Many E&O claims come from a breakdown in communication along the client life cycle or a lack of well-structured procedures in place at the agency. Great processes and procedures in place at the agency that are invariably followed by all staff are critical for two main reasons:
1. "A Blinding Flash of the Obvious" - If you have great procedures you are less likely to make a mistake in the first place.
2. If you do get sued, it frequently comes down to credibility when there is a lack of documentation on either side. The existence of invariable practices in your agency can significantly support your word around the fact that you always process things in the manner you are claiming to have done in the case you are being sued for. Other files can be used as exhibits in your defense.
The following claims examples illustrate these points. They came from actual agents that implemented the Agency Shield ProgramTM after realizing their procedures needed help:
Agent fails to properly explain exclusions and restrictions
The insured client purchased a tenants policy. Following a heavy rainfall a wall collapsed in the basement of the property occupied by the client. The insurance company denied the claim based on it being an uninsured peril (flood and faulty workmanship). The client sued the agent for $100,000 in damages, alleging failure to explain the policy exclusions and failure to procure the appropriate coverage. The trial rendered a decision in favor of the client for the full amount of the claim. The jury accepted the statement that the client never received a copy of the policy and that the exclusions were never explained by the agent, nor was flood coverage offered.
If the agent had proper procedures in place these errors would not have occurred. If they did in fact explain the exclusions, but did not document the fact, the existence of clear process and historical evidence of it being followed would have supported their claim to have done so in this case and added greatly to their credibility - so potentially at least mitigating the amount of the judgment.
Agent wrongfully cancels a policy
Client consolidated a number of commercial policies into one new policy and cancelled the previous individual coverages. The agent inadvertently also cancelled a residential policy but continued to accept the premium. There was a subsequent total loss to the residential property and a claim with the underlying carrier was denied because the policy had been cancelled. The client sued the agency and the claim was quickly settled. This is clearly a situation where a number of things went wrong and in which basic procedures would have raised a flag on at least one of them - so identifying the overall issue.
Agency Shield Program (ASP™) offers agencies an affordable and an easy way review current procedures to identify areas of improvement. Completing the ASPTM process can be enlightening to agency managers and will ultimately reduce E&O exposure, improve client service and build sustainable, profitable processes. It is exclusively available to Swiss Re policyholders and offers a 10% E&O premium credit at completion good for three years on their next renewal. To learn more about ASPTM, visit the Prevention Tools section of the E&O Happens website or click here.
