Many agents contact clients by email or phone when a carrier issues a notice of pending cancellation due to non-payment. This practice is often intended to reduce administrative work associated with cancellations and reinstatements and to help clients avoid coverage gaps. While well‑intentioned, this approach can expose agencies to significant Errors & Omissions (E&O) risk. 

How a Duty Can Be Created 

When an agency establishes a pattern of contacting clients about pending cancellations, it may unintentionally create a legal duty to continue doing so. If the agency later stops, skips an account, or applies the practice inconsistently, courts may side with clients who relied on that past behavior—regardless of the client’s payment history or the carrier’s direct notice. 

If You Continue the Practice 

Agencies that choose to contact clients about pending cancellations must apply the process consistently across all accounts. Key safeguards include: 

• Uniform application: Make the same number of contact attempts for every client.
• Thorough documentation: Written records are critical. If phone calls are made and not recorded, document the date, time, and substance of the call in the client file and support the outreach with written correspondence.
• No exceptions: Inconsistency—missing even one account—can create liability.

Recommended Best Practice: Discontinue Courtesy Calls 

To reduce E&O exposure, discontinuing courtesy calls is the safest option. Agencies should notify clients in writing that this practice is ending and clearly state the effective date. This communication should also reinforce that:

• The client is responsible for timely premium payments.
• The client is responsible for maintaining and replacing coverage.
• Once a policy is cancelled, the agent has no duty to seek replacement coverage unless the client requests it. 

Carriers already issue legally required notices of non‑payment and cancellation, making additional outreach unnecessary and risky. 

Replacement Coverage Considerations 

Agents may respond if a client contacts the agency about replacement coverage after a cancellation. However, initiating this process can create a new expectation of follow‑up, requiring consistent handling for all similar situations going forward. Because clients with payment issues often present additional challenges, agencies should carefully evaluate whether they want to set this precedent. Agents should also:

• Never promise backdated coverage. While carriers may sometimes agree to backdate coverage within a limited window, making assurances that the insurer does not accept can create serious issues. 
• Clearly explain coverage differences between prior and proposed replacement policies and document that discussion. 

Example: How a Claim Can Arise 

An agent manages multiple policies for a client insured with several carriers. The client frequently pays late, and the agent sometimes—but not always—alerts the client to pending cancellations. Although the agent holds a debit card on file, payments are never made without the client’s direction. 

After one of the client’s properties is destroyed by fire, it is discovered that the policy covering that property had been cancelled for non‑payment. The insurer denies coverage and refuses reinstatement due to the client’s payment history. The client then alleges the agent created an expectation that the agent would track policy status and notify the client or seek payment instructions. If a court agrees, the agent and its E&O carrier could be held liable for the loss—even though the insurer sent a cancellation notice directly to the client. 

Why Agencies Are Moving Away from Courtesy Calls 

For years, agencies viewed calls about pending cancellations as a customer‑service courtesy. Industry authorities and E&O carriers now advise eliminating this practice entirely due to the risk of creating an unintended duty. Courts have repeatedly found agencies liable when clients relied on inconsistent follow‑up, even when carriers met their statutory notice obligations.

Implementing a Change in Practice 

Agencies currently making courtesy calls should formally discontinue the practice and document the change. Recommended steps include: 

1. Review and approve the new workflow with leadership. 
2. Set a clear effective date. 
3. Prepare a written notice explaining the change, offering payment options (such as EFT or auto‑pay), and reinforcing client responsibility. 
4. Send the notice to all clients and document it in the agency management system. 
5. Send a second reminder before the effective date. 
6. Train all staff on the new process. 

Final Takeaway 

Ending courtesy calls about late payments and cancellations significantly reduces E&O exposure while improving operational consistency. A clear, documented process—paired with written client communication—helps protect the agency while maintaining transparency and professionalism. 

If you have questions regarding Error & Omissions coverage and best practices, contact Ashley Riley, Director of Risk Management.  Call direct (614) 552-3052 or Toll free (800) 555-1742 or email your questions to ashelyr@ohioinsuranceagents.com 

 Questions regarding the Resource Center contact Jeanie Giesler Resource Center Advisor by phone (614)-552-3054 or Toll Free (800) 555-1742 or email Jeanie@ohioinsuranceagents.com.

Legal Disclaimer: This material is intended to provide you with general background and insight. The material does not constitute, and should not be regarded as, legal advice regarding any particular facts, circumstances, or issues. This material is not intended to serve as a substitute for legal counsel, and we advise you to contact legal counsel for specific analysis, drafting and advice.  

More Information: Seek your trusted advisors Attorney, Banker, and CPA that your legal and financial interests are adequately protected. The information provided in this publication is not intended to be a substitute for legal advice. You should consult your legal counsel and make certain that you are in compliance with state law. These laws and rules are subject to change. If you have more questions about this guide, you can contact: OIA at (800) 555-1742 for the most up-to-date information.  

Cited Resources 

Tips for Handling Client Cancellations for Non-Payment of Premium
Utica

No Such Thing as a Stupid Question 

By: Richard Lund IIABA Virtual University

Ending Follow-Ups with Late Paying Past Due Customers (IA VU) IIABA Virtual University 

BY: BILL WILSON MARCH 3, 2016 

About the Author

Jeannine Giesler, CISR, CPIA, and past President of the OIA Board of Directors, Foundation for the Advancement of Insurance Professionals, currently serves as Resource Center Advisor for the OIA. The purpose of the Resource Center is to contribute to building a comprehensive library of resource materials for our members. We pride ourselves on being the one-stop shop for all OIA members and work to solve every problem or situation you may come across.

Cited Sources