Agency producers – how “good” is the documentation of your client discussions?

In reviewing a number of E&O claims, it certainly seems that the notes detailing the discussion of the various producer / client meetings could use some improvement. It is important to realize that when an E&O claim develops, all file notes / e-mails / proposals, etc. will come into play. Whether these documents help or hurt the agency’s defense is up to the agency and their staff of producers.

Obviously producers play a very key role in the agency and in its future success. Their efforts on new business, client retention, exposure analysis all are very important. The manner in which they handle these various roles will also heavily determine the E&O exposure the agency faces. For at least the last 25 years, producers have generated the majority of E&O claims.

Take the scenario of a producer out in the field discussing various issues with a customer. The discussion could involve desired coverages, coverages rejected, various coverage questions, etc. It is important that these conversations be documented sufficiently to ensure that the potential for any misunderstandings has been eliminated or at least reduced.

There are a number of ways to address this. One that some producers use involves trusting their memory. Trusting that when they get back to the office, they will remember to handle the issue that the client requested. This is certainly not a recommended approach.

Obviously a producer can take notes when the client is communicating and then review those notes and handle any tasks that need to be performed when they get back to the office. This is a good approach but one that some producers feel is especially time consuming. Another approach is to take some brief notes but then ensure that those topics are fully detailed to avoid missing any topics. Since most agency producers probably have a smart phone, consider using your phone when you get in your car to record the details of the discussion. Most phones have this capability or there are free apps to handle this. This recording can then get posted to the agency file or transcribed.  This recording should take place immediately when getting in the car and before moving on to the next stop. There is nothing like the present to ensure an accurate detailing of the conversation.

It is still suggested that the essence of the conversation be communicated back to the client. This can be handled by e-mailing a copy of the recording to the client and advising them to contact you if there are any questions or incorrect statements in the recording. Another approach is to address the conversation in some form of written communication (letter / e-mail, etc.).

These producer / client meetings are extremely important. They typically involve key decisions by the client on their insurance program or key questions to help them understand how their insurance works. Unfortunately, there is also tremendous potential for misunderstandings of these discussions and details. Ensuring that the discussions are well documented is a must for every producer.

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E&O Insights: ‘Just Duplicate What I Have’

This is an excerpt from an Insurance Journal article that I authored in the August 18, 2014 edition.

“From a producer’s perspective, the words in the headline are dangerous when spoken by a customer or prospect. Simply duplicating what the insured currently has, whether the account is commercial or personal, can and has caused more than its fair share of errors and omissions (E&O) claims. In essence, what is the account really saying? Probably something to the effect of: “I’m paying too much. Just give me the same coverage I have now, but at a lower premium.” It sounds like the customer’s focus is primarily on the price, not the coverage.”

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Business Interruption: how many of your customers are properly protected?

Each and every year, there are a significant number of E&O claims arising from problems with Business Interruption. The issues include customers not having the coverage, not having the right type of coverage, not understanding the coverage they have or not having the right amount.

Customers who don’t have the coverage. This coverage is designed to cover the loss of business income/profits if normal business operations are disrupted by a covered physical damage loss to property. It is fair to say that most of your commercial customers have some type of business interruption exposure.

An effective approach to handle this with your customers is to use an Exposure Analysis Checklist to get a firm handle on all the Business Interruption forms that might be applicable to your customer. Each of these forms is fully defined with extensive explanations regarding issues for you to consider.

Customers not having the right type of coverage. There are many forms available and thus it is important to ask the customer various questions to better understand their exposure and which form and limit will achieve the desired result. Questions such as:

- Can the business operate at a temporary location rather than suspend operations?

- Could your client’s business be interrupted because of a loss at one of its suppliers?

- Would the customer suffer a loss if one of their service providers – electrical, fuel, water, heat, refrigeration, communication, etc. – suffered a loss?

- Is there a need for Extra Expense Insurance?

- Are there any new state Ordinance or Law requirements or code upgrades that could delay the customer from getting back in business?

Customers not understanding the coverage they have. It is suggested to include in your proposals the industry definition of that specific type of business interruption and any unique terms / phrases such as “waiting period” or “co-insurance”. Also look to include real life claim examples to help your clients / prospects understand the importance of this key coverage.

Customers not having the right amount of coverage. In many cases, because the current coverage was based on a projection made last year – and especially with the changes in the economy – there may be, and probably are, circumstances where the coverage and limit from last year is no longer adequate. A projection of your client’s sales needs to be factored into the correct limit for the upcoming year. It is highly recommended that you work with the customer’s accountant to ensure calculation of the right coverage amount. Bottom line: Business Interruption is definitely not a coverage you want to renew “as is.”

Business Interruption is an extremely important coverage. Take the necessary time to ensure your customers know the importance of Business Interruption, how it works and what coverage form best fits them.

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Questions to Ask in Cases Involving Leases, Rental Agreements and Other Contracts

The following is an excerpt of an article authored by Kevin D. Bush, managing partner, San Diego office of Cozen O’Connor that appeared on on July 16, 2014.

“In many subrogation cases, the recovery specialist is confronted with one or more “writings,” including a lease, rental agreement or other type of contract, containing various provisions which may affect the recovery rights of a subrogating insurer. Below are a few issues to be aware of.”

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Driverless cars – a new personal lines exposure

You may have heard that “driverless cars” are a thing of the future. Well, as you will note in the attached article authored by Ma Jie, Alan Ohnsman and Craig Trudell that appeared on on July 17th, those days are not that far away. What issues will this create and how will the insurance industry address these issues?

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Earthquake Risk Increased for Nearly Half of U.S.

How many of your customers have earthquake insurance? In light of the new federal earthquake map, this is as good a time as any to educate them and offer to place this important coverage. If they reject the coverage, be sure to get their written sign off.

The following link provides an article authored by Seth Borenstein, Associated Press that appeared on on July 21, 2014.

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How are you addressing coverages for the customer to consider?

It seems that over the last 5 years, one of the E&O loss prevention initiatives that agents have widely adopted involves the use of a cover letter when the policies are mailed or delivered to the customer. This is definitely something that can help agents in their defense should E&O litigation of some type develop. It is definitely suggested to keep the cover letter generic. In other words, do not restate the coverages.

Something like the following:

Dear “client,”

Enclosed please find the renewal of your Businessowners package written with XYZ Insurance Co. You will be receiving your premium invoice shortly.

It is important that you take the time to read this policy to ensure your understanding of the limits and the coverages. If there are any questions or you wish to make any changes to this policy, please contact the agency promptly.

The limits of insurance have been selected by you and we can’t guarantee that the limit selected will be sufficient in the event of a major loss. Higher limits are available upon your request.

Thank you for your confidence in our agency; we appreciate your business.

Imagine if the customer is alleging that they thought they their GL policy covered the exposures typically covered by an employment practices policy. If the customer would have reviewed the policy, they would have noted an exclusion clearly stating that this exposure (age discrimination, sexual harassment, etc.) is not covered. What would be the customer’s chance of prevailing in an E&O matter? Probably not likely.

Oftentimes, an agency will include in the cover letter (or in the proposal), reference to other coverages that the client should consider. At times, the phrase “recommended coverages” is used. Using this phrase has the potential to cause some problems. While you may want to recommend certain coverages, the concern is that if you do not include one and an uninsured loss happens to occur in that area, the customer could allege that “I did not buy it because it was not one of the coverages that you recommended”.

Since your goal is to highlight certain coverages to the prospect or customer for them to consider, give thought to using the phrase: “Coverages to Consider” or “Coverage Options”. This is generally viewed as more matter-of-fact with less value-judgment attached to it as compared to the phrase “Recommended Coverages”. It is also suggested to include a disclaimer that includes language to the effect “this should not be viewed as a complete list of all possible coverages to consider”.

This will help the customer understand that there are additional coverages available for them to consider for their program. Hopefully this will prompt some discussion resulting in some additional sales.

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Kids going off to college – any insurance issues?

Without wishing the summer away, it does seem like it will only be a matter of time (a short matter) before you have some customers sending their kids off to college. For virtually all parents (and for the kids as well), this can be a very emotional time. Unfortunately, during this time, it is questionable whether the issue of insurance is given any thought. Since “stuff happens”, there is the possibility that the current coverage may not be sufficient with tremendous  ramifications. What are some of those issues?

As most insurance professionals are aware, the HO policy provides typically 10% of coverage away from the main premises. Based on the coverage that the parents have, this may or may not be enough. By the time you factor in clothes, a stereo, a computer, etc., the values can be more than one would initially think. Will the 10% be enough?

Another significant issue deals with exactly where the child is living. If they are living in a dorm or some other type of college housing, coverage under the parent’s homeowners would typically apply. However if the child is living off campus in an apartment or in a fraternity or sorority house (this applies to approximately 20% of all college students), most insurance companies consider these arrangements as a permanent residence. This would then preclude coverage from applying under the homeowners policy. This means no property or liability protection. The child should then consider securing a renters policy to cover their possessions and their liability exposures.

Generally, the person who signs the lease is held liable if someone is injured on their leased premises. Do the parents know who is signing the lease?

When it comes to auto insurance, if the student is taking a car to college, the goal is to make sure that the car is properly insured. If the child is taking one of the family cars, be sure that they are listed as a driver on the policy. Another key issue is to make sure that the insurance carrier is notified of the “new” garaging location. While this may result in a higher premium, the insured can also feel confident that the car is properly covered.

Since at the end of the day, the student is ultimately responsible for the car and what happens with it, a good best practice is for parents to advise their kids not to let anyone else drive the car. If a major accident were to occur, the parents’ underlying limits may not be enough.

Obviously any discussions should be well documented in the agency system as well as with a memo back to the parents memorializing the conversation.

These are just some of the insurance issues that come into play when kids go off to college. Unfortunately, fires, car accidents, liability issues do arise from the students as they head off to college. How confident are you that most parents know these issues? Consider dedicating a newsletter / blog / social media message / e-mail blast, etc. to your customers to educate them and encourage them to contact the agency for further discussion. Ironically, you may just find yourselves selling some insurance.


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E&O Insights: Why It’s Important to Review E&S Proposals

This is an excerpt from an Insurance Journal article that I authored in the July 21, 2014 edition.

“Hard market or soft, having an active relationship with at least a couple of excess and surplus lines (E&S) wholesalers is typically required for agencies to be successful. For as long as insurance has been part of our society, the E&S industry has played a vital and significant role. While the benefits of dealing in the E&S market are numerous, unfortunately so are the potential E&O issues. It is critical, for that reason, that agents understand some of the key issues that make this segment of our industry a potential E&O nightmare.”

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Does your documentation “tell a story”?

For many years, the E&O world was filled with the advice of “document, document, document”. After all, nothing determines the direction of an E&O claim as much as the issue of documentation. Unfortunately, taking those three words at face value actually has the potential to spell trouble, serious trouble.

The issue is not just about documentation. Simply documenting a conversation in the file is far from what should be the ultimate outcome. Don’t get me wrong – there have been a significant number of claims where even some degree of documentation would have made a difference in the eventual outcome of the E&O litigation. But conversely, there have been E&O claims where the agent’s position was actually jeopardized because of the documentation. Why you ask?

The key issues involving documentation are:

- Prompt

- Detailed

- Professional

- That any chance of a misunderstanding have been addressed

Prompt – this does not mean “at the end of the day” or “when I get around to it”. It means documenting the conversation when it is happening or immediately after. Have you been to the hospital lately? As you are talking to the doctor or nurse, they are documenting the conversation. No delays. Be sure to get the documentation in the system as quickly as possible. This way, the conversation is fresh in your mind.

Detailedwho did you speak with? The person should not be referenced as “the insured”; their name should be clearly noted. In fact, make it a habit to ask “whom am I speaking with” and then note that in the file. What was discussed? If there was discussion on a specific issue, that issue should be specifically noted. While time is an issue, taking shortcuts in documentation can be a problem. What was resolved? Does the insured need to forward any documents? If so, by when? These issues should all be laid out with an action plan on the next steps. If the insured has been asked to forward a document of some type or contact you back, a diary should be entered to remind you when the document is due and if it has not been received, to contact the customer with a reminder.

Professional – there is a saying “don’t put anything in the file that you wouldn’t want a jury to read”. While this may sound like common sense, not every conversation goes as smooth as you would like and emotions can run high based on how the conversation ended. Keep it professional.

Any chance of a misunderstanding? To address this, it is always best to send the specific person you spoke with a recap of the conversation. Something like: “Per our conversation, you have decided not to move forward with the flood proposal we provided. If this is contrary to your understooding, please contact me immediately”. E-mail is an acceptable means of communication but you may need to prove that the e-mail did go thru and did not get caught in the customer’s spam settings.

While the issue of documentation definitely applies to account managers, csrs, etc., it also applies to producers. As producers interact with customers (answering questions, discussions on exactly what coverage the customer is looking for, what has been ordered, rejected, etc.), these conversations need to be documented using the same principles previously discussed.

Lastly, if you documented a file and for some reason, you were not in the office the next day, if one of your fellow teammates needed to handle one of your files, would your documentation tell the necessary story? If not, then it is probably not at the necessary level.

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