Quality file documentation – A must if your agency is serious about errors & omissions prevention

Posted on May 16, 2012 by Curt Pearsall

This is an excerpt from a Rough Notes article that I authored in the January 2012 edition.

“Over the years, I have reviewed my fair share of errors & omissions claims. While agents can do many things to enhance the culture and commitment of their office, probably the most important is documentation. This is most likely why virtually every E&O class ever taught has heavily stressed that subject because nothing will determine the direction an E&O claim takes more than documentation.

In reality, the issue isn’t just: “Is there documentation in the file?” It heavily depends on the documentation’s quality and timeliness. While it is difficult to identify every area where good documentation is critical, let’s take a look at some areas to focus on.”

Continue Reading: Quality file documentation – A must if your agency is serious about errors & omissions prevention

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Does your account have a need for professional liability coverage?

Posted on May 13, 2012 by Curt Pearsall

When one thinks of Professional Liability, oftentimes the following classes of professional business come to mind: Real Estate Agents, Lawyers, Medical Professionals, Accountants and Insurance Agents. While these are some of the more common, there are more than 100 additional professional occupations –including Appraisers, Engineers, Pharmacists, Court Reporters, Speech Pathologists, Consultants, Therapists and Teachers – that have a Professional Liability exposure.

Does your account have such an exposure? There are actually a number of ways to determine if your account has a professional liability exposure.

-     The use of the various Exposure Analysis Checklists. In each of the over 650 SIC classes of business, a narrative on the exposure by line is provided. These checklists will certainly note if there is a need for professional liability coverage. They will help educate your agency and potentially your client on this exposure.

-     Review the General Liability coverage / exclusions. Typically, if there is a professional liability exposure, the GL carrier will include an endorsement that excludes that professional liability exposure. Obviously, the presence of that exclusionary endorsement is their means of stating that there is a potential professional liability exposure that they do not want to provide coverage for. It is suggested that your agency (CSRs and Producers) be on the lookout for this exclusion.

Depending on the exposure, contact your E&S wholesalers as they typically will have a host of markets available to entertain a submission on the exposure. Upon explaining the account to your wholesaler, they will advise you whether they have a market and if so, which application is needed to secure a proposal. It is certainly recommended that you meet with your client to complete the application to ensure the accuracy of the information.

Presuming that you are able to secure a proposal, request the coverage form from the wholesaler. Then when meeting with your client, provide your client / prospect with the coverage form so that they can review it to determine the adequacy of the coverage.

There are a significant number of classes of business that have a professional liability exposure. Probably more than most realize. By doing your homework and educating your client on this exposure, you have also developed a potential sales opportunity.

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Looks like drugs and E&O don’t mix…

Posted on May 9, 2012 by Curt Pearsall

Attached is a recent news story regarding an E&O claim that a Montana agent is facing dealing with insuring a marijuana operation…

Continue Reading Looks like drugs and E&O don’t mix…

 

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Do you place business with carriers rated less than your E&O coveage provides?

Posted on May 7, 2012 by Curt Pearsall

I recently saw a poll provided by Agents of America (www.agentsofamerica.org) that asked the following question:

Would you place business with an insurance carrier even when you do not have full errors and omission coverage in place? (i.e. – Placing business with a B rated carrier when your coverage does not provide coverage for carriers rated less than B+).

While 80% indicate that would not, 12% indicated that they would and another 8% indicated that it depended on the circumstances. Personally I found these results interesting but yet concerning at the same time. To place business for a client with a company rated less than your E&O policy provides coverage for is extremely dangerous and could have catastrophic results for those agents.

First, I trust that all agents are aware of the financial rating of the carriers they are placing business with. Since ratings could change, agents need to have a procedure to identify the change. If your agency does not, suggest that you put this procedure into effect as soon as possible.

I hope that agents are not under the impression that they cannot be held responsible for placing coverage with a carrier that that becomes insolvent. Whether their specific state will hold them responsible or not, they could still be sued with considerable defense dollars incurred. Without E&O, these defense costs would be their sole responsibility.

If an agent feels that it is necessary to place coverage with a carrier where they do not have insolvency coverage under their E&O policy, it is highly suggested that they bring the financial rating of the carrier to the client’s attention (it is best to reference exactly the words that AM Best uses in their rating methodology). Agents should require that the client sign a letter acknowledging this rating and the implications. This could be significant if an E&O claim does develop.

Proceeding without having E&O protection is not a matter to be taken lightly. If it is necessary to proceed, take ALL possible precautions to minimize the chance of your agency facing an E&O claim.

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E&O Insights: Social Media Can Be Your Friend or Foe

Posted on May 2, 2012 by Curt Pearsall

This is an excerpt from an Insurance Journal article that I authored in the April 2, 2012 edition.

“Effective use of the various forms of social media can play a huge role in the success of your business. Therein is the crux of the issue — “effective use.”

To simply start using social media such as Twitter, Facebook, blogging, etc., without a plan has the potential to result in several problems, including some legal in nature. After all, when you started your agency, didn’t you have a strategy detailing what type of business you wanted to write and what type of agency you wanted to become? I doubt you just opened the doors and shouted, “We’re open!”

Continue Reading E&O Insights: Social Media Can Be Your Friend or Foe

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How long is your insurance agency retaining emails?

Posted on April 29, 2012 by Curt Pearsall

In the event of an E&O action against your agency, the attorney assigned by your E&O carrier to defend your agency will request a complete copy of the file, whether that file is paper or electronic. That file will need to include all e-mails pertinent to that client. It is fair to say that the contents of those e-mails can be an integral part of the E&O case and whether it helps the agency depends on the time and details of the e-mails.

When the attorney requests a copy of all of the pertinent e-mails, will you be able to provide that information? While it is commonly known that e-mails technically exist forever on your hard drive, this can be a very expensive approach.

For this reason, it is critical that agents have some type of a retention plan for their e-mails, both incoming and outgoing. The most common means to retain these e-mails is by attaching them to the file in their agency management system. Most of the agency management systems have this functionality which includes not only e-mails but also e-faxes, voice mail files, scanned documents, Word documents and spreadsheets, etc. Typically the attachment is related to a specific policy and in some systems, this task is automatic which is beneficial (and preferred) as it should ensure that the file contains all of the applicable e-mails. This would allow the e-mails to be properly titled so that they can be easily recognized and retrieved.

If your agency management system does not have this functionality, agents may want to look at printing the e-mails and then either putting the paper copy in the file or scanning the e-mail and placing it in the system. The goal is for the file (paper or electronic) to contain the applicable e-mails.

There is one possible concern based on feedback from some agency management folks. It appears that documents that have been attached (not via scanning) may not be locked from editing. With some systems, while the document can be edited, the system tracks date/time of changes. Editing an e-mail document should obviously be avoided.

Some agencies are moving to a Document management vendor that provides storage and retrieval for all documents regardless of the media. They provide a central filing system for all communications – regardless of the media. Agents comment that the ability to retrieve is fast and it is easy to share information – even in remote locations. This is more of an advanced approach to this issue. If you pursue this approach, determine the security on the stored documents.

How long should agents be retaining their e-mail records? The easy answer is “as long as they can” and certainly getting additional electronic storage is much more cost efficient than the old paper storage approach. The type of business that they write may influence the length but as with paper, 7 years seems to be a common length.

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Some E&O issues involving carrier downloads

Posted on April 26, 2012 by Curt Pearsall

Ask an agent if automation is a positive issue in their agency and many would certainly respond in the affirmative. There is no doubt that insurance agencies have achieved efficiency and financial gains from the use of automation.

Ask those same agents whether automation is a positive issue from an E&O standpoint and the reaction may not be the same. There is no doubt that automation can be a very positive factor…unfortunately, it can also have some negative issues associated with it.

It is very common today for insurance agencies to receive information / policy downloads from a number of their carriers. Due to the hectic nature of insurance agencies, from time to time, these downloads may not receive the necessary priority and attention in the agency.  For this reason, it is highly recommended that the agency appoint a point person with a back up to manage the nightly downloads from your carriers. This point person should have the responsibility of accepting the downloads as they occur from the carrier, typically on a daily basis. If an agency were to not accept them on a daily bais, this could result in inaccurate information in the agency management system…certainly a potential significant issue.

Also it is important for agency staff to realize that just because the dissemination of the information is automated does not mean that it is perfect. There is still the chance that errors could occur…so the downloads needs to be proofed to the same degree that a paper policy would be.

Typically agency staff will be assigned a password to be able to access the carrier download. If that employee were to leave the agency, be sure to take the necessary steps to ensure that employee cannot access the agency files from their new place of employment.

For agency management, it is extremely important to provide the necessary training on the expected usage of downloads … your carriers may be able to assist in this. It is also advisable that management perform periodic audits to ensure that the staff’s handling of the download meets with the agency expectations.

Downloads are an integral part of most agencies providing significant efficiencies and cost savings. Ensuring that they are handled correctly can keep this from being an E&O headache in your agency.

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Does your agency have a disclaimer on both your voice mail and e-mail?

Posted on April 24, 2012 by Curt Pearsall

For some time, agencies have been including on their voice-mail a disclaimer type statement that advises the caller that they cannot look to make policy changes by leaving a voice mail message. Typically the message is something like:

“Please be advised that we cannot add, delete or modify coverage via voice-mail”.

What purpose does a message like this serve? Imagine that a customer contacted your agency after hours and left a message stating that they just their wife a diamond ring for their anniversary and they were heading to Hawaii but they needed coverage bound on that ring. Without a description of the ring, would you be able to put coverage into effect? Probably not. So the benefit of this “disclaimer” is to let the customer know that they cannot simply leave a message and expect that everything has been taken care. Situations like this require the customer to have a conversation with an agency representative to secure the necessary information. Depending on the situation, you may not be able to immediately place the coverage; you either may not have binding authority or may need to approach a wholesaler. If you don’t have this type of statement on your voice-mail system, it is highly recommended to implement as soon as possible.

It is also recommended that you place the same type of message on your e-mail system advising customer that they cannot simply send you an e-mail and expect that everything is taken care. You may want to add a statement advising customer that on any policy or coverage modifications, it is necessary to speak to an agency representative.

These types of statements could just make the difference if a problem developed.

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Is your Insurance agency taking advantage of the resources of your E&O carrier?

Posted on April 19, 2012 by Curt Pearsall

Certainly in the hectic world of running an independent insurance agency, there are no doubt times when you have a question or issue where the perspective of your E&O carrier would be extremely helpful. Maybe it is a question regarding an agency procedure and what the E&O ramifications are. Quite possibly, you have a question on your policy or how your limits or deductible works. Or possibly, what loss control services are available that could help you assess the level of your E&O risk or reduce your E&O premium.

In these situations, don’t hesitate to contact your E&O carrier. While some agents only contact an E&O claims staff member when they have or think they have a claim, in actuality, these professionals are a great resource to help you on a variety of issues. If it is a procedure that could cause some issues, they will help you understand what needs to be done if you decide to discontinue that specific agency practice.

In addition, in many E&O carriers, the underwriting staff are a great resource to address a host of policy issues or questions. I have seen a number of E&O carriers develop risk management sites to provide material including articles, webinars, self assessment tools, responses to frequently asked questions, links to “ask the expert”, etc.

Bottom line, look at your E&O carrier as more than just the provider of a policy. They can be a tremendous resource to your agency to help you manage your E&O risk.

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Your agency’s E&O commitment is only as strong as your weakest link

Posted on April 15, 2012 by Curt Pearsall

When evaluating the strength of your agency’s E&O culture and commitment, you are actually only as good as your weakest link. What exactly do I mean by that? Imagine your agency is a chain. From the outside, it appears that the chain is strong and will hold up to the task. Unfortunately, regardless of the length of the chain, all it takes is one link that when put under stress, breaks down and causes damage.

As has been stated many times over the years, agencies don’t make mistakes, people do. Imagine your agency consists of 20 people, like 20 links to chain. From the outside, it appears that all 20 are committed to E&O prevention, to doing the right thing, the ethical choice. Unfortunately, there is one staff member (one link) that when put under the pressures that exist every day in insurance agencies, might not be as strong as they need to be. Maybe it is a producer that, due to the pressures to meet new business goals, might not be totally honest with a customer, possibly telling them that a particular type of loss would be covered when in actuality, it would not be. Maybe it a CSR that is pressured to modify a certificate providing coverage that is not reflected in the policy.

Some may believe that these scenarios are really not that bad and that the only way the client will know that you misled them is if they have a loss and what are the chances of that. One could assemble quite a collection of E&O claims based on this type of thinking.

Does your agency have a weak link? Bottom line, it is not fair to the other members of the team, those committed to a strong E&O culture, to have a staff member that is susceptible to not doing the right thing when put under pressure. For an agency to truly be successful in E&O loss prevention, all members of the staff, from ownership on down, must be 100% committed and practice what they preach. Without that, your agency’s E&O commitment is only as strong as your weakest link.

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