do or don’t do for their customers. The first article discussed the problems that could arise when an agent assists a customer with a claim.
When a claim is denied, it is important for an agent to avoid crossing over the line between advocating for the customer with the insurance company and taking the blame for the denial. The article advised being very careful about putting anything in writing about the claim denial, especially interpretations of the relevant policy provisions, as what an agent says about the circumstances of the claim and its validity can be used by the customer against the agent, if it turns out the agent’s interpretation or statements made about the circumstances prove to be incorrect.
The article also advises notifying the agent’s E&O carrier before providing documents, giving recorded statements, or participating in settlement discussions with the insurance company and customer, as doing so without the knowledge and consent of the E&O carrier could give the carrier a basis to deny coverage of any claim that may be made by the customer. The article referred to a webinar held earlier this year which explored in detail the do’s and don’ts for agents in this situation. The webinar was recorded and the presentation slides used in the webinar are available for review and download. The slides contain specific guidelines on when and how to advocate for a client and when to call your attorney.
The other article addressed the E&O exposure created by allowing an insured’s policy to automatically renew without determining if any changes had occurred that may affect the coverage needed or at least obtaining something in writing from the insured that authorizes the renewal with no changes. This may seem like a no-brainer, but in the rush of trying to produce new business and dealing with claims and other administrative problems on other policies, it is easy to overlook those policies that are on automatic pilot, so to speak. In this instance, it is more a what you don’t do for the customer that can get an agent in trouble.
It would be preferable for reasons unrelated to E&O exposure for an agent or CSR to conduct a review of the insured’s situation before the renewal of their policy. Such a review provides a reason for contacting the insured to remind them of your existence and to determine if changes in their circumstances require additional coverages, as well as changes to their existing coverage. If an agent does not have the time to conduct a review of the insured’s situation, they should at least get a written statement from the insured that they do not want any changes made to their existing coverage before its renewal date. Such a statement would be a good defense to any claim by the insured if in fact changes needed to be made, as long as the agent had said nothing to the insured that reasonably lead the insured to believe the agent would be responsible for determining if any changes were needed. The article also contains a cautionary case study about what can happen when an insured informs the agent that their address has changed and that information is not reviewed in light of all the insurance coverages provided to the insured by the agent.