Super Storm Sandy Could Have Been Worse for Some Agencies
As one of our value-added service providers, Curt Pearsall isÂ brings a wealth of knowledege to our agents regarding how to avoid errors and ommissions claims.Â Read hisÂ observations of what went wrong and what went right for agents in the case of Super Storm Sandy.
Educate and Document â€“ together they make quite a difference
by Curtis M. Pearsall, CPCU, AIAF, CPIA
President â€“ Pearsall Associates Inc.
Based on some early E&O feedback arising from Super Storm Sandy, it is realistic to think that many of these claims will actually be resolved with little, if any, payment by the E&O carrier. Why? Although in most cases, the discovery is still in its infancy stage, there actually are a couple of things that really stand out.
First, there seemed to be a very concerted effort on the part of many agencies to educate their customers. They educated them on what they had and what was covered and what wasnâ€™t. They also educated them on some additional coverages that they could and should consider. Secondly but just as important, they then documented those discussions. They documented them not only in their agency management system but they also documented them via correspondence back to the customer; essentially recapping the discussions to ensure that there was no misunderstandings.
Did that stop the claims from being made against the agency? Unfortunately no but due to the financial consequences and hardship that many customers are facing, they may had no other choice but to explore all possible options.
As one might imagine and as a point of information, at this point in time, the majority of the E&O claims made involve flood coverage or actually in most cases, the lack of it. The claims attributable to flood seem to be split fairly evenly between personal and commercial lines.
The following are some examples of the types of claims presented. As noted in virtually all of them, there is an education component and then documentation in writing directly to the customer.
-Â The agent, via written communication, advised the client that there was no flood coverage on a builders risk policy and that if coverage was requested, that they should advise the agent accordingly.
-Â The client was advised in writing that in the flood policy they procured, there was coverage for the building but no coverage for contents.
-Â The client was advised in writing the requirement for the completion and return of the specific application. The customer was provided the application but never returned it.
-Â The client was advised in writing of the 30 day waiting period before coverage would go into effect. They delayed in returning the app. The storm occurred within the 30 day period.
-Â The client was advised in writing of the need for an elevation certificate and that the coverage could not be placed without this document. This important document was never received.
-Â The agency required the signature of the customer indicating their rejection of an excess flood proposal.
-Â The homeowners proposal indicated that there was no flood coverage provided. This did not seem to be a concern as the insured did not subsequently request that flood coverage be secured.
-Â The insured was provided a cover letter requesting that they read the flood policy attached and if they had any questions to please contact the agency. The agency never heard back from them.
Once again, although there is a great deal of discovery yet to be completed, in the majority of these situations, it would appear that the agent is in very good shape. In the vast majority of these claims, the completion by the agency staff of the good business practices of the agency should make a difference.
Conversely, in these claim scenarios, absolving the agent of any wrongdoing may present much more of a challenge:
-Â The client was provided a proposal for flood and requested that coverage be bound. The agency indicated that coverage was bound but inadvertently, never notified the carrier.
-Â The agency was advised of an address change but did not appear to send the change in to the carrier.
-Â The client asked for flood coverage. Due to some confusion, the agency secured flood coverage on the wrong location.
-Â The insured requested flood coverage for both building and contents. The agency placed the coverage for the building but no coverage for contents.
-Â The agency put excess flood coverage into effect but never processed the application to secure primary coverage.
You can easily see that these claim examples show the different directions an E&O claim can go based on the documentation in the file.
For agents that 1) took the time to educate the staff who were then able to 2) properly educate the clients accordingly and 3) documented the various discussions in their system and to the customer, good things should happen.
Education and documentation â€“ yes, they take time but at the end of the day, together they really can make a difference.