Does An Agent Have a Legal Duty to Report Wrongdoing by Others?

This question has come up a couple of times in the past month in connection with calls to the Free Legal Service Program that I operate for IIAG members (click here for an explanation of the program).  Not surprisingly, both calls concerned the issuance of insurance certificates, which remains a hot topic among insurance agents.  In one instance, a licensed employee of an agency had created a false insurance certificate for a new home she was trying to buy.  In the other, an agency had discovered that a former customer had created a false certificate for liability insurance coverage that had not been provided through the agency for several years.  In both instances, the question of whether the principal of the agency had a duty to tell the Insurance Commissioner’s Office what had happened came up in the conversation.

Although the recently enacted law on insurance certificates does not contain any requirement that a breach of it be reported to either the Insurance Commissioner’s Office or the police, in a directive issued by the Insurance Commissioner in January 2011 before the enactment of the new law, the Commissioner stated his belief that an agent had a duty to report the issuance of a fraudulent insurance certificate.  In the Commissioner’s opinion, such conduct constituted a “fraudulent insurance act” under O.C.G.A. 33-1-16.  Paragraph (f) of that statute requires “Any insurer, agent, or other person licensed under this title, or an employee thereof, having knowledge of or who believes that a fraudulent insurance act is being or has been committed” to send to the Commissioner “a report or information pertinent to such knowledge or belief and such additional information relative thereto as the Commissioner or his employees or agents may require.”  Such duty encompasses far more than the issuance of fraudulent insurance certificates, as the statute defines “fraudulent insurance act” to include “knowingly and willfully” transacting “any contract, agreement, or instrument which violates” the Georgia Insurance Code, as well as the providing of “materially false information” in writing in connection with the issuance or rating of an insurance policy or the making of a claim under one or the concealment of ” information concerning any fact material thereto.”

The existence of this duty is important for insurance agents for keep in mind, because the Georgia Insurance Code allows the Insurance Commission to suspend or revoke an agent’s license for violating any provision of that Code or of any other law or regulation relating to insurance.  A fact which the Commissioner pointed out in his January 2011 directive on insurance certificates.  It seems clear that the Insurance Commissioner would regard the failure to report the issuance of an insurance certificate in violation of the new law to be a breach of the duty set forth in O.C.G.A. Section 33-1-16.  I have heard that the Department of Insurance is in the process of developing an online portal for agents to use to make the reports required of them by that statute, but for now any such report should be directed to the Department’s Fraud Unit at 708 West Tower, Floyd Building, 2 Martin Luther King, Jr. Drive, Atlanta, Georgia, 30334.  If you have any questions about a particular situation, the telephone number there is 404-656-2060.  Any such report should be made in writing so that the agent would be able to show that they had fulfilled their duty under the above statute.

IIAG’s Fall Conference – What You and I Missed

My post last week dealt with what I learned at IIAG’s Fall Conference in Macon earlier this month about the E&O exposure of agents (click here for that post).  This week I thought I would talk about what I missed by not being able to be in two places at once.  As I noted last week, the other main emphasis in the programming at the conference was on how to use social media, the internet, and other digital programs and gadgets to help your agency grow its book of business.  There were four separate programs on various aspects of this topic.

As I learned later, the big news in this area was the successful launch of a new functionality for the consumer website portion of Project CAP, known as TrustedChoice.com.  It is now possible for consumers who visit that website to not only locate an agent near them, but to also obtain quotes on coverages offered by the six charter carriers of Project CAP: Safeco, Selective, State Auto, Westfield, Central Insurance Company and Main Street America Group. At this time, Georgia is one of only four states for which this new quoting service is available.  It is scheduled to be available  in all the other states by the end of next summer and additional carriers, both national and regional in scope, will begin offering quotes through this website in the future.  For more information on Project Cap and how your agency can participate in it click here.

Digital technology is here to stay and agencies that do not take advantage of what it can do to improve their marketing and office procedures will fall behind.  For those agencies that don’t know where to start or that have made an initial attempt and want to do more, IIAG has a program, Agents Go Digital, that can offer you guidance and other assistance in establishing an online presence for your agency and then using that presence to market your agency’s services and increase its book of business.   Click here for an explanation of the services offered and their cost.

Finally, for those of you who are interested in what the future holds, the Agents Council on Technology (“ACT”) recently held a webinar on that topic hosted by Judy DeLaRosa, chair of ACT’s Strategic Future Issues Work Group.  If you want to try to get in front of the curve, this webinar offers a look into the future of technology in the insurance industry.  It can be accessed by clicking here.

 

IIAG’s Fall Conference – What I Learned About E&O Exposure

IIAG’s Fall Conference took place in Macon 10 days ago.  It was attended by over 100 agents and many exhibitors.  The programs offered at the conference focused on two main topics, how to use social media, the internet (in particular, Project CAP), and other digital programs and gadgets to help your agency grow its book of business and how to make sure your handling of that book of business does not give rise to E&O claims against your agency.  The best part about all but one of the programs was that they were free as there was no registration fee for the conference.

The program that did require the payment of a fee was the one on E&O Risk Management, but that fee was offset by the fact that the successful completion of it would entitle the participant to a reduction in the premium for their agency’s E&O policy, if that policy was obtained through Westport Insurance Corporation, which is one of the IIAG’s preferred providers of E&O coverage.  Being an attorney, I thought it would be a good idea to see what agents were being told about how to protect against the legal liability exposures inherent in running an insurance agency.  The program was presented by IIAG’s Executive Director, Aubie Knight, who I learned has been teaching a class on this and other insurance related subjects at the University of Georgia’s Griffin campus for some time.

My regular readers may remember that I posted an article on the duty owed to insureds by an insurance agent under Georgia law back in July of this year (click here to review the article).  It turned out that the first part of the two part program was devoted to mostly that subject, and I was glad to hear that what I had said in my article was consistent with what Aubie told the participants in this program.  One thing that I had not mentioned in my article, but which came up in Macon, was that if an agent collects a fee from the insured as well as a commission from the insurance company on a policy, the collection of the fee from the insured can be used to increase the agent’s level of responsibility to the insured from its relatively low level under Georgia law.  As noted in my previous article, an agent has only those duties to an insured that the agent voluntarily undertakes to perform on behalf of the insured.

In order to obtain both a fee and a commission for the same policy, among other things, an agent must be licensed as a counselor and specify in writing to the insured the “additional ancillary services”, other than obtaining the insurance policy, the agent will perform in exchange for the fee to be charged (click here for my article on all the things that must be done in this situation by the agent).  The agent will be required to perform all the specified “ancillary services” in a non-negligent manner, i.e., with the care and skill expected of a competent insurance agent in Georgia.  So if you want to increase your income by obtaining both a fee and a commission for a single insurance policy, be aware that by doing so, you will also be increasing your risk of an E&O claim.

I had to leave the conference, so I missed the second part of the program on what an agent and agency can do to minimize their exposure to E&O claims.  The IIABA website has a multitude of resources available to agents on this subject.  Click here to see them.

Georgia’s YAC Does It Yet Again

After winning the Outstanding Young Agents Committee of the Year award last year at the IIABA’s Fall Leadership Conference (click here for my blog post on that award), the Georgia Young Agents Committee took home two awards from this year’s IIABA Fall Leadership Conference, which was held two weeks in San Antonio, Texas.  This time around, Georgia’s YAC won the Outstanding Membership Development Award for excellent achievement in recruiting and maintaining young agent participation in association activities and the Outstanding Communications Award  for achievement in establishing and maintaining an excellent communication vehicle for the young agents in Georgia.

According to the buzz at last week’s IIAG Fall Conference in Macon, this was the first time that one young agents committee had won two national awards in the same year.  Over the past three years, Georgia’s YAC has won 4 of the top 5 awards given by IIABA to young agents committees. (Click here to read about the winners of this year’s other national awards.)

Congratulations for the latest two awards go to Brooks Zeigler, who was the chair of YAC during the time period covered by the awards, as well as to Kelli Dean, the Vice Chair, and Jarrett Bridges, the Secretary-Treasurer, during that time, and the other members of the board of directors and committee chairs.  What I said in my post last year remains true today, the future of the Big I is in good hands with these outstanding young agents and its strong Young Agents Committee in general.