If one were to ask most agency ownership about their E&O exposure, “claims handling” would probably not be high on the list yet this is one of the current E&O hotspots agents should be aware of. When handling customer claims, there are a number of areas where things could go “wrong”.
Denial of a claim. A claims denial should be the carrier’s responsibility. Even if the agency is of the belief that the claim would not be covered, the best practice is to report the claim to the carrier and let them make the decision.
Acceptance of a claim. Technically, agents do not have the authority to approve or accept coverage for a claim. This is also the carrier’s responsibility. I understand that customers are looking for some assurance that the claim is covered but caution should be exercised. There is certainly the potential that the customer has not provided all of the “facts” of the case and one of those key undisclosed pieces could result in a denial by the carrier. Many agencies use language such as the following when communicating with the client: “While I am cautiously optimistic that this claim is covered, I do not have the authority to make coverage determinations. That is the role of the carrier. I will report the claim and advise you as soon as I hear anything further”.
Putting excess carriers on notice. There is the potential that there could be multiple policies that have some degree of coverage for any given claim. A good “best practice” is to advise all applicable carriers, especially any excess or umbrella carriers. This will give them the opportunity to conduct their discovery on the matter. It is often difficult to determine the potential of an underlying claim to exceed the limits of the underlying coverage. When a claim is submitted to your agency, make it a practice to review the file for all possible available coverage, and then put those carriers on notice. Even if the umbrella carrier is with the same insurer as the underlying, it is still highly recommended that the agency automatically put the umbrella carrier on notice at the same time the underlying loss is reported.
Since claims handling has the potential to cause some problems, following some basic “best practices” should minimize the potential for an E&O claim to develop.