Post-catastrophe lawsuits for agent "failure to advise" are trending up
Insureds are increasingly bringing their brokers and agents to court for failure to advise about potential risks or coverage options, according to a recent article in Risk and Insurance. The article cites several legal experts who note an increase in litigation and a trend indicating that insureds are holding agents to a higher standard than in the past. This has proven to be particularly true since Hurricane Sandy, with many households saying they had not been properly advised about flood exclusions. One other trend is that courts appear to be more sympathetic to such arguments than they had been in the past. For example, in one New York lawsuit, "... the court found that receipt and presumed reading of the policy does not bar an action for negligence against the broker." This not only demonstrates the need for E&O coverage but also the importance of documenting and "leaving a paper trail." It also points to the opportunity that agents have to educate consumers and help them to assess the appropriate products and coverage levels for their needs. With super storms and severe weather on the rise, educating property owners about flood insurance should be standard practice.
When it comes to legal exposure and E&O issues, we point you to Curt Pearsall's excellent blog, Agents E&O Tips. In a recent issue of Insurance Journal, Curt authored Mother Nature's Effect on E&O Claims, in which he discusses strategies and practices for agents to minimize the potential for litigation. Don't wait for the next catastrophe to read it!