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In
this case, the agency owner apparently suffered from
dementia while still performing as an agent. It appears
that the agent’s total disorganization caused
this loss. The agency’s client had come to the
insured for BOP coverage for a parts store and although
the agent took an application and a premium check,
nothing was done with either. Of significance was the
fact that the agent had no binding authority with the
carrier for this type of risk. Over the course of several
months, the client called several times inquiring about
the whereabouts of his policy, and was told that the
carrier was behind in issuing policies, but not to
worry. The premium check apparently was cashed by the
agent and never forwarded to carrier. The client's
premises suffered heavy storm damage but was then informed
they had no policy. After inspection of the loss, damages
for the building, contents and business interruption
totaled approximately $250,000. A settlement with the
client’s attorney concluded the matter
 Lesson: The
agent could have avoided this claim by immediately
forwarding the application and premium to the carrier
with a diary entry to follow up until verification
of coverage was received.
In
this E&O claim, the agent procured a commercial
auto binder, through an MGA, for their client, a delivery
service. The agent collected a premium, which was forwarded
to the MGA, who in turn forwarded the premium to the
carrier. Following several losses, the carrier denied
there was a policy, and said that the MGA did not have
authority to bind coverage outside of the state, and
no policy was issued .The agent in this instance failed
to timely follow up for a policy prior to the underlying
loss occurring. Several losses occurred that were not
covered. The loss that has the most exposure involved
a gentleman, who was struck by a truck owned by the
client. His injuries were serious and after working
with the Uninsured Motorists carrier, the case was
settled with Utica paying $185,000 on behalf of the
agent.
Lesson: After
a binder issued, follow for a copy of the policy
to ensure one was issued.
| Commercial General
Liability |
In
this E&O claim, a manufacturer of lifts approached
the agency for products liability coverage. The agency
went thru a broker, who in turn went thru an MGA for
coverage. The MGA was a fraud; he pocketed the premium
and never procured coverage. The agent did not follow
up, and assumed coverage was in place. A worker was
injured when he fell off the lift manufactured by the
client and the client. The underlying loss was settled
for $333,000 and Utica is pursuing the broker for recovery.
Lesson: Know
the parties you are dealing with when coverage
is being procured though those parties, and be
sure they are legitimate entities. In addition,
always follow for a copy of a policy.
In
this E&O claim, the agency’s client, a
bar owner, alleges he asked specifically for assault
and battery coverage under a CGL and an Umbrella
policy. A loss occurred where a bar patron was assaulted
and the CGL carrier denied coverage based on the
client allegedly lying on his signed application,
and the umbrella carrier denied coverage due to an
assault exclusion. When suit papers were served (after
disclaimers were issued), the insured told the client
he would take care of the matter, hoping he could
convince the carrier(s) to rescind the disclaimers.
The agent did not take care of the matter, no answer
was filed to the suit, and a default judgment was
taken against the client for $200,000. The client
had to expend money in an attempt to get the default
lifted, to no avail. He then filed for bankruptcy,
and needed a lawyer to try and get the judgment discharged
by the bankruptcy court. The underlying injury was
not worth anything near the $200,000 judgment, and
we hoped to settle the matter on behalf of the client
for much less. Unfortunately, when the bankruptcy
court ruled that the debt could not be discharged,
and ordered the client to pay the entire amount,
that option was lost. Utica settled the matter with
the client for $320,000.
Lesson: Report
losses to your E&O carrier the moment you realize
a client has been sued and the carrier(s) has disclaimed,
and never give assurances you will take care of a
lawsuit when there is no coverage for your client.
This
E&O claim involves a loss where there is a sharp
question of fact between the agent and the carrier
as to whether or not the agency had been given the
green light to bind Technology coverage for a client
computer software company. The client had prior Technology
coverage with a different carrier which had expired,
and had asked the insured to replace the coverage.
The insured agent states he was given the green light
to quote the coverage from the carrier’s underwriter,
and did so. The underwriter went on an extended vacation,
and another underwriter decided to decline the coverage,
but never told the agent. The agent thought the coverage
was in place. After a loss by the client’s customer,
the carrier denied coverage. With damages of $1mil,
the client sued both the carrier and the agent, claiming
damages that will flow from a settlement of the underlying
action, plus attorney fees in defending that suit,
and attorney fees for prosecuting the claim against
the carrier and agent. Due to poor testimony by the
carrier's underwriters, and questions as to what, if
any, of the underlying case damages would have been
covered under the carrier’s Technology coverage
had it been in place, the case was settled with Utica
paying $150,000 and the carrier $850,000.
Lesson: Do
not assume coverage is in place without verifying
with the carrier a policy is in place.
In
this E&O claim, there was confusion between the
insured and the MGA as to whether coverage was bound
for a beer distributor. The agent thought coverage
was bound, and was holding premium for the policy but
they never followed up, and a $600,000 fire loss ensued.
No policy was in place. There is ample correspondence
to the MGA in the agency’s file which would benefit
the agent’s position. Mediation was held, and
Utica was advised that the agent would bear the majority
of liability. The case was settled for $575,000 with
the MGA paying approximately 43%, and Utica paying
the balance, or $327,500.
Lesson: When
dealing with either a carrier or an MGA, and the
agency is holding premium pending receipt of a
policy, a tight diary system should be used to
ensure follow-up for the policy.
This
E&O centers involves a long time client who sold
his printing business, and the insured let the policy
expire. The new owner contacted the insured for quotes,
and an application was obtained. The insured did
not follow for quotes, as the coverage for the building
was obtained elsewhere. The building was destroyed
by fire several months after the sale of the business.
After the fire, the agent learned that the terms
of the sale included an arrangement for the business
equipment, whereby the old owner (the agent’s
client) retained an interest in the equipment. The
equipment was worth approximately $190,000. When
the agent was informed of the sale of the business,
he did not ask about the equipment. The claim was
settled for $145,000, as it was deemed the longstanding
relationship with the client was a “special
relationship”, and as such the agent owed the
client a heightened duty.
Lesson: When
a long-standing client sells the business, ask
questions to be sure there are no continuing insurance
needs.
In
this E&O claim, the agency owner had significant
personal and medical problems while still performing
as an agent. This caused some organizational problems.
When a client came to the agency for a BOP for a
parts store, the agent took an application and a
premium check but did nothing with either. The agent
had no binding authority with the carrier for this
type of risk. Over the course of several months,
the client called several times inquiring about the
whereabouts of his policy, and was told that the
carrier was behind in issuing policies, but not to
worry. The premium check apparently was cashed by
the agent (never forwarded to carrier). The client's
premises suffered heavy storm damage, and the client
was informed they had no policy. The claim was settled
for $250,000.
Lesson: Forward
all premium checks and applications to the carrier.
This
E&O claim involves an agent procuring a policy
for a farmhouse for the daughter of the client. The
property was sold to the client's daughter and son-in-law
under a land contract but the client still had an interest
in the property. The carrier cancelled the policy following
receipt of a credit check. Following the cancellation,
the client asked the agency to insure the property
under his name, and the agency proceeded to procure
the policy at a building limit of $161,000. When the
policy was written, the carrier informed the agent:
1) they were not going to cover the contents, as the
client had no insurable interest in the contents and
2) they estimated the value to be $384,000. The agent
never relayed that information to the client. A fire
occurred, and the building was totaled. A claim was
presented against the carrier, and they denied the
contents claim of $62,000 and only paid the client
$41,000 for the building, which was based on a bank
lien on the property. The carrier refused to pay more,
stating that was the insurable interest the client
had in the property. Since the agent clearly erred
in not securing a contents policy, Utica settled the
contents claim and argued a reformation with the carrier,
stating that there was clear understanding between
the client and the agent that the entire building exposure
was covered (and the premium collected reflected this)
but the carrier refused. There is case law in the state
that clearly would pin the building loss on the carrier
since they took a premium for a known risk. Utica settled
the loss for $263,000 pursued the carrier for all damages
paid except for the contents.
Lesson: Relay
information received from a carrier to your client.
This
E&O claim involves Hurricane Katrina. The client
had just paid cash for a house on the coast and asked
the agent to procure coverage for it. Prior to the
Hurricane, the agent took the premium check and the
application and faxed the application and a request
to bind to a wholesaler. The agent did not follow
up, and the CSR who worked the request went on vacation.
When Katrina hit, the house was destroyed by wind.
When the agent contacted the wholesaler after learning
of the loss, the wholesaler said they never received
the fax. The agent’s fax machine did not provide
confirmations and we had no way to prove the fax
was sent. There was no policy in place and the loss
was settled for $320,000.
Lesson: Follow
up daily with wholesalers until coverage is confirmed.
In addition, all fax machines should provide confirmations
of faxes sent.
In
this E&O claim, the insured did not take steps
to insure a 21’ 330 horsepower boat under a
homeowner’s policy. The agent was aware of
the boat, but mistakenly thought the homeowner’s
carrier would automatically pick up coverage for
the boat. The homeowner’s carrier disclaimed
coverage following a fatality involving the boat
due to the size and horsepower of the boat. The umbrella
carrier stated that until $1,000,000 in coverage
was exhausted, it would not participate in the defense
or indemnity of the underlying claim. The deceased,
an owner of a modeling agency, was struck by the
boat while waterskiing. The case settled, with the
agent paying $640,000 and the umbrella carrier paying
$250,000.
Lesson: Know
which vessels are automatically covered under a
homeowner’s policy and which vessels require
an additional premium in order to be covered.
In
this E&O claim, the agency’s client requested
a Worker’s Compensation policy for a sub-contractor
of the client. The client was a general contractor,
and the terms of the contract with the sub-contractor
called for the general contractor to supply the Worker’s
Compensation coverage. There was no policy in place
when an employee of the subcontractor fell from a roof
and was seriously injured. Because no WC coverage was
in place, the worker sued the employer directly. The
client incurred expenses defending itself, and had
to pay fines for not having coverage in place. Utica
reimbursed the client for all expenses incurred and
settled the injury claim for a total of $378,000.
Lesson: Carefully
document all requests for coverage from an insured
that has multiple operations and keep all such
requests in a separate folder until coverage is
secured.
In
this E&O claim, the client requested U.S. Longshoreman
and Harbor coverage be provided for their employees.
The agency went through a broker to place the coverage.
An employee of the client was injured, and the carrier
disclaimed, saying there was no policy in place.
The employee incurred medical bills, lost wages and
incurred attorney fees. The client was faced with
the cost of an attorney and had to pay fines for
not having coverage in place. Utica felt that the
broker was at fault, as there was documentation in
file that supported the position that the broker
had agreed to procure the coverage. The total damages
claimed were in excess of $700,000. Following a bench
trial, the Court found our insured equally liable
with the broker. The case settled, and the agent’s
share was $315,000.
Lesson: Follow
up with brokers and MGA’s until coverage
is confirmed. |