Insurance agents/brokers E&O (errors & omissions or professional liability) claims often result from a customer’s claim being denied by an insurer. The denial can occur for a variety of factors including late reporting and coverage. Not only is it important that the correct coverage be placed for a customer, but it is also critical that the claim be reported properly when received.
One example: An agency received a copy of a lawsuit that had been served on a customer, and the lawsuit required that an answer be filed within a set short period of time. The agency sent the papers to the insurer and assumed that they had been received. No follow-up occurred to determine if the insurer had appointed an attorney to answer the complaint. Subsequently the customer was served with a default judgment for failing to respond to the suit and the customer sued the insurer and the agent. The initial claim report had not gone through correctly and the insurer had never received the notice.
Some considerations for effective claim reporting:
- The responsibility for handling claims notices should be clear to your staff. Do all personnel know the process and responsibilities?
- Communicate insurer claim notice requirements, including those contained within the agency contract, to staff.
- Consistently document all claims communications, including communications with insurers and customers.
- Check for any policy that might apply to a claim and communicate the plan for insurer notices to the customer.
- Include excess or umbrella insurers early; do not assume that they will not be involved because the claim will be small.
- Never make any determinations of coverage – this is the insurer’s role.
- And never assume there is no coverage – as above, the insurer responsible for determining coverage.
- Ensure that the claim report has been received by the insurer. Do you have a process for ensuring receipt? Do you require a written acknowledgement of receipt?
- If a claim situation is not going well and may have the potential to turn into an agent/broker E&O situation, provide notice to your insurance agency/broker E&O insurer sooner rather than later.
As a provider of Errors & Omissions insurance for all types of insurance agents and brokers, and related insurance services, we have seen a wide range of claims. Most (but not all) claims against insurance agents/brokers can be avoided or mitigated by following a disciplined approach to coverage placement and claim reporting.
Tennant Risk Services is a specialty wholesale broker and underwriting manager with a focus on Insurance Agents/Brokers E&O. Tennant Risk Services delivers expertise, markets and exemplary services to our retail insurance agent clients in the placement of professional liability insurance (E&O, D&O, EPL, Cyber). And we excel at hard to place accounts. Review our expectations here.
Specialty Insurance Expertise: Tennant Risk Services