Does reporting an E&O claim / incident mean your E&O premium will go up?

This is an often asked question and thus obviously an area of concern. Unfortunately, it is not a question that is easily answered as the end result may depend on a variety of issues including the facts and circumstances of the E&O matter.

First, for those agents that are maybe reluctant to report an E&O matter to their E&O carrier for fear of an increase in their E&O premium, it is vital that you understand what the policy conditions of your E&O policy state about this. Most (probably all) E&O policies require that an E&O matter be reported to the carrier as soon as possible. This requirement is to allow the E&O carrier to do their due diligence and to contact key parties while the issues are still somewhat fresh in everyone’s mind. In all honesty, this is beneficial for all parties. A quality E&O carrier provides more than just a policy; they should play the role as a resource to give agent’s piece of mind on potential claim issues. They will provide guidance including the possible assignment of defense counsel depending on the facts. Not reporting the E&O matter to the E&O carrier because you think it is going to go away is not the approach you want to take.

So the E&O matter gets reported. How this affects your E&O premium will probably be based on a variety of issues including the length of time you have been with that carrier, your past loss history and the facts of the case. If it looks like your agency is not going to be liable, there is now a greater chance that your premium will not be affected. However, if there is evidence of some reckless handling of the client file and the claim has some severity to it, these are typically the circumstances that could increase your E&O premium. Based on the facts, there is the possibility that the agency could face a non-renewal but those outcomes are rare.

It is always suggested to report the matter to your E&O carrier and provide them with an accurate picture of what happened. If it looks like the agency is going to be found liable, advising the E&O underwriter what you learned from the matter and what changes you are planning on making is suggested.

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