In Agents E&O, the basic premise in determining “fault” is built on negligence. In other words, the agency would need to be found negligent in performing their duties. Over the years, the various court decisions have largely shaped this doctrine of negligence and what standard the agency would be held to.
Essentially the basic duties owed include the exercising of good faith and reasonable skill, care, and diligence in procuring the insurance in accordance with the client’s instructions.
This issue of “procuring the insurance requested…” speaks to a couple of key issues that those individuals involved in sales need to be aware of.
– It is vital the agency sales individual listen to what the client / prospect is asking for. Does the request involve standard form coverage or is there a request to obtain coverage for a specific exposure the client wants addressed?
– The need for documentation of these discussions. The documentation should include who was at the meeting, what was discussed, any specific requests, etc. Confirming back to the client the essence of the discussions is always suggested as it helps to address any potential misunderstandings between the respective parties.
There is one other key element involving the “insurance requested” issue. If the agency is not able to secure the coverage requested, there is a duty for the agency sales personnel to inform the client. Failure to do so could result in the client believing that you secured the coverage they requested.
When advising the client that you are not able to secure the coverage requested, it is okay to advise the client verbally but it is also always suggested that this conversation be documented in some form of written communication between the agency and the client.
There have been many E&O claims where the agency was not able to provide the coverage requested but the client was never advised. The agency is going to have a very difficult time “winning” these cases”. It is probably best not to count on the “duty to read” defense in these situations.