June 1 marked the beginning of the Atlantic hurricane season, which spans from June 1 to November 30. Along with checking battery supplies and buying extra bottled water, insurance agents should also consider their potential Errors & Omissions exposures during this hurricane season.
NOAA has predicted another active Atlantic hurricane season this year with 13-20 named storms possible, including 3-5 major hurricanes. This equals plenty of opportunities for hurricane e&o claims to arise.
There are some common types of e&o claims that have arisen from catastrophic storms in the past – we can learn from these past claims to avoid future ones. Read on to learn more about hurricane e&o claims and how to reduce them.
Check out the resources at the American Agents Alliance website for even more information about e&o claims.
Hurricane Season Can Bring E&O Claims
There are some common Errors & Omissions claims hurricane season can bring, even against seasoned insurance agents.
Failure to Procure Coverage
Helping your clients to have the proper coverage in place for their exposures is critical for an agent, but during hurricane season e&o claims can arise from clients who find they don’t have coverage. Failure to procure coverage is a common cause of agency e&o claims in general, so following storms where a client’s homeowners, wind, and flood policies are all stressed is a time when more claims may be filed.
Catastrophic storms can wreak havoc in excess of limits, and this can lead to errors and omissions claims from clients who allege they were not properly advised. Do your clients have limits on their flood and excess policies to match their homeowners? This is a common area where disagreements are likely if clients expected all lines to match but you provided lower limits on excess or flood policies.
Flood Zone Limitations
Changes and inaccuracies in flood zone maps can lead to e&o claims. Properties in areas that face discrepancies in flood zone maps should be rated at the more hazardous level (unless eligible to be grandfathered), according to FEMA. This can result in e&o claims filed by clients when agents miss that distinction or use an outdated flood map that does not show the updated conditions.
Failure to Adequately Explain Coverage
Failing to adequately explain limitations or exclusions in coverage can lead to errors and omissions claims when a client is denied coverage they expected to have in place. For example, discrepancies in understanding replacement cost and actual cash value in policies can lead to e&o claims from unhappy customers who thought they would receive replacement cost.
Ways to Help Avoid Hurricane Season E&O Claims
There are steps you can take as an agent to help reduce your exposure to potential hurricane e&o claims.
Document thoroughly. When you discuss coverage limitations, client declinations, or anything regarding coverage make sure you document the conversation carefully. Have appropriate refusals signed by your client and maintain your files to save electronic discussions. Taking the extra time to specifically document discussions regarding hurricane season and coverage can help if you do face a hurricane e&o claim.
Follow your standard procedures. You’ve already documented your agency’s standard operating procedures with checklists and guidelines, now make sure you follow those written procedures to a T. Check in with employees to be sure they understand and follow the guidelines, too. This should be normal operating procedure anyway, but its importance is highlighted during hurricane season.
Communicate often with your clients. Agents are in the business of relationship-building, and this becomes even more relevant during hurricane season. Communicate often with your clients all year before and during hurricane season – share relevant news and updates about storms, regulations, and anything else that arises. Having a sound relationship in place means you can have honest discussions with your client and share challenging news more easily. Positive relationships can help you resolve issues before they become complaints or e&o claims.
Purchase Errors & Omissions Coverage
Don’t forget about your own insurance coverage – make sure you’ve purchased sufficient e&o coverage to protect yourself throughout the year, not just during hurricane season. Check your aggregate limits, as well. If a catastrophic storm struck your area and many of your clients filed claims, would your aggregate limit be sufficient?
California agents can purchase Errors & Omissions coverage directly from the American Agents Alliance.
Stay Prepared and Safe This Hurricane Season
We always hope the hurricane season doesn’t bring major storms but it’s important to be prepared. Make sure you’re ready for hurricane storm damage as well as for the storm of e&o hurricane claims that could result.
We have additional resources to help you learn more about avoiding e&o claims. Plan ahead by making sure your Errors & Omissions coverage is up-to-date and your limits are sufficient and stay safe this hurricane season!