E&O Prevention
Strategies for the Professional Agent

January 30, 2009
Compliments of Agents of America.ORG
Volume 2
Past Featured Articles
January 27, 2009
George Bernard Shaw - "If all the economists were laid end to end, they'd never reach a conclusion."
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Keys to Avoiding E&O Claims
By Britton D. Weimer, J.D.
In the first issue, we examined the importance of sending customers a written confirmation of coverage discussions.  Now we examine a related issue, the importance of properly responding to voicemail requests for coverage:
If the customer leaves you a coverage request on voicemail, follow up with a confirming e-mail, fax or letter.
Most agents recognize the E&O exposure created when a customer unilaterally requests coverage in a voicemail.  The agent may not review the voicemail until there is inadequate time to bind the coverage.  And, more importantly, voicemail coverage requests are often vague or silent about important coverage terms.  Without the benefit of a two-way discussion, the agent will often not know the specific coverages to bind.
Many agents respond to this exposure by including on their voicemail message a request that customers not leave voicemail requests for coverage.  That is a good first step.  But more aggressive customers are undeterred, and will leave voicemail binder requests anyway!
The safest course is for agents to confirm any voicemail coverage requests in writing - that is, with an e-mail, letter or fax.  This protects you on three levels.  First, it confirms the particular coverage request with the customer, and allows the customer to clarify the request if there is some misunderstanding. 
Second, it helps "train" the customer to be precise with coverage communications, and to avoid leaving voicemail requests.  (Especially if your response includes a friendly reminder not to leave future voicemail requests.)
Third, it establishes a pattern that will help your attorney defend you, should you later be sued by any customer.  This third reason may be less obvious, but it can be vital to your defense.  A customer may claim that he or she left you a voicemail, to which you did not respond.  How do you defend against such a claim?  How do you prove a negative?  The best defense is if you can show that you consistently follow a pattern of confirming all voicemail requests in writing.  Then, if you did not respond to this customer's alleged request, you have circumstantial evidence that it never happened.
The bottom line:  When you receive a voicemail request for coverage, send an immediate friendly confirmation to the customer by e-mail, letter or fax.  This will help you avoid misunderstandings, it will help train the customer for the future, and it will protect you from a future claim that a voicemail request was ignored.
Britton Weimer is an insurance-defense attorney in Minneapolis, Minnesota, and has defended insurance agents and brokers in E&O litigation for over 20 years.  He is the co-author of the new Thomson-West treatise, The Law of Commercial Insurance Agents and Brokers.  
E&O Coverage Tip:  Named Insureds
By Raymond Wahl
Although it would seem to be a simple task to properly list the insured's name on an insurance agent's E&O policy, this is often not the case.  Actually this same issue comes up on a variety of different types of professional liability insurance.
Confusion arises from a number of different things.  First and foremost is a failure to properly list the full name of all entities on the application. This should also include any dba's.  We often see names abbreviated and sometimes left out entirely.  Keep in mind that many and probably most forms only insure the entities listed on the policy.
A second major source of confusion arises from name change requests, be they a result of mergers, newly created entities, or simple change of name.  We've often had requests to change the insured's name from ABC to XYZ.  If we did this then ABC would lose all coverage it had under the policy.  The request should be to add the new name and leave the old name on the policy as well.  Mergers and acquisitions of course complicate name changes and often result in multiple retroactive dates, depending upon the terms of the acquisition.
In conclusion, know whether or not your E&O policy requires all entities to be listed to have coverage for them, and carefully think through any changes that you request.  Many underwriters will simply process your request without question, so if you get it wrong, you could end up with a gap in your coverage.
Raymond Wahl has been an insurance underwriter for over 38 years. He specializes in professional liability including insurance agents and brokers E&O.  He is a past president and trustee of PLUS.  Raymond is the Senior Vice President, Lee & Mason Financial Services, Inc. Farmington, CT
Is Insurance Writing Training Cost-Effective?    (Part 1)
By Gary Blake, Ph.D. 
There is a lot of technical training that each risk manager, broker and underwriting professional must take to be effective. So, it isn't unusual for an insurance executive to put off writing skills training until "after 'cat' season," or "after the new computer system is in place" or "after the next quarter's numbers are in."
An insurance executive who indefinitely postpones upgrading his or her staff's writing skills may be under the impression that either form letters will do the trick or that because all the staff has been in the business a while, their writing must be perfectly fine. Both assumptions are wrong. For claims professionals, knowing how to write effectively isn't the icing on the cake; it's part of the cake itself.
The follow five tips for writing skills training on an on-going basis are discussed in the context of this type of training's Return on Investment (ROI). I do this to point out that, quite often, the dollars spent on this type of training are offset by various benefits that may not always show up on a ledger. Training can be in the form of on-site seminars given by a vendor, webinars, public seminars, seminars at a local college, or internal seminars conducted by a company's training professionals.
1.  Look at the Big Picture
Many insurance professionals spend as much as 15 hours a week writing letters to attorneys, commissioners, vendors, policyholders, agents, senior management, and others. If a broker or agent is shaky about writing, that uncertainty will show up in every letter.
So, let's do some math: one insurance professional may produce 10 written documents a day. Multiply that times 250 workdays. That's 2,500 letters.  If each letter has four errors, stodgy phrases, or muddy thoughts, that's 10,000 mistakes a year. Your writing training goal should be to cut that number in half. If you can do that, you will have received enough value to offset your training costs. That's one staff member's mistakes. Multiply that times about 15 people in a seminar and you've now eliminated, conservatively, 50,000 weak phrases, old-fashioned phrases, long sentences, examples of poor tone, gaps in logic, etc.
I'm not referring to typos or other "small stuff," I am referring to errors that cause readers to phone the adjuster, waste many hours, and alienate customers who become frustrated at trying to make sense of what they have just read.
2. Head off Bad Faith Lawsuits  

Writing training may pay for itself many times over if  adjusters learn to spot weaknesses in claims letters and file notes. 

  • One bad faith lawsuit led to a whole file being discoverable. In that file were examples of nasty, negative, accusatory language.  If an adjuster has never had anyone teach him ways to avoid negativity, subjective comments, and anger in correspondence, then your whole department is at risk. One bad faith lawsuit in Kentucky featured an opposing attorney putting embarrassing prose on an overhead projector and ridiculing the poor prose as well as the tone. That resulted in the company paying out $950,000!


  • A municipal retirement fund found itself in trouble when, because of a vague and muddy retirement payout estimate, a retiree sued for what he expected to receive in benefits.  The court agreed that the prose was hopelessly vague and awarded a very handsome retirement package to the plaintiff.

Gary Blake is director of The Communication Workshop. He has presented on-site seminars and webinars in "Effective Writing for Claims Professionals" at more than 200 insurance companies across the US, UK, and Bermuda. He is the author of the best-selling The Elements of Business Writing (Macmillan). 

Risk manage the uninsurable catastrophoic business costs of E & O claims
By Andrew F. Whitman, Ph.D., J.D, CPCU
The E&O exposure consists largely of uninsurable, potentially catastrophic indirect costs associated with the multi-party, multi-carrier battlefield. Indirect costs include:  loss of agency business, time, resources, damage to client and carrier relations and reputation, all beyond the E&O defense and indemnity policy limits. 
Risk managing these catastrophic costs, in addition to risk managing the process to prevent claims, requires engaging counsel before the claim, giving notice immediately, and exercising your "right" to counsel.  The agency counsel/consultant must be an experienced expert with intimate knowledge of your agency's E&O risk profile.  The catastrophic costs can be avoided and minimized well before an E&O claim is threatened by selecting and planning with counsel, immediately giving notice of  possible claims, and by not communicating with any of the numerous potential parties without the advice of counsel. 
Ask the producing agent and the agency owner who had their depositions taken for two days in preparation for trial, after the schedule changed three times, and are testifying against their key client's interests for whom the carriers have canceled and refused to renew insurance; all this in preparation for trial.  True, cases well prepared for trial typically are settled before trail. Agencies can not afford to wait for the E&O carrier to provide counsel.  In some cases, if the agent had not sent the last letter on behalf of the claimant insured, or had not given a statement to the carrier without counsel, the indirect cost could have been minimized.  Early involvement of counsel permits exercise of strategies to gain a dismissal or release there by containing potentially high indirect costs.  The objective is to avoid and navigate the land mines in this battlefield of multiple parties and multiple carriers, each with their own attorneys.
Selection of counsel should be made with advice of others in the business and the advice of your E&O carrier. The agency should discuss whether counsel will be retained and whether fees are covered by the E&O policy and are within or in addition to policy limits.  (See Raymond Wahl's Tip: Defense Outside Limits.)  This claims-made policy is all the more reason to immediately give notice of the claim. Follow the same process that corporate risk managers employ.  Select experienced E&O counsel to establish a pre-claim plan and to contact at the same time you give notice to your E&O carrier.  
Andrew Whitman, Ph.D., J.D, CPCU, has testified in court in ten states, served as Deputy Insurance Commissioner and Acting Chief Counsel in the Pennsylvania Insurance Department.  He is the author/co-author of insurance articles and books, including co-author of the new Thomson-West treatise, The Law of Commercial Insurance Agents and Brokers. 

Brokers-Excess Lines File Handlers Could Use Your Help (Part 1)
By Neil Weiss, J.D.
From a claims perspective, the broker is a valuable intermediary between an insurance carrier and an insured.  However, nowhere is this truer than at the excess level. 
The initial tasks for a claim file handler when opening a newly reported claim file include confirming coverage and beginning an investigation.  These steps are significant factors in producing a claim file which complies with most carriers' best practices.  A broker can be a great source of information to file handlers working in all lines of business at this stage. 
When confirming coverage, all file handlers will review the carrier's policy which generally can be found with the carrier's underwriter.  However, the broker can be exceedingly helpful by providing all of the underlying carriers' policies to the excess lines file handler.  These policies will be vital for most file handlers who manage claims with "follow-the-form" policy language.  An excess follow-the-form policy will usually incorporate much of the language found in the underlying primary carrier's policy. 
Excess lines file handlers must conduct an independent coverage assessment using all relevant policies, including underlying policies.  This assessment will be performed directly by the file handler, or, depending on the complexity of the claim, will be assigned to coverage or monitoring counsel.  In either case, access to underlying policies is a necessary first step in a coverage investigation.  Brokers have usually been involved in the issuance of all policies within an insurance tower.  Therefore, this is a step in which the broker is in an excellent position to assist file handlers. 
Part 2 of this comment will expand on the way in which brokers can assist excess lines file handlers as claims move into the next stage of factual and coverage investigation. 
Neil Weiss is an attorney with Siesko Partners, LLC focusing on insurance recovery and advisory services.  
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