E&O Prevention
Strategies for the Professional Agent
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January 26, 2012


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Letter from the Editor

Letter from the Editor


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 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.    


AgentsofAmerica.ORG announces a new Preferred Partnership with Huggins Actuarial Services, Inc. Huggins Actuarial Services, Inc. is a full service, independent consulting firm. They offer a wide range of actuarial and strategic consulting services to individuals and firms that need to evaluate, quantify and manage insurance and property casualty risk. Their diverse clientele includes insurers, reinsurers, self-insurers, captives, investment bankers, accountants, lawyers, and risk managers.    


Huggins Actuarial Services, Inc. offers the expert actuarial services critical to the success of any property and casualty insurance endeavor. They can help develop products, establish pricing guidelines, set up reporting infrastructure to monitor emerging results, design appropriate reinsurance programs, commute reinsurance agreements, perform financial reporting, evaluate reserve provisions, support statutory compliance, and so forth. In short, they help clients succeed in today's difficult P&C environment.    


Huggins Actuarial Services, Inc. offers its services to agents and brokers, insurers and reinsurers, policyholders and regulators. Their specialties include Workers Compensation, Medical Malpractice and Auto. As a preferred partner, Huggins will write articles and tips for AOA that are relative to the industry. See this month's article entitled "HEALTHCARE ENTITIES - NEW ACCOUNTING STANDARD FOR INSURED LIABILITIES


As always, we want to thank everyone for their support.  Remember to tell your friends and business associates that AgentsofAmerica.ORG is Free, 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


AOA News, Views, Tips & More


E&O Tip

By Curtis Pearsall of Pearsall Associates Inc.  

Contact Curt at curtis@pearsallassociates.com.


Also see his article, "Providing coverage for an Additional Insured - why this is a hotspot that is not going away"     

Broker of Record letters - a potential E&O issue 


While acquiring accounts via a BOR certainly occurs frequently in this business, it is important to realize they have the potential to result in an E&O headache if not managed properly. 


If the plan is to simply renew the account as is, you could be simply duplicating a mistake of the prior agent. This is now your file and it is now your responsibility. In fact, in certain situations, the agency that lost the account may have no liability at all because its duty to the customer may be found to have terminated upon the ending of the relationship.  

When you acquire an account via a BOR, how confident are you that the current insurance program reflects their current exposures? When were the limits / values last updated? It is best to treat these "new accounts" as if you were targeting them as a prospect by performing a comprehensive review of the file through effective use of an exposure analysis checklist. These checklists, best handled on a personal visit, are a great tool to analyze, determine and update the customer's exposures. Then on the proposal, provide options for them to consider and for those coverages that they do not desire, get the appropriate sign off. This will certainly help to build a stronger E&O wall.


On personal lines accounts, since a face-to-face meeting is probably not as practical, provide these accounts with a pre-renewal questionnaire to complete and return. This is a tool contained in the Exposure Analysis checklists that, as with commercial accounts, helps to identify exposures that have developed in the last year, and those the customer was not aware of or thought were already insured.


When you meet with the customer to discuss "what they had" and what you are proposing, be sure to bring to their attention any differences in the insurance programs. While there will no doubt be enhancements that you are making to the program, the possibility exists that there may be areas where the coverage is less. It is critical to bring these to the customer's attention, document the discussions and get their sign off that they are agreeing to the switch.


Is it clear exactly when your agency technically becomes the agent of record? Is it effective midterm or at the next renewal? Is the account switching over all of its business or just a part of it? How does the carrier handle these matters? These are issues that need to be discussed and resolved to ensure any coverage modifications or claims issues are handled properly. There have been a number of E&O claims where this area of confusion has resulted in the mishandling of certain issues.


Bottom line - Do not simply renew "as is." Perform the necessary updates on coverage's and limits and keep your agency from a potential E&O headache.


For additional information

contact curtis@pearsallassociates.com or visit  Pearsall Associates.



Insurance Coverage Tip 

by Kristie Resnick of Martin & Company


Auto Insurers use Telematics to track driver's habits


Auto insurers have found a new way to implement usage-based insurance with the integration of Telematics Systems. Carriers offering this feature allow insured's to place a small device in their car to track their driving habits and mileage. The data is assessed to determine if the insured is eligible for a premium discount.


The benefits of these programs are seen by both the Carriers and the Insureds. The implementation of Telematics encourages insureds to develop safer driving practices, leading to fewer accidents. Commercial insureds, including fleet managers, are able to more effectively track their driver's habits and enforce safety standards.


Hartford's TrueLane and Progressive's SnapShot are among the programs offering Telematics to Personal Auto customers while Liberty offers the commercial counterpart through their OnBoard Advisor Program.


To view more "hot trends" in the Property & Casualty Insurance Marketplace, visit:

Martin & Company's Market Trends & Updates


E&O Loss Prevention Tip


Description of Claim:

Common Mistakes in Replacing Coverage

Allegations against the Agent:  Agent bound a Multi-State Commercial General Liability policy for his client, a contractor, on 2/27/2002. The contractor performed work in a variety of states, including California. Prior to placing this coverage, the contractor had coverage that did not have any exclusions for work performed in California. However, the insured agent in this matter placed coverage with a surplus lines carrier that had an endorsement attached to the policy that excluded any operations performed in California. When the insured reported a claim to the carrier, it was denied due the exclusion for work performed in California.


The underlying loss: The insured was sued for work defects and damage resulting from these defects.


Damages:  $32,500 for the defense costs and $4,500 for resulting damages flowing from work performed by the insured.


Brought to you by:

CalSurance Associates - A Division of Brown & Brown Program Insurance Services, Inc.  




Sale Hunting Tips 

By Mark Hunter, "The Sales Hunter".

Also see his article, "Your Network is Your Insurance Policy"


Show your client respect by taking notes on what they're saying.  - When you're in a meeting with a client one of the best ways to show respect and get them to share with you even more information is by taking notes on what they're saying.  When they see you taking notes you're visibly showing them how much you care about what it is they're saying.


For more Information visit www.thesaleshunter.com

or contact Mark@TheSalesHunter.com.



How to Make and Save Money in this Market 

By Bruce Hughes of 321Swipe.com


Also check out his article, "Understanding PCI Data Security Standard


Expand your product line.  Today an entirely new industry is forming.  Get in front of the wave you don't want to miss this opportunity. Identity theft is rising and the insurance industry and the credit card acquirer world are forming an alliance to provide solutions and mitigation products to combat this ever growing threat.


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



Social Media Tip 

By Cynthia Cavoto of Fire Brand Social Media, LLC


This month's EBook is entitled, "Press Release Traffic Secrets" we know you'll find this information valuable for your business.  Also see her article. "When Should you Hire a Social Media Marketing Consulting Firm?" 


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

We don't have an internal procedure manual                4%

It is reviewed every year.                                          68%

It is reviewed every 2-3 years.                                   21%

We have a procedure manual but it has never been updated                                                                    7%


This month's poll question:


How often does your agency participate in E&O Risk Management training?

 ~ As required by my E&O carrier to obtain a discount
 ~ Yearly 
 ~ Every 3-5 Years
~  Never 

How to Use Insurance Leads

By ParsaolLeads


Keep yourself updated on the market trends related to the insurance product that you are selling. This is the kind of information that you can use in your sales pitch or presentation. Market knowledge is also the kind of thing that helps you establish your expertise on insurance with your customers.


For more information visit ParasolLeads 



Table of Contents

Providing Coverage for an Additional Insured - Why This is a Hotspot That is Not Going Away

By Curtis Pearsal, CPCU, AIAF, CPIA


If it Ain't Broke, Don't Fix it

By Charles T. Wilson, CMC, CRM, RPLU


Healthcare Entities - New Accounting Standard for Insured Liabilities

By Huggins Actuarial Services, Inc. 


Your Network is Your Insurance Policy

By Mark Hunter "The Sales Hunter"


By Cynthia Cavoto


Understanding PCI Data Security Standard 

by Bruce Hughes 


To File or Not to File a Claim?

By Treacy Duerfeldt 


Antitrust Exclusion Excludes Coverage for Deceptive Trade Practices


providingProviding Coverage for an Additional - Insured 

By Curtis M. Pearsall, CPCU, AIAF, CPIA


Let's take the following scenario: Your agency is asked to provide a certificate of insurance naming an entity as an additional insured. You pull the file and note that the policy for your customer provides blanket additional insured coverage.Let's take the following scenario: Your agency is asked to provide a certificate of insurance naming an entity as an additional insured. You pull the file and note that the policy for your customer provides blanket additional insured coverage provides blanket additional insured coverage. There is no doubt that this scenario occurs with some degree of regularity in many insurance agencies. So are you all set?  




ifitIf it Ain't Broke, Don't Fix It

By Charles T. Wilson, CMC, CRM, RPLU


Regular news reports remind the Risk Manager how sadly or horribly wrong the title of this Tip can be.

San Francisco's Bay Area Rapid Transit (BART) system experienced a nasty incident on New Year's Day, 2009, when a police officer fatally shot a passenger.  Let's not dwell on the details of what happened, but focus on the consequences of a "mistake" or "accident" to any business or organization.



healthcareHealthcare Entities - New Accounting Standard for Insured Liabilities

By Huggins Actuarial Services, Inc.



In August 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries. Under existing authoritative guidance, a health care entity could net its estimated liabilities from malpractice or similar claims against the estimated insurance recoveries. ASU 2010-24 no longer permits netting of the recoveries and estimated liabilities. Instead, the health care entity will be required to present the full estimated liability in its financial statements, as well as an asset for the estimated receivable for the amount covered by insurance policies. This accrual also includes claims that had occurred but had not been reported as of the fiscal year-end (IBNR claims) if there is coverage under a claims-made insurance policy, as there is no guarantee that the policy would be renewed and be in force when the claims were reported in the future.  ASU 2010-24 is effective for fiscal periods beginning after December 15, 2010 (i.e. December 2011 and June 2012 fiscal year-ends).  




yournetworkYour Network Is Your Insurance Policy

By Mark Hunter "The Sales Hunter"


This past week I was reminded again how important it is to have a strong network of contacts.  We all know how a network can help us with leads. What we may not realize is how a network can serve as our insurance policy. 




whenWhen Should You Hire a Social Media Marketing Consulting firm?

By Cynthia Cavoto


Social media consulting is what's needed as you're strapped for time and you cannot do the social media marketing yourself. Every one of us knows how critical it'll be to market your Internet business making usage of every one of the resources, as well as tools obtainable. One tool includes social media websites - bookmarking and networking websites. These websites receive millions of Internet traffic each day. The great thing concerning social traffic is that it will be easy to discover your target audience inside them.  




understandingUnderstanding PCI Data Security Standard 

By R Bruce Hughes


PCI Data Security Standard (PCI DSS) is the core standard and addresses security technology controls and processes for protecting cardholder data.  PCI standards present technical and operational requirements for protecting cardholder data. The standards apply to any organization that stores, processes or transmits cardholder data.  




Ernest Agent  


Click here for Free Property and Casualty Ideas



tofileTo File or Not to File a Claim?
By Treacy Duerfeldt


Agents are asked all the time, "Should I file the little claims or just pay them myself?" and there seems to be no true rule of thumb. Professionals are more than sales people because they have the experience and training to answer questions that aren't simply "black and white." Yes, the wrong answer is a possible E&O claim and this issue needs to be taken seriously. 





antitrustAntitrust Exclusion Excludes Coverage for Deceptive Trade Practices

By Elizabeth F. Caraballo, Esq


The Antitrust Exclusion in a Not-for-Profit Individual and Organization Insurance Policy barred coverage for allegations that the insured engaged in deceptive trade practices, false and misleading advertising, and deceptive labeling, among other things. Welch Foods Inc. v. National Union Fire Ins. Co., No. 10-2261 (1st Cir. Oct. 24, 2011).









Swett Static Ad  






excessExcess Carrier Obligated to Provide Coverage Notwithstanding Bankrupt Insured's Inability to Pay Underlying Retained Limit

By Matthew R. Watson, Esq. 


Rosciti v. Insurance Company of the State of Pennsylvania, 659 F.3d 92 (1st Cir. 2011) 


Buyers purchased a mobile home manufactured by plaintiff insured. Contending that the home was defective, the buyers later sued the insured, seeking to recover for the alleged defects. Thereafter, the insured filed for Chapter 11 bankruptcy protection, thereby effectively staying the buyers' lawsuit. The buyers added the excess carrier as a defendant, seeking to recover directly from it pursuant to a Rhode Island direct action statute (R.I. Gen. Laws 27-7-2.4), which allows tort victims to recover damages from liability insurers of a bankrupt tortfeasor to the extent of the existing coverage.



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