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Common Errors Alleged

Knowing the common E&O claims can point your agency in the right direction of knowing how to proactively avoid them. Here are some of the most common E&O errors made by agencies. They are broken down by the normal agency business functions listed below:

Cancellations and Non-renewals:

Failure to notify customer of policy cancellation
Failure to replace coverage upon cancellation or nonrenewal
Interfering with the insurer’s right to effect cancellation
Historically calling a customer to advise of late payments on direct bill policies and then failing to do so and a claim occurs after cancellation
Failure to offer an Extended Reporting Period (“tail”) on a Claims Made policy

Customer Claims Processing:

Failure to provide timely notice of a claim to the carrier
Failure to transmit a lawsuit to the carrier in a timely manner, resulting in a default judgment against the insured
Failure to notify an insurance carrier when other coverage (or a defense) might be provided by another carrier or party
Alleged claim investigation/adjustment error (e.g. - Giving authorization to an insured to make repairs prior to approval by the insurer)
Failure to adequately explain policy provisions or misleading an insured to believe coverage will be provided when it will not

Endorsements:

Failure to procure coverage by endorsing all policies when requested to make a change
Providing inaccurate information to the carrier
Failure to increase or decrease limits or add coverage in a timely manner
Failure to identify or add an additional insured/loss payee
Making a policy change based on an unauthorized instruction (such as from a person without authority to give the instruction)
Failure to endorse all policies when requested to make a change

Marketing and Selling:

Failure to identify a loss exposure and propose a risk management solution
Failure to adequately identify value of the exposure and recommend adequate limits
Errors on proposals
Overstating the benefits provided by an insurance policy or the services offered by an agency

New Business:

Failure to process applications in an accurate and timely manner
Failure to procure the coverage requested by the prospect/customer
Failure to adequately identify exposures including advising the customer of any coverage gaps, limitations, or restrictions
Failure to obtain, add or accurately identify additional insureds or loss payees
Failure to advise the insurer in a timely manner when coverage was bound by the agency on its behalf

Policy Audits:

Failure to disclose the auditable nature of a policy
Intentionally understating or misrepresenting the premium basis at the beginning of a policy

Renewals:

About one-fourth of E&O claims involve a renewal. Specifically, the situations that give rise to E&O claims involving renewals typically include:

Failure to procure a renewal policy
Failure to duplicate prior coverage
Failure to adequately identify and secure coverage for new exposures
Failure to recommend adequate value/limit
Errors when entering information on renewal applications
Failure to adequately explain to the insured policy provisions or what must be done to secure a renewal

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