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Holiday Greeting of E&O Prevention Tips
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
Document, Document, Document!
As we all know, there is no silver bullet for preventing
E&O claims. However, there is one thing that every agency could do
better, and that is 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 over 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 go over your information to better understand whether the claim has any merit. (Utica closes over 80% 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 get this customer to sign a form that states that she was offered the coverage but chose not to buy it? Without some evidence in the file that at least indicated that 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 that 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. I know that your staff is busy, especially in this marketplace, but as the saying goes, "an ounce of prevention is worth a pound of cure." That even applies to E&O claims.
Know What
You Sell and Sell What You Know
One day, your neighbor who is also an accountant, calls you up and advises
you that he is not happy with his current agent and would like you to
take over his professional liability account by broker of record. What
is your reaction? You are probably thinking that this is great news and
in fact, it may be. Or are you thinking, "what does our agency know
about accountant's professional liability?"
There are resources that you can use to learn more about this class of business. However, what if your neighbor's account involved 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 that 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?
Take a look at the words you use to describe your agency. Those words
may be in a marketing brochure, in the yellow pages in the phone book,
or on your Internet site. Do you use phrases
like "we have the best prices in town" or "we take care
of all of your insurance needs" or "for complete protection,
come to us?" Well, I need to tell you now that if you are using those
words, one day, they are going 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 really are not totally
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.