2020 was an unprecedented year for many types of businesses, and insurance faced many challenges along with most other industries. Pressures from the economic downturn and hard market made conditions challenging and COVID-19 lockdowns and slowdowns caused losses to many businesses.
Agents have and will continue to face questions and challenges from clients as they recover from the pandemic. Errors and omissions claims appear to be on the rise stemming from the pandemic.
Read on to learn more about pandemic-related errors and omissions claims. For more great content like this, join us at the American Agents Alliance and check out our blog.
Pandemic-related Errors & Omissions Claims
We are now over a year since the start of pandemic-related lockdowns in the US. Businesses that suffered losses due to this have submitted claims to their carriers or are starting to submit their claims. And as we know, many of these business interruption claims are being denied by the carriers due to no coverage for pandemic-related disruptions and losses.
This means those businesses who are denied coverage from their carriers may turn to their agents and brokers – they may allege their agent did not offer or sell them the correct coverage and did not advise them of the risks they faced without proper coverage.
What to Expect Next
The hard market we are in currently is expected to continue, which leads to various challenges with pricing and placement and tends to exacerbate difficult marketplace situations. Clients may have difficulty affording increased premiums for pandemic coverage and drop other coverages or lower limits and increase deductibles.
Clients will continue to seek advice from their agents and brokers about whether their business interruption claims will be covered. We can expect pressure in the form of E&O claims from some clients when they are denied by their carriers.
E&O claims often have a long tail – meaning the errors and omissions claim is often filed later after other claims have been filed and settled. This means we could see pandemic-related E&O claims for quite some time.
What Actions Agents Can Take Now
While claims that will be filed as a result of COVID-19 cannot be prevented now, we can mitigate future losses. Agents can talk to their clients about their policies and pandemic exclusions and wording to make sure clients understand limitations and benefits.
Carriers will likely be updating and rewriting policies to make their stance on pandemic coverage clearer – agents should help their clients understand changes in wording and what those changes mean for the client.
Some clients may elect to purchase new coverage that is written to afford some type of pandemic coverage, while other clients may pass on the coverage. Whichever option your client elects, documenting the discussion can help you in the future should you be presented with a pandemic-related E&O claim.
The general insurance rule of ‘document everything’ applies here – you want to be certain your customer understands the coverage they are selecting and declining, especially when it comes to often-challenged areas like business interruption.
We may be managing pandemic-related E&O claims for some time. The good news is this provides carriers the opportunity to rewrite policies with clearer language and agents the opportunity to help their clients find the best policy for their needs.
Make sure your E&O insurance coverage is current and reach out to your clients proactively to help them purchase the right policy for their needs – it is the right thing to do and helps you avoid Errors and Omissions claims.
The American Agents Alliance offers an exclusive errors and omissions program for agents. Get a quick, online quote today. Contact us to learn more about the limitless membership benefits of the American Agents Alliance today!