As one could certainly imagine, the completion of the app to secure coverage is critical. Specifically, the data and the information on that app are the key elements. Whether the application is completed on-line or otherwise, the carriers are implicitly counting on the accuracy of this information to determine acceptability / pricing, etc. As noted by the following actual E&O claim, when that information is not accurate, bad things can happen.
This claim arises out of allegations that the agency erroneously reported a commercial property as 80-99% sprinklered in an online application, resulting in the policy being issued with a Protective Safeguard Endorsement. The problem was that the property was, in fact, not sprinklered. The app was incorrect.
The property sustained a fire that rendered it a total loss. When the claim was submitted to the carrier, it was denied based on a violation of the Protective Safeguard Endorsement conditions in that the property did not have a working sprinkler system. An E&O action was subsequently filed against the agency, alleging the agency presented false information to the carrier, resulting in an inappropriate endorsement being added to the policy that left the client without coverage for this loss.
How could an “error” like this occur? Was it intentional in an attempt to secure better pricing? Was it a situation where the producer never visited the risk and thus counted on the prospect to provide the correct information? The answers to those questions are not known.
Bottom line, the client suffered a total loss and there is no insurance to respond. The agency faces an E&O claim for which they may be found responsible.
If the application was completed based on information the client provided over the phone, this type of information should have been confirmed back (in writing) to the client and the client asked to review and verify its accuracy. If the application was completed on site, the producer should have asked to see the sprinkler system and the prospect should have been requested to sign the app, whether a signature was required or not.
Due to the level of importance that an application plays in the securing of coverage, honesty is the only way. The information needs to be 100% accurate regardless of how the application is provided to the carrier.