What is the key one?
When to report an issue to your E&O carrier.
You will notice that I did not say “when to report an E&O claim”. This is because there are going to be times when you may not know whether the matter will develop to that level.
Let’s look at several scenarios where you may wonder “should I notify the E&O carrier?” or “should I at least, notify my manager”.
– A client calls to report a claim and you advise them that they don’t have coverage for that type of claim. (Caution should be exercised as it is heavily suggested that agencies not deny claims – this is a carrier responsibility). The client is obviously very upset and makes some remarks that they are not happy with this and imply they will be getting an attorney. You may feel that you are on solid ground. Should that issue be reported?
– A client suffers a loss that is not covered or has an issue where they feel your agency did not properly advise them (such as the client alleges that were not aware a WC policy was subject to audit and they are now getting a bill for an additional premium). They send you an e-mail or letter or call you demanding that you take care of this. Should that be reported to the E&O carrier?
Every year, I hear about E&O claims that did not get reported to the carrier in a timely fashion. It is not clear if the agency thought the matter would simply go away or maybe the concern is that the E&O carrier will be raising your E&O premium due to these notifications.
The overwhelming majority of E&O policies are written on a claims-made basis. These policies have specific language that denotes the definition of a claim as well as the reporting requirements. Every agency including the staff should know what the criteria is for the reporting of an issue. Typically, the language will include “demand for money or services”. So, when you receive a demand for “money or services”, whether verbally or in writing, DO NOT IGNORE IT!
Based on your level within your agency, elevate that issue to your superiors. If you are the owner, elevate that issue to your E&O carrier. E&O carriers have tremendous expertise and are there to assist your agency and guide you in dealing with these types of matters. They may advise you to “let’s sit tight for now” or they may want to assign counsel to represent your agency moving forward or some other option. Let them make that judgment call.
Obviously, the answer to both of the scenarios mentioned above – YES!!
What can happen if a claim is not reported in a timely fashion? The E&O carrier may be able to deny the claim for “late notice”. This will now leave your agency totally responsible for all costs, including defense, judgment, etc. When this occurs, the agency future could be in jeopardy.
Every employee needs to know to take these types of issues very seriously. This would be a great topic to include at an upcoming agency staff meeting.