In this monthly E&O insurance claim scenario, a small town agent whose client was always late in paying his life insurance premium drove to the client's home every month to pick up the premium check. The client only paid the minimum premium and there was no cash value in the policy to allow an automatic premium loan to be taken if a premium payment was missed. The agent failed to pick up the check one month and the policy lapsed. As a pre-condition to reinstatement of the policy the carrier required that the insured attest that there had been no material change in his health. Unfortunately, the client had been diagnosed with cancer during the interim and the carrier refused to reinstate the policy. The client thereafter filed a claim against the agent for allowing the policy to lapse. The court ruled that the agent had assumed an elevated duty of care to the client by his custom and practice of driving to his home and picking up the premium check each month and that he had relied upon this practice to his detriment.
Loss Prevention Tip:
All agents are required to conform to the same professional standard of care – i.e. that degree of care and skill ordinarily exercised by members of the same profession currently practicing under similar circumstances in the same locality. Agents can assume an elevated standard of care by their actions in their efforts to provide good customer service, and thereby expose themselves to additional liability.
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