Next time you’re in a meeting with fellow agents (or on a Zoom call) take a look around. This is a statistic that may shock you:
One in seven insurance agencies and brokerages report a potential Errors and Omissions Claim annually. One in seven!
Just like our client’s claims don’t only happen between 9am and 5pm, E&O claims don’t discriminate by size or location of the agency. Small, large, rural and urban agencies all face the potential for an E&O lawsuit.
That’s why we’re bringing you our new mini series: E&O Risk Management. We are going to drill down on some risk management recommendations you can implement in your agency to help you mitigate exposure to an E&O claim and help provide a good defense should you face one. Remember, just because a client alleges you made a mistake, they still must prove you were negligent. That’s why having sound risk management procedures are critical to providing a good defense.
A spike in E&O claims occur when we experience catastrophic events such as hurricanes, floods, wildfires, and yes, a pandemic. It’s typically during these events that uncovered losses are realized and clients seek indemnification for their financial loss by filing lawsuits. When an agency has good risk management protocols including strong documentation and consistency in procedures, the likelihood that the claims move forward is reduced by 50%.
COVID continues to bring uncertainty to our society. Globally, legal battles are waging against insurance companies from restaurants, hotels, movie theatres and retailers who are all seeking indemnification for COVID related closures.
We are facing one of the most important legal battles within our industry right now and it’s not going to be over anytime soon.
Unfortunately, with a second wave looming comes the possibility of a second round of closures. And you guessed it, a potential second round of business interruption claims and lawsuits. Insurance companies seeking to clarify their coverage position may be adding virus and pandemic exclusions on their insurance policies.
POLICY REVIEW IS CRITICAL
As agents, it’s critical that we understand how the insurance companies we are appointed with are responding to the pandemic. Are they adding exclusions to eliminate any gray area that could be interpreted to extend coverage? If so, we need to be sure we are pointing that out to clients.
Reviewing insurance policies once they are issued and before we send them to the client is a great procedural practice in the agency. Check your renewal policies against the expiring policy, the renewal quote and proposal for accuracy and to verify that policy endorsements including exclusions have not changed from the prior year. Any reduction in coverage needs to be identified, explained to the client and documented in the client file.
Remember, without documentation in the client file, it’s hard to prove that the conversation or exchange took place. Proper documentation can be the difference between a claim being dismissed or moving forward to trial.
2020 has been a tumultuous year – but we need to use this as a learning experience. Let’s make sure your processes are in order and your staff is fully trained on Errors and Omission topics. We can do a private E&O training for your team – virtually or in person – that will not only get you CE, but also a discount on your E&O policy. Don’t wait until it’s too late – arm yourself with knowledge today!