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In
this claim, the carrier alleged that the insured misrepresented
the gross weight of a dump truck when it was added
to the policy. The carrier’s underwriting guidelines
stated that they would not insure any truck with a
gross weight in excess of 45,000lbs. When the agency
attempted to add a truck that weighed (according
to the agent) 50,000 lbs., the carrier initially
hesitated but after some further dialogue, the carrier
added the truck. The truck was involved in a loss where
the operator ran a light and injured a man and a woman
in a car. Injuries were severe enough to warrant a
total settlement of $225,000 and in addition, the carrier
spent $38,000 defending the loss. After the loss, an
inspection of the truck revealed the gross weight was
74,000 lbs. and this was substantiated by the statement
on the door of the vehicle declaring the weight. When
pressed, the agent stated that he was familiar with
makes/models of trucks and guessed at the weight. The
total claim is for $253,000 and it appears that the
agent is primarily liable.
 Lesson: This
claim could have been avoided if the agent would
have asked the owner the weight of the truck. Don't
guess at the weight when the correct answer is
easy to obtain.
This
E&O claim was based on a claim by an owner of a
business who had a bad accident as a pedestrian and
sought Underinsured Motorists (UIM) coverage under
a Commercial Auto policy. The policy did not list the
owner as an additional insured. Several policies were
involved but it appeared that when the coverage was
moved to another carrier, the UIM coverage listing
the owner as an additional insured was not duplicated.
When there was an indication that the agent was asked
to duplicate cover, Utica realized that its chance
for success was less and decided to take the case to
verdict. The verdict against the agency was $193,700,
considerably lower than the amount demanded.
Lesson: When
moving coverage from one carrier, be sure the coverages
are at least equal and if they are not, communicate
the differences and document your discussions with
the client.
This
E&O claim involves a principal of a business who
was not named as an additional insured under a replacement
commercial auto policy. The prior policy listed the
principal as an additional insured. The client’s
son was severely injured (brain injury) in an auto
loss while a passenger in a friend’s car, and
made a claim under the Commercial Auto policy for Underinsured
Motorists benefits. The policy had a $500,000 UIM limit,
but the son did not qualify as an insured as he was
not occupying one of the covered autos. Had the mother's
name (she is the client’s principal) been added,
he would have been entitled to UIM coverage. There
was a question of residency at the time of the loss,
as the son would have had to have been a resident relative
of the mother in order to qualify for UIM coverage
under the Commercial Auto UIM coverage. The case against
the agency was settled for $200,000.
Lesson: When
replacing coverage, be sure the coverage obtained
is at least as favorable as the policy replaced.
In
this E&O claim, the agency failed to add a sister
company of their client to a products liability policy.
Both the client and its sister company were involved
in the manufacturing and distribution of rock crushing
equipment. An employee of a recycling firm was seriously
injured by the conveyor belt apparatus of rock crushing
equipment sold by the client, resulting in the loss
of both legs. When the sister company was sued by the
injured party, both the primary carrier ($1mil limit)
and the umbrella carrier ($5mil limit) disclaimed coverage,
stating the sister company was not an insured under
their respective policies. The underlying damages were
in the $10mil - $15mil range. Following discussions
with the primary carrier, they agreed to honor the
claim on behalf of the sister company in exchange for
a payment of around $300,000 by Utica.
Lesson: When
servicing a large commercial account, be aware
of the relationship of all related entities associated
with the account, and inquire as to the coverage
protection needed for each entity. All discussions
with the clients concerning coverage should be
documented.
In
this E&O claim, a customer had coverage on a
previous policy for direct suits by employees, which
was allowed under certain circumstances in the state.
The law changed, and the agent believed that there
was no exposure for direct actions as a result of
the change in the law. The endorsement covering direct
actions by employees was removed at the agent’s
request on renewal although the premium savings was
minimal. The client was subsequently sued in a direct
action by an employee, and the court allowed the
claim to stand. A judgment was rendered against the
client for over $400,000, and the client in turn
sued the agency. The claim was settled for $250,000.
Lesson: When
a law is changed that may affect coverage, seek
legal advice before deciding to remove coverage
for clients.
This
E&O claim involved a loss where the agent submitted
a photo of the wrong building to the carrier. The agent
submitted a photo of a cottage, and the risk was actually
a motel converted to a residence. The carrier denied
coverage, based on false information regarding the
submission of coverage. The error occurred because
the agent got confused as to the street address, and
took a photo of the building with the right address
number, but on the wrong street. The claim was settled
for $142,500 with some contribution by the carrier.
Lesson: Ask
clients for a description of their property before
going to photograph the property, and read maps
carefully.
In
this E&O claim, the agent procured a property
policy for a new customer. The building was destroyed
by fire, and because of the size of the loss, a large
coinsurance penalty was applied because the amount
of coverage requested was nowhere near enough to
cover the exposure if the building was destroyed.
The difference in what the client could have collected
(he did not rebuild) if there was no coinsurance
penalty was between $400K - $600K. The case hinged
on whether the agent had a duty to suggest higher
limits. The agent had actually quoted higher limits
several years before to the client in an attempt
to get the client’s business, but the client
decided to stay with his prior agent at that time.
The claim eventually settled for $215,000.
Lesson: Ask
sufficient questions of clients to know if the amount
of coverage being requested is enough to cover a
building. If a quote had been given to a prospective
customer, and the prospective customer eventually
becomes a client, keep all records together.
This
E&O claim involves a long time client of the insured’s.
An apartment building owned by the client was on the
previous term's policy with the standard $500,000 FEMA
coverage for the building. There was an excess flood
policy in place, but locations in Flood Zone A were
excluded. The client received financing from a bank,
and the bank’s requirements for coverage on the
building were shared with the agent. One of the requirements
of coverage was loss of rents coverage which was secured
but it excluded coverage for locations in Zone A. The
building was flooded, and it was determined the building
was in Zone A. The client clearly understood that there
was no coverage for flood damages to the building beyond
the FEMA coverage, but stated he should have been informed
that the loss of rents also would not have been covered
if due to a flood loss in Zone A. FEMA policies do
not cover loss of rents. Following the loss, he was
unable to keep up on the bank note because of decreased
revenue from the loss of rents for a period of time.
The agent was adamant he did not perform his duty by
not securing loss of rents coverage for flood losses
and the case was settled at mediation for $163,000.
Lesson: Carefully
examine any requirements for coverage an insured
presents, and explain to the client when a particular
coverage requirement cannot be met.
In
this E&O claim, the agent procured coverage for
several buildings for the client and the client had
requested flood coverage be included. The proposal
from the MGA that the agent was going through stated
there was coverage for flood except for Zones A&B.
The agent retyped the proposal, left off the limitations
for Zones A&B and sent it to the client, who
accepted. The agent admitted missing the flood limitations.
A flood occurred, and $1,7000,000 in damages was
claimed. The intended limit was $1,000,000. Suit
was filed against the carrier and the agent. The
twist here is the fact that the actual endorsement
which purports to limit flood coverage was poorly
constructed by the carrier; it says the limit is: "1,000,000,
except for flood zones A&B”, and it should
have said zones A&B were excluded. This is ambiguous
- a reasonable interpretation could be that there
is unlimited cover for flood zones A&B. We believed
the carrier had some problems because of that language.
The case settled with the client, with the carrier
paying $700,000 and the agent paying $275,000.
Lesson: When dealing with an MGA, carefully review any proposals
to ensure they meet the client’s needs.
This
claim involves a loss that arose from builder’s
risk policy written through a carrier that covered
a home being renovated by a client. A fire occurred,
and the carrier claimed they were only responsible
for labor and materials connected to the re-modeling,
and not the existing structure. There was no Homeowners
or Fire policy in place for the house when the fire
occurred. The client claimed the insured should have
known the limitations on the builders risk coverage,
and there should have been a Homeowner’s policy
in place to cover the existing house. The client claimed
$1.8 million in damages, and the builder’s risk
carrier stated the total unpaid loss was around 800,000.
There was some exposure for the carrier also, due to
the confusing language in its policy. Following depositions,
the loss was settled with Utica paying $675,000 and
the carrier paying $250,000.
Lesson: Know what is and what is not covered under a Builder’s
Risk Policy and secure additional coverage if there
are limitations to coverage for the structure under
the Builder’s Risk policy.
In
this E&O claim, the agency dropped the ball in
securing flood coverage under an inland marine policy,
which was specifically requested by the client. The
policy contained an exclusion for properties within
a flood plain. Despite this, the agent had informed
the client that flood was covered for the location.
The damages claimed were $750,000 for damaged/destroyed
petroleum coke stored by the agency’s client.
The loss subsequently settled for $545,000.
Lesson: Read
the policies procured for customers to determine
if the coverage requested by the client was the
coverage secured. In addition, FEMA maps should
be reviewed to determine whether or not a risk
resides in a flood plain.
In
this E&O claim, the agency failed to properly replace
WC coverage for a trucking firm that had "all
states" coverage on a previous policy. The new
policy only covered losses in the state in which the
client was domiciled. The client had an employee who
was injured in another state, and because they had
no coverage for losses occurring in that state, the
client was obligated to reimburse that state’s
uninsured WC fund for WC benefits paid to the employee.
In this case, the Worker’s Compensation Board
ruled the carrier does not owe any coverage. The case
was settled by reimbursing the client the monies it
had to pay the state plus attorneys fees. The case
settled for $317, 000.
Lesson: When
replacing one policy with another, extra attention
is needed to ensure the coverage available in the
new policy was at least equal to the coverage available
in the old policy.
In
this E&O claim, the agency wrote multi-state
coverage for a trucking firm with a carrier that
went insolvent. A trucker was injured when she fell
off the back of a truck and made a WC claim, which
initially was paid by the reinsurer of the insolvent
carrier. The payments ceased, and the reinsurer,
along with the agent were sued in the state the trucker
resided. Although Utica felt that the reinsurer should
continue to pay the WC benefits, the claimant hired
a new attorney in the middle of litigation, and the
suit was amended to included state trade practice
violations against the agency for writing WC cover
in that state with a non-admitted carrier. In addition,
the agent did not have a license to sell a policy
in the state. After the judge let the reinsurer out
of the action and following an unsuccessful mediation,
the case was settled for $1,000,000.
Lesson: Be sure of all the rules and regulations pertaining
to all states in which a Worker’s Compensation
policy may apply are adhered to. In particular, if
a state requires coverage to be placed with an admitted
carrier, make sure the carrier is admitted in that
state. Also be licensed in all states where you sell
insurance. |