Is your insurance agency careless with the content of your e-mails?

Posted on June 17, 2013 by Curt Pearsall

It is vital that every agency staff member, regardless of your position, to realize that in the event of an E&O claim, your ENTIRE agency file will be discoverable and admissible. This means that both the attorney assigned by the E&O carrier to defend your agency and the plaintiff attorney (hired by the person or organization suing your agency) will have the right to that file. Thus every agency note, every e-mail sent pertaining to that account will be available and you can count on those documents being reviewed.

In regards to the rules pertaining to file documentation and e-mail content, one of the BIG rules deals with professionalism. From time to time, there is no doubt that conversations with customers can probably get a little emotional. When documenting these conversations in the system, make sure that the emotion, the heat of the moment, does not come shining through. For example, if you were to enter in the system, “spoke with Curt regarding his homeowners insurance – what a jerk he is”, this file note would no doubt be reviewed by the various attorneys and potentially used against you and your agency in any E&O litigation.

In addition, agency staff should be careful with comments that they may enter in the system or use in an e-mail that would paint them in a somewhat negative light. This could involve an admission of a lack of understanding of a particular issue or a misstatement of how a specific coverage would perform. For example, if you were to indicate that “I am really not sure how co-insurance works” and a problem developed down the road involving co-insurance, this type of statement could be potentially very damaging. It would be argued that if the agency staff member did not understand co-insurance, what are the chances that a customer would understand it?

Bottom line, when entering notes in the system or communicating with customers or carriers, be very careful. Reread your comments and make sure that you feel comfortable with what you have typed before officially (and permanently) making your comments part of the file. After a problem develops, it will then be too late to change it.

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Has the financial rating of any of your insurance carriers changed?

Posted on June 13, 2013 by Curt Pearsall

Over the last couple of months, the vast majority of the insurance carriers have seen their financials reviewed by one or more of the rating agencies (AM Best, Demotech, S&P, Moody’s, etc.). While it appears that the majority of the time, the “financial rating” goes unchanged,  there is certainly the possibility that the rating could go up or down.

How did your insurance carriers fare? What is the latest rating? Hopefully you know the answers to these questions. If not, a concerted effort should be made to secure this information. Actually with many of the various rating organizations, their website provides easy access to this type of information. I would not recommend that you rely on the carrier for this information as I am not sure how forthcoming they are going to be if their rating deteriorated.

If the rating of any of your carriers has deteriorated, consideration should certainly be given to sending a letter to those customers in your agency insured with that carrier. If the rating changed from “A” to “A-” (using the AM Best methodology), this would probably not prompt a need for a letter. However, a change from “A” to “B-” should definitely result in some type of notification.

What should the letter include? Good question.  Here is some suggested language:

The insurance on your (type of coverage) is currently insured with (insurance company). We have recently determined that A.M. Best Company (a full-service credit rating organization dedicated to serving the insurance industry) has downgraded ( insurance company)  from ____(include AM Best rating & AM Best definition) to____(include
AM Best rating & AM Best definition).We are not aware of the exact reason(s) for the change in the rating.

Since an insurance company’s financial condition can have a significant impact on their ability to meet their current and future claims responsibilities, the purpose for this letter is to provide you with this key information to enable you to make an informed judgment as to whether you wish to continue coverage with (insurance company). (Name of agency) has multiple carriers who would potentially be able to quote replacement coverage for you. While some of these carriers have a higher AM Best rating, there is the possibility that the premium could be higher.

We would like your advice on how to proceed regarding either continuing coverage with (insurance company) or requesting that we provide you with a premium quotation for your (type of coverage) with other insurance companies in our office.

It is recommended to have contact with each of those customers to answer any questions they may have and to resolve the issue. Any decisions from your customer should be noted in your agency management system and also memorialized in writing back to that customer.

Hopefully this is not an issue that your agency has to deal with but you won’t know until you do some homework to identify the current rating.

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Who is insured under your insurance agency E&O policy?

Posted on June 10, 2013 by Curt Pearsall

Do you know who / what is covered as an insured under your E&O policy? There is no doubt that this is potentially a critical issue at E&O claim time so before that claim happens, check your policy carefully.

Most E&O policies include the actual business entity whether that be a corporation, partnership, individual, or LLC. Within those business structures, the individuals serving as Officers /  Directors / Partners are also typically covered. I have seen some policies name the stockholders also as an insured. While this may sound like a benefit (and it may be in some cases), it is important to remember that the limit applies to all insureds. As a result, the greater the number of insureds, the less potential limit available per insured.

Employees are also covered as are former employees, whether they retired or left the agency for some other reason. One area that has the potential to be significant deals with the matter of Leased or Temporary workers. Many E&O policies do not cover this class of worker. Thus, let’s say that your receptionist leaves your agency and you go to a Temp Agency for a temporary replacement. This person technically does not work for the agency; they work for the temp agency. If this person were to commit an error of some type (and this is definitely happening in the insurance agency world), the individual and the agency could potentially not have any protection under the E&O policy.

Another key segment of workers where there is a lack of consistency among E&O policies involves Independent Contractors. Some E&O policies cover this level of staff member by naming them specifically in the policy while other E&O carriers  cover independent contractors provided that there is a written agreement / contract in place between the agency and the individual. If your agency is using independent contractors, do you have an agreement in place detailing the key issues? Also, to the extent that they are covered, it is important for the agency and the contractor to both realize that the contractor is covered only when performing various duties on behalf of the agency. If they do work for themselves or another agency, they need to secure separate coverage for those activities. For any agency that uses independent contractors, typically in a sales / production capacity, it is critical to check your E&O policy to determine how it addresses this level of staff member.

No two E&O policies are the same and the Who is an Insured section of the policy is definitely one of those areas where there are some differences among the E&O carriers. Actually, if looking to move your E&O from one E&O carrier to another, this is one of the key areas to review carefully. It is certainly better to find out who is an insured before the loss as opposed to after it.

 

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Dog Bite Claims Falls in 2012

Posted on June 5, 2013 by Curt Pearsall

As many of you know from my seminars and webinars, the issue of dog bites has caused a fair number of E&O claims. After all, as noted by the attached article from the Insurance Information Institute (www.iii.org) , more than 1/3 of all homeowners liability claims are as the result of dog bites.

Why is this an E&O issue? Essentially it involves the cross breeding that is occurring in that industry and as a result, there is the potential that when a family buys / owns a dog that they may not be aware of the breeds that make up that dog. As the insurance industry reacts to this situation, agencies may see tougher underwriting guidelines and more exclusionary endorsements detailing those breeds that are not covered should a dog bite occur. If at the time of the “dog bite”, there is no coverage for that breed, this has the potential to result in E&O litigation.

Bottom line, this is a serious issue and agents should look to educate their customers on this matter.

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Will your agency management system survive a catastrope?

Posted on June 3, 2013 by Curt Pearsall

Over the weekend with the 90+ degree heat, I finally got a chance to catch up on some of my insurance reading. One of the articles that I read with great interest was from PropertyCasualty360.com - entitled Shell Socked – Six Months After Sandy – Agents Look Back.

Within the article were stories by agents that spoke to the damage done to their agency management system as a result of Sandy. For some, the impact was significant.

In many situations agents are like the shoe cobbler – they do a better job of protecting the assets of their customers than they do for themselves. While some may not believe that a catastrophe like this could happen to them, all one has to do is turn on Weather Channel and it seems that on any given day, a huge part of the United States is being affected by one type of weather or another. So, what is the potential that your office could actually be affected by a weather related catastrophe. Will your files / records survive? If you still rely heavily on paper, will that paper survive?

Most agencies are automated but what will happen to your automation? If the server resides in your office, what if that were to get damaged? As the article pointed out. this happened to many agencies as a result of Sandy.

At this point, you may be saying “No problem – we back up our files everyday”. OK, where is the back up located? I know of one agency that was affected by Hurricane Katrina that religiously backed up their system every night on a disk and would take the disk home with them. During Hurricane Katrina, they had backed up their system on a disk and the disk was stored in the owner’s truck. Unfortunately, the truck containing the back up disc was swept away by the Hurricane. So even if you back up your files, is the back up going to survive? I am not the technology guru but having your files stored using cloud technology just might be the answer.

It is suggested that you ask your IT folks how well your agency management system will survive a catastrophe. You can wait until a catastrophe hits to find out the answer. Something tells me that getting that answer now is the better choice.

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How often is your agency holding staff meetings?

Posted on May 30, 2013 by Curt Pearsall

Hopefully, some of you don’t respond “I can’t remember the last time we had a staff meeting”. But if you do, today is a new day.

There is no doubt that life at the agency side of the business extremely busy and you may be thinking that we just don’t have the time. If your staff meetings don’t really seem to accomplish anything, then you are probably right – you don’t have the time. The key is to have staff meetings that accomplish something and there is no doubt that agency staff meetings, if properly conducted, can be extremely valuable in many areas.

If your agency is not holding staff meetings on a regular basis, it is suggested that you start off with once a month. Probably not a bad idea to bring in some refreshments, people seem to like meetings better if they get fed.

Who should be included? If possible, look to include all levels in the agency as this will make everyone feel a part of the team.

What should be discussed? There are a host of ideas / topics that will be of benefit to everyone. Among them:

Communication – these meetings are a great way to address current issues, changes in company binding levels or new coverages. While communicating this information “on the floor” may be the norm, using a staff meeting to communicate this key information provides a much more focused environment where you have a better chance of having the staff’s full attention.

Education – this should be a strong focus and there is no doubt that the opportunities here are endless. If possible, have a topic established for each staff meeting. The subject may involve “Discussing the E&O exposures of each staff level” or issues centered on the specific time of the year. For example, this time of the year, the agency may be getting calls from customers on the insurance issues with their sons and daughters having graduated from college. Many agencies look to the staff to identify and discuss the various questions that customers are asking. As each staff member grows in their knowledge and expertise, they will be more confident and comfortable in their position.

E&O education – many agencies have advised me that they are using my blog postings as a topic for their staff meetings. This will certainly help to enhance the E&O culture and commitment of the staff. Once again, be sure to include all of the staff as receptionists and claims staff are unfortunately generating E&O claims today.

Confirmation of key agency practices - staff meetings present the perfect opportunity to stress key agency practices, such as the agency’s specific expectations of professional, thorough and timely documentation not only in the agency file but also with written documentation back to the customer when appropriate. Staff meetings provide a clear and consistent message to all members of the agency.

If your agency has not been holding agency staff meetings, start with once a month and see if it is necessary to conduct them with greater frequency. If you have been conducting but have not found them beneficial, look to “retool” your approach with the above suggestions to achieve greater benefit.

 

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E&O Insights: Restaurant and Tavern Risks

Posted on May 22, 2013 by Curt Pearsall

This is an excerpt from an Insurance Journal article that I authored in the May 20, 2013 edition.

“Chances are just about every town in the United States has a restaurant, tavern or pizza parlor. Pursuing this type of risk, then, is common. Yet before taking that first step, do your homework to help you understand that these risks have some unique exposures that must be properly addressed. History has shown that failing to do this has been a significant reason why this class of business generates many errors and omissions (E&O) claims.”

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When is a checklist more than a checklist ?

Posted on May 20, 2013 by Curt Pearsall

When speaking with agents, I am often asked to address the top initiatives that agents can undertake to reduce the potential for facing an E&O claim. Certainly, education is a key one and this includes education of both the agency staff as well as the customers of the agency. Documentation is also extremely important.

There is actually a tool available in the market that helps to serve both of these roles. That tool: an Exposure Analysis Checklist. Now I understand that many agencies use an Exposure Analysis Checklist and those checklists may serve the agency well. Typically these checklists are a document that contains all of the possible coverages, those that were “recommended” and what the final decision of the customer was. There are a couple of assumptions that these checklists include – 1) that the producer that is providing the proposal knows the intimate details of each of the coverages that they spoke of and 2) that the producer was proficient in explaining to the customer / prospect the various coverages and how they work. Do these checklists accomplish this?

The checklists that I am speaking of are actually so much more than just a checklist. Specifically, the checklists that I am extremely familiar with and actively promote are the Producer Online (Rough Notes) and Producer Plus (Vertafore). They are both custom designed and provide a very systematic approach to ensure that the necessary questions are asked to fully uncover and identify their exposures. These checklists when effectively used provide a very efficient means of gathering and organizing the data.

These are also a great tool to address the education of the staff and the customers as they are a tremendous source of knowledge and information on over 650 SIC codes and all of the applicable lines of business. So if you are a producer and plan to pursue a dry cleaner, how would you get up to speed on the exposures of a dry cleaner?  By using the checklists to do some homework before you visit the dry cleaner, you will be intimately familiar with the coverage issues (by line of business) that you need to discuss.  To significantly enhance your knowledge on virtually any class of business you can think of, these checklists are great. For newer producers, this will allow them to get up to speed quicker and thus achieve greater success for themselves and your agency.

There is an additional benefits that really aids in the defense if an E&O claim were ever to be made against your agency.  These checklists,  when effectively used, will provide a record of your agency offering the various options of coverage and what the customer’s final decision was.

The checklists also include a definitions section for each of the lines of business.  Consider including these definitions in the proposals you provide. This will not only assist your customers in better understanding their insurance program, it should also  enhance the image and reputation of you and your agency.

While these checklists are common for commercial lines, they definitely have their place with personal lines. In fact, if your agency is undertaking an aggressive cross selling objective, the Rough Notes product contains a great tool to assist in that endeavor. It contains a form that addresses a wide range of potential exposures. Many agencies use this form to annually solicit updates from their customers on any change in their exposures. By reaching out to your customers, you are helping to build a better defense if in fact, your customer suffered an uninsured exposure.

So if your agency has a checklist, how effective is that checklist in educating the agency staff and your customers? Take a look at the two checklists mentioned. They will enable your agency to enhance  your E&O loss control commitment. And you will sell more insurance – a definite win-win proposition.

For a significant discount on the Rough Notes checklist, provide them with the following code (379DM) and tell them that Pearsall sent you.

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“If it’s not in the file, it didn’t happen”

Posted on May 15, 2013 by Curt Pearsall

As hopefully every agency staff member knows, documentation is one of the biggest issues that will determine the direction of an E&O claim. Good documentation should make the E&O carrier’s job much easier while sketchy or incomplete documentation could spell trouble with a capital “T”. Actually the statement “If it’s not in the file, it didn’t happen” is a common position taken by the legal profession in various litigated matters.

At the time of an E&O claim, both attorneys (representing the agency as well as the plaintiff) will have a right to the file in question. This applies whether that file is paper or electronic.

If the customer has a record of a conversation that they had with a representative of the agency but the agency does not have a comparable record of the conversation, depending on the issue, this could be a problem in the defense of the agency. This is one of the reasons why agency staff need to document discussions - the customer is probably documenting those discussions.

If a discussion took place between the agency and the customer and neither party has that conversation documented and a problem develops, it could very well be up to the courts (the judge or the jury) to decide who to believe. Essentially these issues come down to the word of the agency staff member versus the word of the party bringing the action against the agency. Who will win – tough to predict.

As a result, it is very important for the staff to understand discussions which go undocumented could become “hearsay”. This certainly speaks to the reason why discussions be appropriately documented. Because if it’s not in the file, the courts may decide that “it didn’t happen”.

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Is blanket additional insured coverage truly blanket?

Posted on May 12, 2013 by Curt Pearsall

This is an excerpt from a Rough Notes article that I authored in the April 2013 edition.

“The concept of additional insureds has been around for quite some time, possibly since the beginning of modern day insurance. Why then has this issue become a major hotspot that is resulting in a significant number of E&O claims?

There are a number of reasons. The main issue involves the actual blanket additional insured coverage form and whether that really offers the coverage that the form implies.”

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