Document Coverage Declinations
E&O Insurance Prevention Tip for the month of September:
Claim Scenario: A customer requested coverage for his newly built barn. The agent, knowing that the customer had invested in state of the art materials and machinery, suggested a higher limit option than what the customer initially requested for the policy. Although the agent advised higher limits, the customer declined and purchased coverage for his barn with the lower limit option to save money. Later in the year, the roof of the barn caved in, destroying the majority of the contents in the barn. The customer’s insurance policy only provided coverage for about half of the machinery in the barn. As a result, the client brought a claim against his agent alleging he did not recommend appropriate coverage based on his needs. Although the agent had advised higher limits which would have provided adequate coverage for the barn, he did not document the conversation in which the customer declined the higher limit option.
E&O Prevention Tip: Always document and confirm in writing any declination of coverage recommendations.