Many Errors and Omissions (E&O) claims involve clients alleging that they told their agents about situations that were then never reported to the clients’ carriers. The agent often tells his or her E&O claim adjuster that the client did talk to him or her about the situation and that the client did not want to report it.

If clients ask you whether they should report a claim, the answer is that their insurance policy spells out the claim-reporting requirements – and that they likely need to report the claim right away and provide the details specified in the reporting provisions of their policy.

If it is the client’s decision not to report a claim, document this in writing to the client and include it in your file.

Remember the following when dealing with agency client claim reporting:

• Do not tell a client not to report a claim.
• Do not take it upon yourself to make an insurance coverage decision as a reason to not report a client’s claim.
• Be sure to report to all applicable policies (primary, Umbrella, etc.). If you are uncertain as to whether a policy is applicable, report the claim.
• When submitting a loss notice form on behalf of a client, consider placing the carrier on notice with a cover sheet that the agency accepts no responsibility for reliance upon, and has not undertaken verification of, the information contained in the loss notice and that the carrier needs to verify all information with the agency client.
• Many policies require reporting claims directly to the carrier. Consider from an E&O perspective whether it may benefit the agency to have clients report directly to their carriers rather than having your agency accept the responsibility and potential liability surrounding claim-reporting issues. If a client contacts you regarding a claim, it is best to advise them in writing that they should report the claim directly to the carrier and provide the claims contact information or advise them where they can locate this information.
• Keep your agency file well-documented.

A Good Rule of Thumb
Whether it is reporting a claim or reporting a potential claim under your E&O policy, or fielding a claim-reporting question from a client, a good rule of thumb is to immediately submit a claim to the carrier and let the claim adjusters take care of the rest.

Could This Happen to Your Agency?
An agent received a notice of potential claim from their client, and the agency has a policy of not accepting notices of claim. The agent advised the client that the client would need to submit the claim directly to the carrier, supplying the client with the claim-reporting details. The client did not report the claim to the carrier at that time. A few months later, the client further contacted the agent with a notice of summons and was again advised to report the claim to the carrier. Again, the client did not report the notice to the carrier. Subsequently, a default judgment was made, and the claim was then reported to the carrier by the agent. There was no documentation of the instruction from the agent to the client regarding reporting the claim. This E&O claim resulted in a payout to the client exceeding $100,000.

LESSON: Document in writing if you advise a client to report a claim directly to a carrier.