Over the last couple of years, the agency’s use of carrier proposals is becoming much more common. This is especially true with small commercial accounts or accounts in the personal lines division. Using the carrier proposal actually has several advantages including:
- A gain in efficiency. To retype the carrier proposal onto the agency letterhead takes time and effort. Every agency is looking for some gains in efficiency and this approach is a plus.
- Accuracy is enhanced. If an agency were to retype the carrier proposal onto the agency letterhead, there is certainly a greater possibility that an error is made in the transfer of the information.
- Support from the carrier. If there was an error in the carrier proposal and the agency used that document, I would have to believe that the carrier would agree to providing the coverage created by the error.
- Greater depth of information. There is a good chance that the carrier proposal has greater depth to the information provided which should enable the client to more clearly understand the proposal.
Unfortunately, there is also a disadvantage to using a carrier proposal. This disadvantage, however, is easily addressed.
Typically, the carrier proposals do not include any of the common disclaimer language. This disclaimer language can play a key role in the defense of the agency should a problem develop.
Thus, if the agency is sending the client / prospect the carrier proposal, it is highly suggested the agency include some of this disclaimer language in a document commonly referred to as a “wraparound” because it envelops the carrier’s materials with protections for the agency.
What are some of the disclaimers that should be included?
- “This is a convenient coverage summary, not a legal contract. The actual policies should be reviewed for specific terms, conditions, limitations, and exclusions that will govern in the event of loss.”
- “Higher liability limits may be available. Please let us know if you would like a quote for increased limits.”
- If the carrier is non-admitted, that fact should be stated with the additional statement regarding the absence of guaranty fund protection.
- Since it is common for agencies to include on the proposals other coverages for the client to consider, the “wraparound document” should include a statement of “other coverages to consider include but are not limited to the following”.
Proper use of the carrier proposal can lead to some positive gains and with the inclusion of a “wraparound” document, it can also aid in the defense of the agency in an E&O matter.