E&O Prevention
Strategies for the Professional Agent
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December 29, 2011


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Letter from the Editor

Letter from the Editor


To all of our readers and subscribers, hope you and your families had a wonderful Christmas Holiday and more importantly are looking forward to the NEW YEAR Again this month we are using our new format that includes our new feature "AOA News, Views, Tips & More". The objective is not only to provide you with some interesting articles dealing with topical issues and subject matter  but to  also to provide you  with important  information and insights that is relative to your business..


Our mission is to deliver the BEST people, products, information, and services to agents all designed to help them manage and grow their business and provide ongoing value to their clients.


AgentsofAmerica.ORG announces a new Preferred Partnership with the Claims Captain TM:


Treacy Duerfeldt and the Claims Captain initial reporting system have recently been selected as a preferred partner of the Agents of America.  His current practice focuses on wholesale liability and workers compensation solutions.   The solution's focus on expedited reporting and company/employer control of information fills a critical gap for both the insurance industry and its commercial policyholders.  Use of a multi-platform smart phone (Blackberry, Droid/HTC, I-phone) application  integrated with web based administration and tools provides the real time information and control needed to combat delay and address injured parties/workers in a timely fashion. 


As a preferred partner, Treacy will write articles and tips for AOA that focus on how claims reporting solutions can add value to agency operations, assist policyholders, provide for increased sales, and affect employee/management attitudes concerns safety.  Further, Insurance agencies can actually generate additional revenue implementing Claims Captain TM for their policyholders. To contact Mr. Duerfeldt or learn more about Claims Captain TM, visit www.claimscaptain.com.


We also would like to acknowledge our Preferred Partner, Swett & Crawford who for the sixth year in a row, the Business Insurance Readers Choice survey named the best wholesale broker in the industry. Click here to read more!





AOA News, Views, Tips & More


E&O Tip

By Curtis Pearsall of Pearsall Associates Inc.  Contact Curt at curtis@pearsallassociates.com,  also check out Curt's article "Exposure Analysis Checklists: the E&O impact can be huge!"  


Strengthen your E&O Commitment in 2012

As a new year approaches, this is a good time to plan for enhancing the E&O culture in your agency in 2012. It all starts with a commitment by a management, a lead by example mentality. The message that management sends heavily determines the culture of the staff. 


For the agency staff, your E&O commitment should be to yourself, your fellow team members and to the agency as a whole. It is important that each task be handled promptly and professionally and conversations are fully documented in the system and where appropriate are also documented back to the customer / carrier to address any potential misunderstandings. Your customers are relying on you for information and knowledge so be sure to possess the necessary technical skills.


Virtually every agency has some opportunities to achieve a stronger E&O culture and a stronger commitment to E&O loss prevention. Some possible areas to consider:


Include an education component in your staff meetings - this could be a technical topic, discussion on a new carrier form or new underwriting guidelines or possibly to address the questions that your customers are asking. Also help them understand E&O and what steps they can take to reduce the chances of the agency facing an E&O claim.


Education of the customers - develop a newsletter, either paper or electronic, to help your customers understand what they have and what they don't.


Develop / enhance your account rounding campaign. Not only will this help your customers understand their coverage but it should also result in increased sales.


Procedural review - are some of your procedures in need of some updating? If it has been a while since they have been reviewed, you may find some great opportunities to achieve gains in efficiency and professionalism.


Attend an E&O loss control seminar - these can be extremely beneficial to help educate the staff and to allow them to hear E&O guidance from a trained E&O professional. These classes are filed for continuing education credit which provides an additional benefit. They also can save you money on your agencies E&O as most E&O carriers provide a credit for these classes.


Good E&O results don't just happen...they take a strong commitment from each and every member of the staff. Look for 2012 to be a year with a strong E&O commitment.




By Robert D. Chesler, Esq. of Lowenstein Sandler, Contact Robert at  rchesler@lowenstein.comalso check out Robert article on, "The Spreading Web of Food Recall Liability"





Many insurance professionals are not alert enough about noticing claims to insurers.  Clients are worried that reporting a claim will cause their premiums to rise, while brokers are concerned about their relationships with their carriers. Brokers must realize that late reporting of claims under a claims-made policy is usually fatal to coverage.  Claims-made policies require that the insured provide notice of the claim during the policy period in which it first receives the claim.  There are almost no exceptions, no prejudice is required, and courts are willing to inflict harsh results on insureds.  This problem is exacerbated because definitions of 'claim' are very broad, and both brokers and insureds may not realize the need to report, for example, an angry letter.  Every company and insurance professional must notice everything to the insurer that even smells like a claim.


2. Counting Occurrences.


Many brokers and attorneys assume that all claims arising from a single product defect constitute one occurrence for purposes of the application of deductibles. However, many states have held that each separate claim is a separate occurrence. The main impact here is with respect to deductibles, which seldom have an aggregate. Thus, assume that a client receives 1000 claims arising from a product defect, and that each claim can be settled for $10,000. Further assume that the policy has a per occurrence deductible or SIR of $25,000. In many states, this means that the insured will not have any coverage.


3. Batch Clauses and Integrated Occurrences.


One way to deal with this issue is with batch clauses or integrated occurrence provisions.  These are different names for a policy provision that states that all claims arising from the same product defect will be treated as a single occurrence.  However, keep in mind that all such clauses are not created equal, and that some of them will have special notice provisions.


4. Intellectual Property Infringement Insurance.


Many clients, and many insurance professionals, do not focus on the fact that the current advertising insurance coverage of the general liability policy contains precious little IP infringement coverage.  It has no trademark infringement coverage, and copyright infringement coverage is limited to the infringement of an advertising idea in an advertisement.  An active market now exists for IP insurance coverage.  Brokers should make sure that clients are aware of the coverage gaps and the possibilities for coverage to fill those gaps.


5.  Data Breach Insurance.


Liability for data breach is a huge exposure for clients.  The general liability policy contains limited coverage for this exposure in the form of 'invasion of privacy' coverage in the personal and advertising injury section.  However, the application of invasion of privacy coverage to data 


E&O Claim Prevention

By Brown & Brown of California, Inc. dba CalSurance Associates, Email: info@calsurance.com


Description of Claim:


Know Your Binding Authority and Don't Exceed It


Allegations against the agent An agent bound a homeowner's policy on a $1.5m home. The agent has binding authority with the insurance company for any risk valued $750,000 and under. When placing coverage on homes with value greater than $750,000, the agent must get authority from the carrier's underwriting department. In addition, the home was in the process of being built and had not been completed nor were the intended resident's going to be occupying the house within 30 days of the binder. This was another violation of the underwriting guidelines.

The underlying lossThe house caught fire and was deemed a total loss.


Damages: The insurance carrier was forced to pay the claim and sought reimbursement against the agent for binding an ineligible risk.  The loss to the agent's errors and omission coverage was in excess of $1,000,000.



Financial Tip of the Month 

By Mike Brady of the Brady Financial Group, LLC.   Contact Mike at mike@bradygrp.com


"As we close out the year many owners are focused on not only maximizing current year results but also setting next year's expectations through a budget process.  Many agencies develop their budget solely on the new business forecast while not considering areas such as retention and operating expenses. Take the time to compare your operating expense against industry standards and you might be surprised to find the expense ratios are higher than they need to be.  Understand where your agency dollars are going and how you're spending compares to the industry average.  Each dollar saved goes directly to the bottom line!" Visit Brady Financial Group.



Insurance Coverage Tip 

By Kristin Condi Toto of Martin & Company


Cyber Breaches: A Growing Concern for Employers


Data breaches and cyber attacks are a growing concern for employers due to the rising occurrence and severity of such events. As a result, many employers are more aware of their own cyber breach exposures and are looking to insurance companies to fill that coverage gap.


The Chubb Group is now offering protection for cyber breaches through its new ForeFront Portfolio 3.0 Program for Private Companies. The "CyberSecurity" coverage part includes coverage for Cyber Liability, as well as optional coverages such as Privacy Notification Expenses, Crisis Management Expenses, E-business Interruption, E-Theft Loss, etc. Insureds with "CyberSecurity" also have access to Chubb's cyber risk management website and cyber loss prevention services.


To view more "hot trends" in the Property & Casualty Insurance Marketplace, visit:  Martin & Company's Market Trends & Updates.





How to Use Insurance Leads

By ParsaolLeads


Be organized. As with any undertaking, you should have a game plan before you start processing insurance leads. Do not contact customers unless you know the insurance you are offering them very well. As an agent, you are expected to be an expert in the products you are selling. There may be a question or two that you are unable to answer, but you can assure your customer that you will get back to them with the answer as soon as possible and use this as a good reason to follow up with your customer later.  For  more information visit ParasolLeads. Also see their article on, "Three Mistakes to Avoid When Contacting Insurance Leads".


Claims Reporting Solutions

By Treacy Duerfeldt of Claims Captain TM


TIP:  How does a commercial policyholder feel if their employee or customer is encouraged to contact insurance carriers directly in the event of an injury?  Agency claims departments can better assure more complete information to the best contact first while keeping their policyholder "in the loop" as opposed to finding out after the fact. To contact Treacy  or learn more about Claims Captain TM, visit www.claimscaptain.com.



Social Media Tip 

By Cynthia Cavoto of Fire Brand Social Media, LLC


This month's EBook is entitled, "Creating Business Listings on Local Search Engines" we know you'll find this information valuable for your business. We know you'll find this information valuable for your business. Please feel free to email us to share your comments. In addition, we are happy to consider suggestions or topics you'd like us to put into an EBook


Each month, we will feature a brand new Social Media EBook that contains valuable information on how you can harness the power of social media. Each featured EBook will contain a wealth of information that will include such topics as Facebook, LinkedIn, Twitter, Email and Blogging to name a few. Contact Cynthia at cynthia@agentsofamerica.org





Result From Last Month's poll question:


How do Insurance Agents obtain their Continuing Education?


~Online                                                     62%

~Live seminars                                          23%

~Thru their state agent association              15%


This month's poll question


How often does your agency review and update their internal procedure manual?

We don't have an internal procedure manual

It is reviewed every year.

It is reviewed every 2-3 years.

We have a procedure manual but it has never been update




Sale Hunting Tips 

By Mark Hunter  "The Sales Hunter",  Contact Mark at Mark@TheSalesHunter.comAlso check out his article"What Is Not Changing in 2012"  


Make sure you're giving the client eye contact as your present your proposal.    -  If you can't give your client eye contact when you present your proposal you're telling the client you don't believe in what it is you're presenting. For more Information visit http://thesaleshunter.com/




How Create Revenue & Save Money in today's economy 

By Bruce Hughes of 321Swipe.com


Entertain non- traditional business


Here is a limited list of recommendations that our clients have shared with us over the years that are related to the insurance industry:.


  1. Consider outsourcing your HR, benefits and payroll to an external provider. Handing over administrative responsibilities to  another company will save you time and money,
  2. Consider a PEO (Professional Employer Organization). PEOs take over the administrative and legal responsibilities of managing your employees, effectively becoming "employers of record." This translates into lower HR costs, better benefits packages and reduced legal liability for your company,
  3. Lower your credit card transaction costs. If you accept credit cards you may be able to lower your credit card transaction costs. Check with your provider,
  4. Temp it out. Rather than paying for employees who sit idle when business is slow, consider hiring temporary employees to handle surges in activity. (PEO),
  5. Protect your customers from identity theft. If you accept credit cards you are at risk for fines and loss of customer base.  Check the coverage your processor provides and check with your insurance agent for gap insurance.

For additional information contact Bruce Hughes at 941 552 0725 x 103, or visit www.321Swipe.com





Again, we want to thank everyone for their support.  Remember to tell your friends and business associates that AgentsofAmerica.ORG is now offering FREE MEMBERSHIP


Also, available for our readers, AgentsofAmerica.ORG is now offering a new service to all of our subscribers and readers to market their products, services or upcoming events, MARKET SOLUTIONS. This unique opportunity will allow you to reach thousands of Insurance Agents, Brokers and Insurance Professionals across the country in timely, efficient and cost effective manner. In addition to sending out your message, we can also help you use Internet Marketing as medium to convey your announcement, as well as on how it can be utilized to effectively grow your business. If you have any question, please send your inquiries to: info@agentsofamerica.org.


"Bringing the Best Together"

Brit Weimer, Esq.


Table of Contents

Exposure Analysis Checklist

By Curtis Pearsal 


Conflicts of Interest Can Eat Your Lunch 

By Charles T. Wilson, CMC, CRM, RPLU


3 Leadership Lessons I Learned in the Forest

By Michael Mercer, Ph.D. 


Social Media and the Holidays

By V. John Ella


What is Not Changing in 2012 

By Mark Hunter "The Sales Hunter" 


The Spreading Web of Food Recall Liability 

by Parsol Leads

Multiple Separate Claims of Embezzlement

By Kathryn Formeller, Esq. 


Employees: Comfortable in Their Own Genes?

By Stephanie K. Rawitt, Esq. 


3 Mistakes to Avoid When Contacting Insurance Leads 

By ParasolLeads 


The New Year Brings New Laws for California and New York

By Sanjay Bansal, Esq. 


Virginia's High Court Finds No "Occurrence" in Global Warming Case

By William K. Enger, Esq., Carl J. Pernicone, Esq., Thomas L. Appler Esq., Robert E. Rider Jr. Esq. 

Table of Contents

exposureExposure Analysis Checklist 

By Curtis Pearsall 


For as long as I can remember, the #1 cause of E&O claims has been "Failure to provide the proper coverage". For many E&O carriers, this accounted for over half of their E&O claims. If your insured were to suffer a loss that is either not covered or not completely covered, they may look to "blame" your agency by bringing an E&O action. What is the solution? Actually, the most effective way for your agency to address this issue is through the use of an Exposure Analysis Checklists. 



conflictsConflicts of Interest Can Eat your Lunch 

By Charles T. Wilson, CMC, CRM, RPLU


Recently, a client had an expensive and disappointing experience.  Their Human Resources service provider suddenly had a problem with a difficult employee-related action my client felt obligated to take.  Apparently, the HR provider did not want to take any responsibility for the difficult decision.  This conflict of interest was a total surprise to my client and was never discussed up front.



leadershipLeadership Lessons I Learned in the Forest

By Michael Mercer, Ph.D.


You can learn amazing leadership lessons and skills in a forest - if you pay attention. I know first-hand, because I have a forest behind my house. Here are three terrific lessons I learn in the forest - lessons to help you improve your leadership skills.




socialmediaSocial Media and the Holidays

By V. John Ella, Esq.


As the holidays approach, I am reminded of an employment law attorney I used to know who wrote a column about this time of year about holiday parties. He would warn Human Resources ("HR") professionals to beware of sexual harassment issues as the punch flows and inhibitions dissipate at the annual office get-together. How things have changed. In this era of Facebook and I-phones, every day is a holiday party in terms of potential liability. It used to be the only photographic evidence of employee carousal was a black and white photocopy of someone's derriere. Now, smart phones capture everything in full color pixilation and the evidence is posted instantly. We may never know what Herman Cain and his associates were up to in the 1990s, but if it had happened now, you can bet there would be a text, tweet, or digital photo to add fuel to the Yule log fire.




whatisWhat Is Not Changing in 2012

By Mark Hunter "The Sales Hunter"


This time of year we are deluged with trends, predictions and numerous opinions from a number of sources about what is going to happen in the coming year. It seems as if everyone has the "secret sauce" that will make the New Year perfect.




theThe Spreading Web of Food Recall Liability

By Robert Chesler, Esq.


Suits against Jensen Farms arising from its sale of listeria-tainted cantaloupes are expected to seek more than $100,000,000. These damages are estimated to be more than Jensen Farms' available insurance coverage. Perhaps as a result, plaintiffs are naming a variety of other companies as defendants, including (1) distributors, 2) supermarkets, including both Wal-Mart and a wholly-owned subsidiary of Kroger, and (3) the food safety auditing company that Jensen used. If experience from other product liability and toxic tort trends is a guide, all of these numbers will soon increase - the food industry will see more plaintiffs, seeking more damages, from more types of companies.  



multipleMultiple Separate Claims of Embezzlement Constitute a Single "Related Claim"
By Kathryn Formeller, Esq.


Multiple claims arising from a law firm employee's embezzlement scheme constituted "related claims" subject to a single "each claim" limit of liability, according to an Illinois appellate court in ContinentalCasualty Co. v. Howard Hoffman & Associates, 2011 Ill. App. LEXIS 876 (1st Dist. August 15, 2011).  










employeesEmployees:  Comfortable in Their Own Genes? 

By Stephanie K. Rawitt, Esq.


Key Points:

  • GINA protects the privacy of genetic testing results.
  • Employers are prohibited from acting in a discriminatory manner through the improper collection and/or use of genetic information.
  • Employers should comply with GINA's requirements now in order to shield themselves from liability exposure.

 Read More... 


threemistakes3 Mistakes to Avoid When Contacting Insurance Leads 

By ParasolLeads


When you have your newly purchased insurance leads in hand, you may feel anxious about contacting them. After all, you paid for these leads and you don't want to blow it with the first phone call or e-mail. Your best strategy is to consider this time of contacting leads as the ultimate insurance marketing task, so put your best face forward, prepare yourself with all of the information and knowledge you need, and make the contact. Also, to avoid a worst case scenario, consider these three common mistakes you can avoid when contacting insurance leads:








Swett Static Ad






thenewThe New Year Brings New Laws for California and New York 

By Sanjay Bansal, Esq. 


The New Year often ushers in new beginnings and a chance at fresh opportunities for many enterprising businesses. Unfortunately-for California employers-the New Year will also usher in the mandates of AB 469, also known as the "Wage Theft Prevention Act of 2011." AB 469 was signed into law by Governor Brown in October 2011 and goes into effect January 1, 2012. Amongst other requirements, AB 469 creates new Labor Code section 2810.5, which requires all employers to provide written notice of specific wage and hour information to newly hired non-exempt employees at the time of hiring. This information includes the following:  



virginiaVirginia's High Court Finds No "Occurrence" in Global Warming Case

By William K. Enger, Esq. , Carl J. Pernicone, Esq., Thomas L. Appler Esq., Robert E. Rider Jr. Esq.,


The Virginia Supreme Court's ruling in The AES Corp. v. Steadfast Ins. Co., No. 100764, 2011 Va. LexisNexis 185 (Va. September 16, 2011) made it the first state supreme court to find that the emission of greenhouse gases alleged to cause global warming is not an "occurrence" as that term is defined in a typical commercial general liability policy.



Motivational Quotes/Joke of the Month

By Michael Mercer, Ph.D., Book Author & Management Psychologist, HIRE THE BEST - & AVOID THE REST™, 


Contact Dr. Mercer at Mercer Systems, Inc. or (847) 382-0690.  


"Act Nice or Leave"

-- Sign on wall in scene of "New Year's Eve" movie


"The hardest thing is taking the first step."

- Arial, the Little Mermaid


"Successful people make a habit of doing the things that unsuccessful people don't like to do."

- Herbert Grey


"Self-discipline is the ability to do what you should do, when you should do it, whether you

feel like it or not."

- Elbert Hubbard


- - - - - - - - - - - - - - - - - - - - - - - - - -




A naughty young boy was talking to his family's clergyman.


The clergyman asked, "Do your parents ever pray?"


The boy answered, "Yes, my parents pray every night."


The clergyman said, "Oh, really.  Well, what do your parents pray?"


The boy replied, "Every night, after they tuck me into bed, my parents say to each other, 'Thank God he's in bed!!'

This newsletter is produced in conjunction with Agents of America, www.agentsofamerica.org. The contents of which may not be reproduced without the express written permission of Agents of America.