Insurance agents are bound by important deadlines as the timely filing and processing of paperwork directly affects when a customer’s coverage is in force. By missing a specific deadline, even by a single day, you could leave your client without coverage at the date it was promised. The claim example below illustrates how a lack of timely processing contributed to an E&O claim being filed against an agent. Review this claim and the following E&O Prevention Tip to help reduce your E&O exposures.
Description of Claim: A customer requested flood insurance through the National Flood Insurance Program. An application was completed and the premium was paid for the coverage. The agent advised the customer that he had no binding authority for the flood coverage but that he would process the paperwork right away. The Flood Program allows the effective date of the policy to be calculated from the date of the application if the application is received at their offices within ten days. Otherwise, the policy effective date will be 30 days from the date of receipt of the application at the Flood Insurance Offices. The application had been mailed by regular mail during the Christmas season and did not arrive at the Flood Insurance offices until 12 days after the date the agent wrote the application. A flood occurred in early January and due to the fact that the application had not been received within 10 days, the loss was not covered.
E&O Prevention Tip: Allow extra time for the processing of paperwork. Start tasks early to account for emergencies, changes, or unexpected delays. Although the agent told his customer that he did not have binding authority, the customer was led to believe that there would be no problem getting coverage from the date of the application. Sending the application and premium payment by certified and/or express mail would have prevented this claim.
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