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:
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.