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Holiday Greeting of E&O Prevention Tips
by Curtis M. Pearsall, CPCU, CPIA
Special Consultant to the Utica National E&O Program
Document, Document, Document!
As we all probably know, there is no “silver bullet” for preventing E&O claims. However, there is one thing every agency could do better – documentation. To truly understand the impact of good documentation, let's look at how an E&O claim is handled.
When a claim is reported to Utica National, we begin our investigation to determine what happened. The top two types of claims – failure to provide the proper coverage and failure to place after agreeing to do so – make up more than 75% of claims . Let’s say you are faced with a claim from one of your commercial accounts for failure to recommend an umbrella. Utica National, or a representative, will review your information to better understand whether the claim has any merit. (Utica closes approximately 70% of all claims for no payment, so there are many E&O claims with no merit — you are still entitled to a defense.) You remember discussing this coverage with your client and that she indicated her business was "insurance poor" and couldn't afford any more. Did you let it go at that, or did you have this customer sign a form stating she was offered the coverage but chose not to buy it? Without some evidence in the file that at least indicates you offered it and she didn't buy it, the claim could come down to your credibility versus the credibility of the customer. I can't guarantee you will win this one.
Documentation of phone conversations, face-to-face conversations, offerings and rejections of coverages, and explanations of coverages are all real-life examples where documentation can truly make a difference. Your staff is busy – especially in this marketplace. Yet, as the saying goes, "an ounce of prevention is worth a pound of cure." That certainly applies to E&O claims.
Know What You Sell and Sell What You Know
One day, your neighbor, who is also an accountant, calls to tell you he is not happy with his current agent and wants you to take over his professional liability account by broker of record. What is your reaction? You probably think it’s great news and, in fact, it may be. Or are you thinking, "What does our agency know about accountants’ professional liability?"
There are resources you can use to learn more about this class of business. However, what if your neighbor's account involves aviation coverage or a large multi-state trucker? Would you still jump so quickly? You shouldn't if you don't know the product.
These are some examples of classes of business. What about lines of business? Does your staff understand Directors & Officers coverage or Employment-Related Practices Liability? If your staff doesn't understand it, what is the chance they will ill-advise your client? Talk with your staff about these issues. If they need more training, get them to a seminar or provide them with a resource that details the line or class of business.
How Do You Market Your Agency?
Look at the words you use to describe your agency. Those words might be in a marketing brochure, in a yellow pages ad in the phone book or on your Web site. Do you use phrases like "we have the best prices in town,” "we take care of all your insurance needs" or "for complete protection, come to us?" Well, if you are using those words, one day they will come back to haunt you. These types of phrases and slogans create an impression in your client's mind that you are expected to live up to. If these statements are, in reality, not completely accurate, change them. A good friend of mine runs an agency that uses the slogan "Performance, not Promises." A powerful statement that sounds good, positions the agency well and will not hurt the agency if it is faced with a claim. What do your slogans say about your agency?
Happy Holidays from the dedicated professionals of the Utica National E&O Department.
Communiqué is published for our agent-customers
for informational purposes only and is not intended to be, nor should
it be relied upon as legal advice. Legal questions should be directed
to your legal advisor.