How
About a New Year's E&O Resolution That is Guaranteed to Make a Difference?
by Curtis M. Pearsall, CPCU, CPIA
Special Consultant to the Utica National E&O Program
As we begin a new year, tradition has it that we should look at ourselves, both personally and professionally, and identify changes that will make our lives more fulfilling and enjoyable. While most people attempt this in their personal lives, there is no doubt that a New Year's resolution in their business life can be just as significant.
| As the owner
of the agency, I would suggest asking yourself and your employees
to respond to a series of statements, such as: |
There is no doubt that
if you or your staff answer "no" to any of the above statements,
this would be a great place to make a New Year's resolution.
Every
one of these are key to avoiding E&O claims. Going back
over 15 years, I have heard from many lawyers that if the agent would
have just documented the conversation, the claim against the agency may
not have even happened and even if it still did, the end result would
have been totally different. Here is one such
case:
The suit was brought against the agency for failure to provide a commercial client with products and completed operations coverage. There was an underlying fatal truck accident involving a product made and installed by the agency client. Following a denial of coverage from the carrier, the client settled the fatality claim.
The owner of the product manufacturing business then brought suit against the agency. The client had been insured through the agency for several years including both products and completed operations liability coverage. Prior to the fatal accident, the client's carrier gave notice of non-renewal. The agent then sought replacement coverage obtaining a replacement liability policy, which excluded products and completed operations. He sought the separate coverage, offering quotes which were higher than the previous policy. The client requested he search for a lesser cost coverage. The agency was unable to obtain a source for lower cost completed operations liability coverage. The agency did not however, document the status of the products completed operations coverage in a letter to the client . The client took the position that they were never told that the replacement policy omitted any of their previous coverage.
The case went to trial on the basis of conflicting testimony between the agency and the client. The complaint was that the agent failed to procure satisfactory and adequate replacement insurance coverage. Without documentation, the jury was left with their need to rely only on the statements of the parties.
The end result was that the jury found in favor of the client. There was no document to support the agent's position, that the coverage had been offered and rejected. Had the agent taken the time to document this crucial part of the replacement coverage discussions in a letter, the weight of evidence would have shifted in favor of the agency. Without this, the result was an adverse verdict and the agency was held responsible to pay the client for the underlying loss.
Documenting these conversations takes time but taking that time now could make a big difference later. The above case gets repeated many times over and if every one of those agents did just one thing differently in the upcoming year and that one thing was documentation, they would have significantly reduced the likelihood of an E&O claim being successfully pursued against them.
Make a New Year's resolution that will truly make a difference in
efficiency, profitability and an improved agency reputation.