Overview: E&O coverage may be more important than ever. With so many businesses closed due to the pandemic, many are filing business interruption claims with their insurers. In at least one case, the claim went to court, and the judge ruled for the insurance company. This scenario could lead businesses that don’t have business interruption coverage to sue the insurer. Is your agency ready?
COVID-19 has changed a lot of things for businesses. Some haven’t closed but are still struggling to stay open due to loss of workers or business. Some have had to close and reopen multiple times, with all of the resulting expenses. And some closed once and never came back. What does all of this mean for insurance companies?
Lawsuits are Trickling In
Put simply, a lot of people are losing money due to interruptions in business that nobody could have predicted. Except, of course, it’s the job of insurance agencies to predict when the policies that they sell might be needed, including policies that cover business interruption. That means that some of the companies that have lost money – and their attorneys – may now be looking at insurers and agents as possible sources of compensation.
The questions that attorneys are asking are: Did this person or company have business interruption insurance? If they had it, were they denied? If they didn’t have it, was it offered? Did the client ask for it and not receive it? Were they properly advised? And of course, are they entitled to make a claim now?
Who is Being Sued?
Are you at risk of being sued over business interruptions? Perhaps. The first targets of these types of lawsuits are insurers that deny claims. But if those lawsuits fail, agents will be a secondary target. Similar cases are already being seen and talked about, so agents who deal with this type of insurance need to be ready.
This happens because business insurance agents are expected to create plans that suit each individual business. The plans can be personalized, which may not be the case with some other types of policies. So, if the policy fails to properly protect the client, the blame may then fall on the agent who crafted it. At least one such lawsuit has been struck down, but the suit may signal a trend.
What to Do Next
Both insurers and insurance agencies are receiving recommendations to fight early COVID-19-related claims with everything they have. Of course, as soon as one lawsuit has been won, other plaintiffs and their attorneys are going to try it, even if they hadn’t been planning on suing before. It’s worth the money to vigorously defend against these kinds of suits.
Otherwise, agents need to follow best practices as outlined by their E&O coverage. Most importantly, this boils down to carefully explaining every exclusion and nuance in a policy to the client and documenting everything that they do.
Going forward, clients may be able to see the value in taking on more insurance in order to cover against things that can’t easily be foreseen, like a global pandemic. That’s important for them and for you.
To find out more about what agents need to know about E&O coverage in a pandemic, contact the American Agents Alliance. Ask about E&O Insurance.