Our June E&O prevention tip reminds agents that there is no substitute for exercising due diligence.
Claim Scenario:
An agent was asked to procure a commercial package policy for a condominium Home Owners Association. When the quote was delivered, the deductible for wind losses was listed as “$10,000 plus 2%”. This was presented to the customer, who rejected it in writing and the agent notified the underwriter, who sent written confirmation correcting the deductible to $10,000. The policy was issued and when the agent received the declarations page by email, he reviewed it and noted that the deductible for property damage was $10,000. The carrier also mailed a copy of the policy which reflected the incorrect $10,000 plus 2% deductible. About six (6) months later, the client suffered a wind loss to the tune of several hundred thousand dollars, but the carrier assessed the larger deductible when the claim was adjusted. The client disputed the deductible and an E&O claim was filed. Ultimately, the agent and the customer were able to present overwhelming documentation to the carrier regarding the procurement of the policy, including the digital record and the carrier paid the claim subject to the $10,000 deductible. This resulted in an additional payment to the customer of approximately $30,000, enabling the client to complete the necessary repairs.
E&O Prevention Tip:
While nobody is perfect, an agent or agency with sound business practices that does not cut corners is much less likely to face an E&O claim, especially one with substantial damages paid. There is simply no substitute for exercising due diligence in all aspects of an insurance transaction and keeping complete records in the customer file.
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