Documentation - What is your agency's expectation

by Curtis M. Pearsall, CPCU, CPIA
Special Consultant to the Utica National E&O Program

I remember back in 1987 asking Ron Anderson and Jim Harrison, two of the true experts on the Agents E&O class of business, what the key was for an agent to avoid / minimize E&O claims. Their response was clearly document / document / document. Having just been provided with the responsibility of managing the Utica program, this seemed to be too simple; there had to be more to it. Now over 20 years later, while there are a number of steps that can be taken to reduce the potential for an E&O claim, a key factor in whether a claim is even brought and if it is, what direction it takes deals with the matter of documentation.

Take this recent claim: you are successful in securing a new account and the client initially asks you to just duplicate what they currently have. Sounds simple. As you get into securing proposals, the client advises you (verbally) that due to economics, they are not interested in continuing their umbrella coverage. As a result, you proceed with placing the remainder of the coverage. After you get the other lines placed, one of their vehicles is in a serious accident resulting in the fatality of one of other car’s passengers. Definitely a loss that would exceed the underlying limits and hit the umbrella layer.

Guess what their story is now? They are advising you that they wanted their prior coverage replaced exactly as expiring, no exceptions. The issue: there is nothing in writing, nothing documented. It is too early to know where this claim is going to go but without the necessary documentation, the defense of the agent is definitely not as strong. In retrospect, one could fault the agency for not having full and complete documentation in the file. For example, a letter to the client recapping the conversation that the umbrella was not wanted would have been appropriate. Maybe providing the client with an umbrella proposal anyway and then getting their signoff that they don’t want it. Sure, these would take time but I would hope that all would agree that it is time well spent.

Could this claim occur in your agency? Is there a clear and concise position from management to the CSR’s and producers how you would expect the above matter to be handled / documented? Is the documentation expectation actually documented?

Unfortunately there are many more claims like the one above where a solid trail of documentation would make the difference. Imagine in the claim above what would happen if there was solid documentation. Chances are the claim would not have even become a claim when the client realized that they put in writing that they did not want the umbrella policy.

There are many scenarios where the degree of documentation would play a key role in the defense of the agency. Whether you are dealing with policy changes (either additions or deletions) or moving accounts from one company to another where the coverage may be different, solid documentation is key. The preference would be to get something from the customer in writing but if this is practical, sending the customer a letter / e-mail detailing what you believe that they are asking for is a good alternative. Also, ensuring that the right person is doing the documenting can play a big role. If the producer spoke with the customer, then the producer should be the one handling the documentation. To ask a CSR to handle that when they were not even part of the conversation is not appropriate and certainly not fair to the CSR.

Also be certain that the documentation in your system is handled promptly and without a lot of abbreviations. You definitely want to keep the comments professional as notes in your system can be discoverable in the event that a claim develops on that file.

Good solid documentation takes time and there is no doubt that while strong documentation is key, it is easier said than done. It would be appropriate to talk this thru with your staff to see if you can collectively identify some efficiencies that will enable your staff to have the time to do the necessary documentation.

If you are serious about making changes that will reduce the potential for an E&O claim being made against your agency, documentation is a great starting point. There is no doubt that taking the time to the proper job of documenting will pay major benefits for your agency.