Clients often request their agents to provide them a new policy to replace one they already have. Whatever their reasons are, it is important for you, the agent, to be sure the new policy provides the same coverage as the old policy did. Far too often, both the agent and client assume the coverage is the same when, in fact, it does not provide the exact same coverage as the original policy.
Occasionally, a client wants the new policy to have different coverage than the original one. It is imperative that you understand exactly what coverage your client requires. Claims against insurance agents E&O insurance policies are often based on a replacement policy not providing the exact same coverage as the original one. If your client has requested any change in coverage in the new policy, you must document the client's change request. Here is an example of a claim that was filed on the grounds that the agent made a mistake in replacing one policy with another one when the new policy did not provide the same coverage.
Review the example and the E&O insurance prevention tip that follows it.
Claim Description: A contractor, who did work for his clients in several different states, including California, had a policy that provided him coverage in any and all states where he worked with no exclusions under a Multi-State Commercial General Liability policy. Subsequently, a new policy was bound with a surplus lines carrier that attached an endorsement specifically excluding any work performed in California. Apparently, neither the agent nor the insured noticed the exclusion for work performed in California until the contractor filed a claim with his insurer. The contractor was sued for damages related to alleged defects in work he performed in California. When the contractor’s claim was denied, he filed a claim against his agent. Estimated cost of the claim: $38,000.
Prevention Tip: When clients ask for a policy to replace their original policy, find out exactly what coverage the client expects from the replacement policy. Carefully compare both policies to be sure the new policy provides the coverage the client has requested. Have the client carefully review the new policy and agree that it provides the needed and requested coverage. If changes in coverage have been made in the replacement policy, have the client acknowledge in writing that the new policy conforms to the client's request. As insurance agents ourselves, the American Agents Alliance offers a very affordable, A-Rated, and admitted E&O insurance program for P&C insurance agents. If you are a P&C insurance agent, you can read about our E&O insurance program right here.