First, it is important to point out that just because one of your files became the heart of an E&O claim, this does not mean you did anything wrong. An agency can do all the right “best practices” and still have a claim brought against them. As the saying goes “you don’t have to do anything wrong to get sued”. Actually, some E&O carriers openly state that in any given year, 60% or more of the E&O claims are closed for no payment. With the right level of E&O loss prevention, you have a greater chance of winning these cases.
Consider trying this exercise:
At a future staff meeting, access the agency system and bring up a list of accounts for each of the staff. Then for each of the Account Exec level staff in the agency, pick a file at random that was recently worked on. Maybe create a hypothetical scenario that this client has recently suffered a claim that was not covered. If you are in an area where floods have occurred with some degree of frequency, maybe use the flood coverage as an example. Another approach is to have the entire group do an evaluation of the file. Obviously, this exercise needs to be done in the right spirit and used as a learning experience.
Review the file and determine what are the positive elements of the file that will aid in the defense of the agency and what are the negative elements that will hurt the agency’s defense. Look at issues such as the level of documentation, the handling of communication with the client that would have identified new or emerging issues or other coverages for them to consider, and how were rejections of coverages handled. You can certainly include additional items.
With the agency now facing this hypothetical claim, what do you think the chances are for the agency to prevail in the claim? Add to the discussion – what could the agency have done better to enhance their chances of winning the case?
This exercise will hopefully help to identify some weaknesses that need greater attention and get fixed.
The other option is to wait for an actual E&O claim to occur and then be left with the lawyers sorting things out. I think if we were up to me, I like Option #1 the best.