Get it in writing !

It is certainly a frequent occurrence in the insurance world for clients, business or personal, to look to reduce their limits. The reason could involve issues such as cost or possibly the client feels the limits are more than their exposure.

There are various ways the client may request the reduction. When the client sends the agency some form of written communication, these should provide a strong defense should a problem arise down the road. The communication can be in the form of a letter or e-mail where there is clear evidence of who is making the request and what the actual request is. Instructions on a cocktail napkin probably will not hold much weight in the court room.

Oftentimes, the client request is either made during a face-to-face meeting or via a phone conversation. These scenarios create a potential greater degree of E&O exposure without the proper level of documentation.

If the request for a reduction is made based on an agency proposal, many producers will simply ask the client to note the reduction on the proposal and initial the request. While this may be common, it is not the best approach. If the request is noted and initialed, it is highly suggested that the producer either promptly verify / memorialize the request in writing back to the client or produce a revised proposal indicating the limits the client is agreeable to and looking for the client to sign accepting the proposal as presented.

Bottom line, the request should be in writing either from the client to the agency staff member or vice versa essentially memorializing the request.

As noted in the following article, written by Judy Greenwald and published on on 12/19/17, this issue was clearly a key element in the E&O matter of Alliant vs Cammeby’s Management Company LLC. Alliant was acting as an insurance broker for the New York-based Cammeby’s firm.

“A federal appeals court has refused to overturn two jury verdicts that found Alliant Insurance Services Inc. negligent for reducing the flood sublimit on a New York property owner’s policy before Hurricane Sandy, and finding it was liable for $20 million.”

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