Overview: Is your agency ready for an upcoming surge of errors and omissions claims? We don’t want to be pessimistic, but in the insurance field, perhaps more than any other, it really does pay to be prepared. And to be fair, a global pandemic is a whole new experience for everyone, so there’s really no telling what effects it will have before it’s all over, or how far-reaching those effects will be. Take a look at what you need to know about the anticipated COVID-related claims and your E&O protection.
Why Are E&O Claims Rising?
With a little bit of thought, you can probably come up with all sorts of reasons why insurance claims might be on the rise almost across the board. Yes, people drove less, so car insurance claims went down when lockdowns were instituted. But all sorts of other claims – from health and life insurance to workers comp and business interruption claims and more — have all increased.
New E&O claims are likely to come largely from the business interruption claims. There’s no doubt that COVID-19 has interrupted business in any number of ways. Even if a business wasn’t forced to close in a lockdown, it may have shut its doors for some other COVID-19 related reason – loss of employees due to illness, for example. So it shouldn’t come as any surprise that business owners are filing claims. When those claims are denied by insurers, businesses may resort to suing their agents. (Some already have; see this Claims Journal article for cases to watch.)
Reasons for E&O Claims
E&O claims are generally filed because of errors, omissions, misleading statements, neglect, or breaches of duty. For example, a client might file a claim if they feel the insurer or broker failed to offer sufficient business interruption coverage. They may also go after agents for failure to provide notice about a lack of coverage for COVID-related claims, or in some cases, making guarantees about what would be covered that couldn’t be kept later.
Preparing for Anticipated E&O Claims
If you haven’t reviewed your agency’s E&O policies in a while, this is a good time to do so. Agencies may not yet be seeing a flood of claims because lawyers and their clients will file claims with their insurers first and only target agencies when those claims are denied. But you can expect more of these claims to come, so it’s a good idea to review your policy and plan accordingly.
Experts suggest that it makes sense to defend strongly against any COVID-related E&O claims at this juncture because as soon as cases start being decided in favor of plaintiffs, more cases will flood the courts. Learn how your agency can defend itself before the rush of lawsuits that’s almost certain to come.
Contact the American Agents Alliance for questions or concerns about your agency’s E&O insurance needs.