In the world of Agents E&O, over the last number of years, there has been a fair amount written and discussed on the issue of a “Special Relationship”. While on the surface, this sounds like something that an agency would want to achieve, in reality, there are some very significant issues and ramifications for agents that achieve this “status”. Many of these ramifications are actually potentially very troubling.
In most states, the agent is essentially an order taker and it generally held responsible for providing the coverage that the client specifically asks for. In other words, if the client asks for auto and homeowners coverage and you honor their request, you are generally okay. If the client suffers a loss that exceeds the underlying coverage and alleges that you, as their agent, should have recommended an umbrella, the odds are probably in your favor for prevailing in any subsequent litigation. There is still the likelihood that your agency may be sued but once again, you stand a good chance of prevailing.
There are however certain circumstances that could change the legal standard from that of an order taker to “an advisor”. While this may sound like the role that you want to achieve, this status carries with it some increased potential for liability.
In the vast majority of the E&O cases that I have seen over the years, especially in the last 5, the plaintiff’s attorney has alleged a relationship between you and your client of more than just an “order taker”. Comments such as the following are common:
– The agency has been their agent for over 20 years
– The agency writes all of their personal and commercial business
– The plaintiff relied on the advice of the agent and always secured the coverage that the agent recommended
– The agency website stated that they are “experts” and “specialists”
– The agency website stated that they will make sure that the property values are updated each and every year
– The agency producer made various verbal comments on their expertise and that they will make sure that the customer is properly insured
– The agency website and the proposal indicated that they provide a wide variety of risk management services
These statements are many of the key “buzz” words that are “alleging” a potential “special relationship” that could elevate the standard of legal liability of the agency. This is not automatic and the E&O litigation will typically be decided on the actual facts of the case. In other words, there is no magical formula that “A + B + C = special relationship”. However, if you think of your various clients, how many have you insured for over 20 years? Is there more of a possibility for the plaintiff attorney to allege a “special relationship” if a problem were to develop on those accounts?
Some key best practices:
– Take a look at your website and all promotional material. Is the information accurate? Are there any words or statements that could be used against you?
– Educate the staff on the importance of choosing their words very carefully when interacting with the clients.
While many agencies probably want to be viewed as more than just an order taker, essentially this is the standard that you will be held to. That is, unless you have achieved “special relationship” status. A status that may not be as special as you hoped.