E&O Prevention Tips: Avoid Hidden Dangers When Placing New Coverage
Clients may ask for coverage an insurance agent has not placed before. In an effort to satisfy the client, the insurance agent may unknowingly place insufficient coverage due to a lack of familiarity with the market. When this is the case, an insurance agent must take extra time and care to ensure the correct coverage is selected. The claim example below illustrates how a lack of experience placing coverage contributed to an E&O claim being filed against an insurance agent. Review this claim and the following E&O Prevention Tip to help reduce your E&O insurance exposures.
Description of Claim: The client approached the insurance agent to place full coverage for his restaurant. The insurance agent had never placed coverage for a restaurant and therefore did not have experience in this market. The insurance agent placed property and liability coverage through a wholesaler with a non-standard carrier. However, the insurance agent did not procure business personal property or loss of income coverage. The insured suffered a fire loss causing damage to the kitchen and smoke damage throughout the restaurant. The insured alleges that the insurance agent failed to get adequate coverage for his restaurant.
Estimated Claim Cost: $45,800.
E&O Prevention Tip: If you do not have experience with a certain coverage, let the client know that you can’t help them and refer to the specialist who has experience in the area if available. Committing to place an unfamiliar or complicated risk may lead to an increased E&O insurance exposure for your agency.