How are you keeping the staff focused on E&O ?

The development of a solid E&O culture is definitely not something that you mention once and expect the staff to abide by whatever they were told. To develop a solid E&O culture requires a continuous message to the staff.

How is this typically done? Some common (and unique) approaches to consider:
– During those times that management addresses the staff, it would certainly be appropriate for there to be some inclusion of comments pertaining to E&O loss prevention. Many staff may need to be provided the “why” behind the E&O message. This will help them understand the importance. A key element is that management is viewed as “walking the walk and talking the talk”. Without this, the comments will be viewed as shallow and not truly sincere.

– Including E&O discussion during the agency staff meetings. The topic could be on E&O in general or on one specific item such as documentation, sign off on client buying decisions, watching the words used either in print materials or verbally. Many agencies have commented that they have used articles in this blog to help strengthen the message with the staff.

– Messages around the office. What do I mean by this? A good example deals with the importance of documentation. There is a common phrase used in the court room that “if it is not in the file, it didn’t happen”. I have seen agencies that have these words put on paper and displayed in various ways around the agency.

– Celebration of results. It is important for staff to see the good things that are happening in the agency and that the procedures are being followed. This is a primary purpose of internal auditing; to determine to what degree the various processes and procedures are being completed. Assuming the results are positive, there should be a celebration of some type. If some of the staff are not adhering to the required procedures, they should be asked to develop an action plan on how they are going to change the results moving forward.

A strong E&O culture requires a consistent message that shows the required commitment. It does not happen overnight. By finding ways to keep E&O loss prevention “front and center” demonstrates that this is an issue the agency is very serious about and each member of staff should be serious about as well.

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Do your branch offices have the proper E&O culture ?

Remember this old game – tell something to the first person in line and ask that they tell the next person what they were told and have that person tell the next one, etc. Invariably, when you ask the 10th person in line what they were told, the story barely resembles what the first person was told.

Well, the same thing happens in the world of insurance, especially for those agencies that have branch offices. Somehow, what the branch offices heard differs, sometimes significantly, from the “home office”.

When you are dealing with key E&O procedures and practices, this disparity can cause some issues and potentially some E&O claims. How can this potential problem be averted? Here are a couple of suggestions:

– The agency should have a point person that has the overall E&O loss presentation responsibilities. This way, someone clearly “owns” this important initiative. It is vital that this point person have the support and backing of Sr. Management.

– When procedures are implemented, changed, etc., the point person as well as a key member of Sr. Management should visit the branch offices to ensure a clear delivery of the message. If a visit is not possible, video conferencing can be used provided the entire branch office staff are on the video conference. Delivering the message to one person and asking that they communicate it to the rest of the staff could result in the message being somewhat “watered down”.

– Have a point person in each office that serves as the champion to ensure a strong E&O culture. This way when Sr. Management leaves, there is someone in the agency that keeps the focus on the issues.

Ideally, you want each office to take ownership of this key element of the agency. I have seen many agencies implement initiatives in their office. For example, to strengthen the need for quality and prompt documentation, put signs around the office stating, “if it’s not in the file, it didn’t happen”. These serve as constant reminders of the expectation.

Bottom line, more often than not, the branch offices of agencies (whether achieved through growth or acquisition) are more of a “hot spot” for E&O claims than the “home office” is. Look for ways to keep this from happening in your agency.

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Wisconsin Court: Bulldog Attack Not Covered by Insurance Policy

As I have referenced numerous times over the last 8 years or so, dog bites are generating a significant number of liability claims and based on policy language and potentially other issues (such as underwriting guidelines), some of those liability claims may not be covered by the homeowners’ policy. As you will note in the attached article that appeared on on May 17th, the court upheld the language in the policy pertaining to dog bites.

“A Wisconsin appellate court says an insurance company doesn’t have to cover a bulldog attack that left a woman hospitalized.”

Continue Reading Wisconsin Court: Bulldog Attack Not Covered by Insurance Policy

Could this issue have been avoided? It is tough to say without knowing some further details. However, if the policy did, in fact, stipulate that only ONE dog attack would be covered, possibly reinforcing to the client the need and benefit of reading their policy would have helped. A letter that accompanies the policy to the client advising them to read the policy and to advise if there are any questions might have resulted in a different outcome in this matter.

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How strong is your focus on training?

Let me ask you a couple of questions…

Five years from now, how many of the current agency staff will have retired? Where will your agency find qualified people to replace and train them? In addition, as the agency grows in volume, there is a good chance that additional staff will be needed to fill the necessary job responsibilities. How will you train those new staff?

As we all know, learning insurance and its various nuances is not easy and definitely takes time. There is a good chance today that many agencies have internal and sales staff that don’t know insurance to the degree they should and since agency staff can be held accountable for what they say, this presents a very scary picture. In fact, when some E&O carriers look at their statistics that are driving E&O frequency, lack of sufficient product knowledge is high on the list. Clearly, agencies need to have a solid focus on training to ensure their staff know the products they are selling.

There are a variety of approaches to the training of sales staff on the various technical elements of insurance. A key issue is that someone in the agency clearly needs to “own” this issue. This person needs to do the proper evaluation and develop a structure that provides the training to the needed areas. The evaluation could be done using a test or possibly a mock sales presentation where the staff are asked various questions on specific coverages. Some additional approaches to consider:

– Weekly classroom environment where a specific type of coverage / type of business is discussed and the exposures dissected. Consider asking your carriers if they can help.
– Your state agents’ association. They may have some training scheduled on various topics or could possibly at least recommend someone if needed.
– Training organizations such as the Institute or the National Alliance.

Bottom line, training of staff needs to be a key issue within every agency. This will hopefully result in staff knowledgeable on the coverage they are selling but it should also minimize the potential for your agency to face an E&O claim.

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Unmarried couples living in the same household – a potential E&O issue?

Today, this is quite possibly much more of an exposure than in recent years – couples that have decided to “live together” without getting married. If the homeowners’ insurance was not modified, would there be coverage for the additional person if a loss occurred? There are some issues that could determine this.

First, it is important to look at the definition of “Who is an Insured”. It is common for this to read as follows:

“Insured” means a) you and residents of your household who are (1) your relatives or (2) other persons under the age of 21 and in the care of any person described in a. (1) of this provision. Thus, using this policy language, if the unmarried couple bought a home together (in both of their names), I would guess that most carriers would be willing to issue one policy with both names as the named insured. Thus, coverage for both parties should be in place.

But what if the home was only in the name of one of the parties, would there be coverage for the other person? Technically they don’t meet the definition of “who is an insured”. Thus I would conclude that “no, there would not be any coverage – no property coverage nor liability coverage.”

If the additional person has substantial personal property, it would be prudent to check with the homeowners’ carrier to see whether they can be added and thus covered. If that will not be allowed, the additional person should look to look to purchase a separate renters’ insurance policy. This should be easily accomplished.

This is all well and good provided that your agency is aware of this exposure and can find out the necessary details. However, is there the possibility that you have clients with this exposure that have not given any thought to the insurance implications?

Might be a question to add to your new and renewal business questionnaires and checklists.

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1 in 10 homeowners have this exposure – is it properly insured?

The most recent statistics lists 9.4% of households rent a storage unit and this percentage does not include how many of those actually rent more than one unit and short term renters that rent a unit for a month or two while moving.

Bottom line, this is a quickly growing industry that many customers are utilizing. As you will note, without the proper coverage, there are some definite uninsured exposures.

When consumers rent a storage unit, they are probably under the impression that they have the proper coverage. Yes, the homeowners policy does provide coverage, typically for 10% of the personal property limit in the HO policy. Obviously based on that limit, there may not be sufficient coverage. For example, customers with a $50,000 personal property limit would only have $5,000 coverage. Is this enough?

However, there are some other differences that folks renting storage units may not be aware of that are quite significant. Issues such as:

– Most HO policies do not provide coverage for losses from rodents or flood and certainly not for earthquakes or named storms while in storage. If coverage for these exposures is desired, it may be available through the homeowners’ carrier but at a hefty premium.

– Loss of personal property in the storage unit is subject to the HO deductible, oftentimes in the $1000 to $5000 range.

As with many other exposures (such as my recent posting on watercraft detailed), purchasing a stand-alone policy for this exposure may be the best approach. Coverage including the exposures mentioned above is available through organizations such as SnapNsure ( – underwritten by Hanover). These policies provide broader coverage yet are inexpensive with low deductibles compared to HO policies. The deductible for all primary policies up to $25,000 coverage is only $100.

Although this coverage is sold direct to the public, it might be an opportunity to educate your customers and to provide them with a resource to more fully address this exposure.

Continue Reading: 1 in 10 homeowners have this exposure – is it properly insured?

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“Stated value” vs “Agreed Value” – aren’t they the same?

No, they are not.

Which one is better? Let’s take a look…

Here is the traditional definition of “Stated Value”:

“In the event of a total loss we will pay the Stated Value or the Actual Cash Value, whichever is less.” Note the word “less”. This essentially allows the carrier to adjust the loss on an ACV basis.

To get the protection desired, the better approach is to secure coverage on an Agreed Value basis. How does that work? It is often referred to as “short and sweet”. The carrier and the insured reach an agreement on the value of the item (car, boat, etc.). In the event that the insured item is damaged or destroyed, the insurance company pays out the agreed upon value – no more, no less.

To secure this level of valuation, it may be necessary for you (as the agent) to look at specialty carriers. This is often one of the areas where the coverage form is better.

“Stated Value” is definitely not the same as “Agreed Value”. This is probably one of the big misunderstandings in the insurance world.

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Is coverage for watercraft sufficient under a HO policy?

Now that it looks like winter is over and we are going right to summer, you might have some clients looking to put their boats in the water for some fun and relaxation. When insuring watercraft, there are typically a couple of options. The HO policy can be endorsed (provided the watercraft meets the guidelines) or the watercraft can be insured on a separate stand-along policy. Is there a difference in the coverages? Yes, and actually many of the differences involve areas that occur with some degree of frequency.

Issues such as:

  • Waterskiing (or tubing). If this is a potential scenario, be aware of some limitations on the HO policy. If one of the water-skiers gets hurt and needs some medical attention, there is a good chance that the Med Pay coverage under the HO policy will not respond.
  • Pollution. If gas is accidentally spilled into the water (yes, it happens), there will probably not be any coverage under the HO policy for this “pollution” exposure.
  • Towing / wreckage. If the watercraft is involved in an accident that results in the boat needing to be towed to shore, this is not a peril insured when the coverage is placed on the HO policy. In addition, wreckage removal is not covered by most HO policies.
  • Valuation for physical damage. The options under a HO policy are more limited typically only providing coverage on an ACV basis. Securing the valuation on an “Agreed Value” basis is definitely preferred.

So how do you secure coverage for the above issues? A good best practice is to provide your client with a proposal for a stand-alone watercraft policy. The premium will be higher but that is because the coverage is better.

If you are thinking “the client will never spend the extra premium”, quite honestly, this is not your call. It is best to provide the client with options and explain the difference and the value of a stand-alone policy. Thus, when dealing with your clients on their watercraft exposure, provide them with options to consider. Not only will this allow your client to make an educated decision, it will also serve as an element of protection should an uninsured loss occur.

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Include specimen policies with the proposals

Have you ever had a situation where your client had a loss before the policy was even issued? It happens, and it actually happened to me back in my days as an underwriter. My account (a big printer) had a Mercedes stolen before I even had the policy issued.

What if your client had a loss before the policy was issued and the claim was denied due to some exclusion in the policy? The client could contend that they had no knowledge of what the exclusions were and might go so far as to state that they would not have purchased the coverage had they known all of the exclusions.

Would they have a case? The agency might have somewhat of a defense if they had listed the exclusions on the proposal. Unfortunately, the titles provided to some of those exclusions might not provide enough clarity as to what the exclusion actually excludes.

Listing the exclusions (or at least some of them) is a good idea. However, if you are going to list some exclusions, it might be best to include the following statement: “Exclusions include but are not limited to the following”.

There are a couple of additional approaches.

        Include specimen policies with your proposal. This might be cumbersome to do this for all coverages, but it is especially important on coverages (such as E&O, D&O, Cyber, EPL, etc.) where there can be significant differences among the various carrier forms.

        Include a statement in the proposal that “Specimen policies are available upon request”. This is extremely easy to implement and probably won’t result in many clients actually asking.

 As I have noted in probably every E&O class I have ever taught, at the time of a problem, there are two buckets. One bucket for the client which would include all of the issues that favor the client. The other bucket is for the agency and would include those issues favorable to the agency. The goal is for the agency to have as many items in their bucket as possible. Including specimen policies or even the statement that “specimen policies are available upon request” would be an item that would be in the agency’s bucket.

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Does your proposal include this?

Let me ask you a question:

When you provide a proposal to a client (current or prospective), what information are you using to develop that proposal? While there may be some information you can gather from websites or other third party sources, aren’t you, in reality, using the information that the client has provided you?

What if that information is not totally correct? If the policy is written and the client suffers a claim, this is often the time when the carrier discovers some inaccuracies in the application. Based on the degree of those inaccuracies, the carrier may look to deny the claim based on a position that “they never would have written the account had they known the correct information”. Your agency’s position may be “we used the information the client gave us”.

There are some defenses that could be used but obviously only if they were in place.

One of those defenses should involve requiring (not just requesting) the client review the application before affixing their signature. Using a statement such as “I certainly believe that I have taken down correctly the information that you provided me so I would like to have you sign the application. However before you put your signature on the document, please review the application and advise me if there are any answers noted that you do not feel are accurate”.

Another approach to provide some degree of protection in the event of a problem is to make it very clear to the client that you used the information they provided you. To assist in protecting your agency in the event of an issue, give thought to including a statement such as:

In evaluating your exposures to loss, we have been dependent upon information provided by you.  If there are any other areas that need to be evaluated prior to binding of coverage, please bring these areas to our attention.  Should any of your exposures change after coverage is bound, such as your beginning new operations, hiring employees in new states, buying additional property, etc., please let us know so proper coverage can be discussed.

Following some simple steps could make a world of difference if a dispute arises.


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