Consider the following E&O scenario: An agency looks to move one of their accounts from company A to company B. In the placing of the coverage with company B, one of the coverages (that was on the company A policy) does not get included. A loss occurs involving that “missing” coverage. Who is probably going to be found ultimately responsible? In all likelihood, the agency for essentially moving the coverage but not verifying the same coverage was being put in place.
In reality, this E&O claim scenario is occurring with alarming frequency. Coverages such as extra expense, physical damage on a commercial vehicle and a fine arts schedule (such as jewelry) are being omitted. How can it be prevented?
There are obviously multiple steps where the issue of “duplicating coverage” should be verified including the initial marketing of the coverage as well as at the time of the proposal. In addition to those two steps, a final review of the policy before delivery should be performed.
When the policy has been received from the carrier, it needs to be reviewed to ensure that everything is in order. I have never had a single agency exec advise me that every policy they get from their carriers is perfect. The average seems to be around 1 out of every 10 policies contain an error. So mistakes are occurring!
While the policy should be reviewed based on what the proposal stated, it is vital a comparison to the policy it is replacing be done. It is important the focus not be just on the coverages noted on the dec page as there will probably be coverages within the policy that should be reviewed. The entire policy should be reviewed.
Many agencies have developed a policy review checklist to verify the coverage is what was ordered and what the client requested. The person performing the review should be required to note in the system that the review was completed, when it was done and what was found.
The entire issue of the moving of coverage from one carrier to another (commonly referred to as the Mirror Test) is one of the more significant areas generating E&O claims. There is no doubt that taking the necessary time to review the policies before they are delivered might just catch some of the “errors”.