| Commercial
General Liability |
The
details on this E&O claim involved the agency procuring
a CGL policy for a client that owned a motel through
an MGA. Six months after policy inception, the policy
was cancelled for non-payment of premium with the notice
of cancellation being sent by the MGA to the agency.
The agency intended to find another policy for the
risk, but failed to either notify the client of the
cancellation or replace the policy. In fact, months
after the cancellation date, the agency produced certificates
of insurance for the client indicating coverage was
in force. A person fell at the motel, and the client
expended $25,000 defending itself. Suit was filed against
the agency and since the agent had no excuse for failing
to notify its client of the cancellation, and had no
excuse as to why he issued a certificate of insurance
well after the policy had been cancelled, the loss
was settled for $20,000.
 Lesson: When
a customer has a policy cancelled, keep the matter
on a very short diary until replacement coverage
is offered to the client. Never issue a certificate
of insurance when there is no coverage in force.
In
this E&O claim, the loss occurred as a result of
the insured sending a certificate of insurance to a
bank for a policy that had been cancelled for non-payment
of premium prior to the insured sending the certificate.
The client owed some premium, and there was some confusion
as to whether the amount already paid would keep the
policy in force. A fire ensued, and a total of $3,000,000
-$4,000,000 in damages had been claimed. Both the client
and the bank made claims. The bank claimed it would
not have loaned money for a mortgage ($400,000) but
for their reliance on the certificate. The client claimed
that they thought the premium was paid, and relied
on the certificate as evidence they had a policy in
force. Utica felt that the bank’s claim was owed,
but not the total amount of the client’s claim,
as they had not paid the full premium. The claim was
settled for $1,000,000.
Lesson: When
a difficult client has a history of late premium
payments, check with the carrier before any certificates
of insurance are issued.
This
E&O claim involves a client’s seasonal home
on the Ocean that was insured by a surplus lines carrier,
which did not automatically renew coverage from year
to year. Near the end of each policy term, the carrier
would send an “offer to renew” with a premium
quote to the agent, who in turn would contact the client.
As the second term expiring date approached, the carrier
sent its offer to renew and a premium quote to the
agent. The agent alleges a CSR forwarded the premium
quote on to the client, who was a long time customer
of the agency. The client denies receiving any correspondence.
Sometime after the cancellation date, pipes froze and
burst causing extensive water damage to the house.
The CSR who allegedly sent the premium notice to the
client had been fired and since there was no documentation
in the agency’s file to indicate the premium
notice was sent to the client, the case was settled
for $52,500.
Lesson: Copies of all correspondence sent to a client should
be
kept in the agency’s file.
In
this E&O claim, a client had paid his renewal
premium in full to the agent. The agent placed the
money in the agency’s account and was waiting
for an accounting notice from the carrier. The carrier
had recently changed its billing procedure, and the
agent assumed the carrier would take the money out
of the account. The money was never taken and the
policy was cancelled. Shortly thereafter, a fire
ensued and damaged the client’s home. A request
was made for the carrier to provide coverage, and
the carrier refused. The loss for additional living
expense, contents and repairs totaling approximately
$117,000 was paid and suit was filed by the agency
against the carrier for recovery. The carrier eventually
paid 50% of the claim.
Lesson: Keep
an accurate accounting of all premiums deposited
and withdrawn to ensure premiums are properly credited
by a carrier.
In
this E&O claim, the agency’s contract with
a carrier was terminated by the carrier with the
two parties agreeing upon a mutual date that all
renewals with the carrier would cease, and policies
beyond that date would expire. A client’s policy
with a renewal date after the agreed upon date expired,
and the agency failed to find a replacement carrier.
This was discovered by the agent after a frozen pipes/water
loss claim was reported to the agency. The client’s
claim was settled for $14,000.
Lesson: When
switching policyholders from one carrier to another,
be sure to check the list of clients that need
to have policies replaced, and let no client slip
through the cracks.
In
this E&O claim, the agency had insured this client
for many years for all of their insurance needs. The
client requested the insured place "Key-Man" life
policies for the benefit of the client for several
key employees. The policy would pay the company if
one of the client’s key people died. The insured
secured the coverage through a carrier and gave the
carrier an initial premium payment. The address given
to the carrier by the agent was the street address
for the client company. All previous policies and dealings
with this client listed the P.O. Box address of the
client, and all correspondence in the past had gone
to the P.O. Box. The premium check forwarded to the
carrier had the P.O. Box listed as the address. In
addition, the application listed the phone # for the
client. The carrier started sending bills to the street
address, and they were sent back as undeliverable.
The life policy was cancelled without the agent or
the client knowing - the cancellation was sent to the
street address. A key employee died after the cancellation,
and the policy would have paid $2,000,0000. Suit was
filed against the agent and the carrier. Counsel, following
discovery, opined the settlement value as to the agency
was $250,000. While there were some arguments in favor
of the agency, the main problem was the incorrect address
given to the carrier by the agent. The carrier settled
for $750,000 and the agency settled for $150,000.
Lesson: Be
extremely careful when listing addresses on an application.
In
this E&O claim, the personal lines carrier for
the agency’s client found out the client’s
car was being used for commercial purposes and decided
to non-renew the policy and thus non-renewal notices
were sent, including a copy to the agency. The client
later claimed he never received the notice. Sometime
after the notice was sent, the agent sent certificates
of insurance to the client indicating coverage was
in force. The client stated that he felt he had coverage
because the certificates indicated he did. The client
had an accident, and damaged another car. The carrier
disclaimed, and the client sued the agency. The case
settled for $3,500.
Lesson: Never
issue a certificate of insurance unless there is
an in force policy in effect.
In
this claim, the agency procured worker’s compensation
for a small contractor. After the policy had been in
force for a month, the carrier decided to cancel the
policy for underwriting reasons. Both the client and
the agent denied seeing a cancellation notice and thus
no replacement policy was procured. It was not until
a worker was injured several months after the cancellation
that it was discovered the WC policy had been cancelled.
The client was forced to pay the benefits and sued
the agent. A review of the agency’s records revealed
a fax the agent had received one month prior to the
cancellation date from the carrier clearly indicating
the policy was to be cancelled. Because the agency
failed to act on the fax, the case was settled for
$11,000.
Lesson: React
to all communication from the carrier relating
to the status of coverage for a client. |