E&O Prevention
Strategies for the Professional Agent
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February 29, 2012


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Letter from the Editor

Letter from the Editor


Early next month we will be releasing the revised and final Table of Contents for our "E&O Loss Control & Risk Management Program for Insurance Agents and Brokers"  AOA is bringing together  the best  talent and resources  to create the nation's  first risk management initiative geared in helping agents reduce claims, as well as provide them with a practical guide to their agency operations  In light of the tremendous response from our readers  and supporters we have decided to create a second volume of topics and solutions incorporating many of the Chapters from our first EBook offering "Thirteen Things Every Insurance Agent & Broker Should Know

Check out our new feature below, "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. As always, 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.


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"Bringing the Best Together" 

 Brit Weimer


AOA News, Views, Tips & More


E&O Tip
By Curtis Pearsall of Pearsall Associates Inc. Also see his article, 

"Specialization - a win - win scenario? Maybe not

It is critical to take your documentation to the next level.

For many years, the prevailing philosophy regarding the issue of documentation was essentially - document the conversation in the file / agency management system promptly and thoroughly. While many may contend that this has served the industry well for all of those years, this "school of thought" has some holes in it and unless these holes are plugged and plugged quickly, the dam could break taking the agency down with it.

One of the holes deals with the degree and thoroughness of the documentation. There have been many E&O claims where the documentation in the system read something like this - "spoke with insured regarding their homeowners coverage". What exactly does that tell you? Would you want to have your agency defended in litigation based on this statement? Probably not. This statement in your system does not advise 1) exactly who (the name should be part of the documentation) the conversation was with 2) exactly what was discussed and 3) exactly what was resolved. Are there any open items? If the insured is going to be getting back to you on an issue, when? Is coverage in place in the meantime? Essentially a good "test" for documentation: can another member of the agency review that documentation and know exactly what was discussed, what was resolved and what the understanding is between the two parties? If not, the documentation is falling short.

The other "hole" deals with misunderstandings between what they said and what you heard or vice versa. Face it, at the time of a claim, there is a good chance that the memory of your customer will not be as sharp as it used to be. They won't remember the conversation the same as you. May want to call it "selective retention". How does it get resolved?

The best approach is to document back to the customer (or carrier / wholesaler, etc.) in writing (e-mail / letter, etc.) the essence of the conversation. The discussion could involve an explanation of coverage or the modification on one of their policies or a host of other issues. By sending the customer a letter recapping the discussion with a statement such as the following, this should help to identify any misunderstandings:


Mr. Jones, per your request, we have deleted the physical damage coverages on your 2008 Toyota. If this is contrary to your understanding, please contact the agency as soon as possible. Maybe they only wanted collision deleted as they were taking the car off the road for the winter.


You can look to address these misunderstandings either before the loss or after it. Somehow, the conversation may be more professional if it occurs before the loss.

Take your documentation to the next level. Yes, it takes time but it could just make the difference in avoiding an E&O claim.


For additional information contact curtis@pearsallassociates.com



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

When considering the value of your agency don't overlook the importance of the Balance Sheet. Too often agency owners, who are preparing to sell their agency, focus exclusively on revenue and EBITDA and forget about the Balance Sheet. Depending on the type of transaction (stock or asset sale) the financial strength or weakness of your balance sheet can impact either the sales price or future liabilities the seller will have to pay with their sales proceeds. All agency owners, regardless of where you are in the life cycle of your agency should take the necessary steps to strengthen their balance sheet. 


For more information visit the Brady Financial Group.


Insurance Coverage Tip
By Kristin Toto of Martin & Company

Increasing Occurrence of Data Breach Prompts Broadened Coverage

All companies store personally identifiable information to some level whether it is limited to their own employees or extended to include customers and clients. It is the company's legal and fiduciary responsibility to protect and provide a secure environment for that proprietary data; however, in recent years, there has been an increasing occurrence of incidents in which this sensitive data has been viewed, stolen or used by an individual unauthorized to do so. In the event of a data breach, companies are obligated, and in many states required by law, to notify the individuals who may have been affected by the breach. Data breaches can lead to a whole host of potential damages including law suits brought about by the affected individuals of the breach.

Central Mutual Insurance Company has identified the need for companies to protect themselves in the event of a data breach, and as a result, is now offering an expanded Data Breach Coverage that provides first party insurance coverage that includes legal and forensic information technology review of the breach, notification to the affected individuals, as well as toll-free help lines and credit monitoring services to the affected individuals. For those who become identity theft victims, Central Mutual also provides identity restoration case management services. Through this expanded product offering, Central Mutual is also providing coverage for defense and settlement costs in the event that affected individuals sue the insured.

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

Kristin A. Toto
Insurance Product Research & Development * Martin & Company
Tel: (610) 325-4455 * Fax: (610) 325-4405 * www.martincompanyus.com



Results From Last Month's poll question (New Feature)

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

As required by my E&O carrier to obtain a discount 33%
Yearly 60%
Every 3-5 Years 7%
Never 0%

This month's poll question

What would your firm consider to be the most important item in making a change to a new E&O Insurance Carrier?


Financial Strength/AM Best Rating


RiskSmartSolutions - Risk Management Tip
By Charles T. Wilson of RiskSmart Solutions®

See also his article, "2012 Risk and Protection Checklist." 

Help your clients organize their priorities for the New Year


Here's a short checklist of 7 Risk and Protection reminders they can actually implement:

1. Update asset lists
2. Update values
3. Schedule key dates
4. Review insurance protections
5. Update safety
6. Prioritize HR issues and Training
7. Update Emergency plans

Contact Charles at Charles@risksmartsolutions.com, 510-685-3883 or visit www.risksmartsolutions.com.


E&O Loss Prevention Tip:
Description of Claim:

Issues that can arise when using a wholesaler

Allegations against the Agent: The underlying insured, a trucking company, requested that our agency procure a $5,000,000umbrella policy. The agent went through a wholesaler to procure the coverage. The insured agency had limited experience with this specific wholesaler. The agency issued a certificate of insurance to the underlying insured prior to getting any written confirmation that the policy was issued. This was done on or around 7/1/2008. On 8/24/2008 one of the driver's for the underlying insured was involved in an auto accident. When the claim was reported to the carrier, it was discovered that the umbrella policy was never procured.
It was later determined that an employee of the wholesaler had issued a fraudulent quote, declaration page and other documentation to reflect that the coverage was in force. The wholesaler is uninsured and the insured agent, as the retail agent, became the target defendant for failing to procure the coverage as requested. It is alleged that the agent fell below the standard of care in issuing a certificate of insurance without having confirmation that coverage had been placed, and failing to do his due diligence in researching this wholesaler.

The underlying loss: The underlying insured's driver was involved in a fatality accident and was found to be at fault.

Damages: In excess of $5,000,000

Brought to you by:
CalSurance Associates - A Division of Brown & Brown Program Insurance Services, Inc. - Email: info@calsurance.com, Phone: (800) 745-7189

Social Media Tip
By Cynthia Cavoto of Firebrand Social Media.

Here is this month's cost-effective and easy SMM (social media marketing) idea to benefit all website businesses:

Facebook Advertising: It's the most cost-effective SMM tool obtainable to website owners. With its outreach of over 300,000,000 users, Facebook allows small companies to build up a presence for themselves upon a powerful platform which connects them with a big worldwide potential client base. You can sign up for a Facebook Business Fan Page account utilizing your business's username to register the business. Read every one of the rules for Fan Pages, study the competition then evaluate the Facebook presence of your rivals. And just copy their plan for success by personalizing it for your targeted audience.

This month's EBook is entitled, "Link Building Secrets" we know you'll find this information valuable for your business.

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




Commercial Prospecting Tip  

By Christa Colt of myrelevent.com - Putting Science in to Cold Calling 

Diary of a Commercial Telemarketer 


Christa Colt is the Lead ASR at ClearData, the Insurance Industry's leading commercial telemarketing company and a partner of AOA. Christa's team spends their days scheduling appointment's for insurance agents across the US and these are her tips... Christa says - Electricians, plumbers, lawn care, HVAC, contractors of all types are highly sought after by most insurance agents. The owners of these businesses however, can be very difficult to get a hold of. I've had my best success calling contractors when they are on their way to the shop or job site. This is usually between the hours of 7:30am & 9:00am. I will try them again between the hours of 4:00pm & 5:00pm when they are driving home from work. A little know trick for reaching outdoor contractors is to call them on a day that it is raining... If you would like to have my team working for you please give us a call at 866-586-2088 x100 www.myrelevent.com  




Motivational Quotes (New Feature)

By Michael Mercer, Ph.D., provided AoA with Motivational Quotes and Joke-of-the-Month.  He is author of "Hire the Best & Avoid the Rest" plus 5 other books. You can subscribe to "Dr. Mercer's Management Newsletter" at www.Pre-EmploymentTests.com.


Also available this month is Dr. Mercer's article, "3 Steps to Hire the Best People for Your Training or Apprenticeship Program"



"The simple things I do are actually all complicated."

- Peter Townsend


"If I'd asked the consumers what they wanted, they'd have said a faster horse."

- Henry Ford


"Nothing great was ever achieved without enthusiasm."

- Ralph Waldo Emerson


"The hurrier I go, the behinder I get."

- Amish proverb



I'm having amnesia and déjà vu at the same time.  I think I forgot this before.


Table of Contents


Specialization - a win - win scenario? Maybe not

By Curtis Pearsal, CPCU, AIAF, CPIA


2012 Risk & Protection

By Charles T. Wilson, CMC, CRM, RPLU


Executive Effectiveness: Becoming Highly Productive

By Michael Beck  


3 Steps to Hire the Best People

By Dr. Michael Mercer, Ph.D 


Did you know your company could be Unionized

By Dianna D. McCarthy, Esq. & Robyn Silvermintz, Esq. Winget Spadafora & Schwartzberg, LLP.


The California Trial and Appellate Courts Found Contrary to the Jury's Finding of Sufficient Evidence of a Hostile Work Environment Based on Gender 

By Wendy Wilcox, Esq.  


By William Rusteen, Esq.


How to Generate Leads from Existing Customers

by Mark Hunter 


A Dangerous Precedent

By Brian K. Stewart, Esq & Ryan P. Harley, Esq. Collins Collins Muir + Stewart LLP 


By Treacy Duerfeldt


specialSpecialization - a win - win scenario? Maybe not 

By Curtis M. Pearsall, CPCU CPIA of Pearsall Associates Inc.


Over the past couple of months, it certainly appears that that there have been a number of industry experts heavily promoting the value of specialization for today's agencies. Are the days of the generalist over? No. Actually for many agencies, it may be very difficult to specialize based on their structure and demographics of the communities they serve and market to. However, for many agencies, it appears that going down the path of being a specialist is the way to go. However, it is important for them to realize that while there are certainly benefits from this approach, it is not without risk.   





twenty2012 Risk and Protection Checklist  

By Charles T. Wilson, CMC, CRM, RPLU   


As you organize your priorities for the New Year, here are 7 key Risk and Protection reminders for your checklist.  Many of these we know are important, yet they're often not immediately urgent so they fall to the bottom of the pile.  An annual schedule and planning can be effective in avoiding last minute panic.





execExecutive Effectiveness: Becoming Highly Productive

By Michael Beck 


For an executive to be highly effective, they need to become highly productive. In addition, how they attain high productivity is as important as the productivity itself. High productivity is essential for executives because it serves three important purposes. The first, most obvious, is that it enables us to get our work done. No small task given the pace of business and the extra load budgetary constraints impose. The second, no less important benefit, is that by completing our work in a highly productive manner, it keeps our stress and anxiety levels under control. Controlling stress and tension is critical, since persistently high feelings of stress cause health problems, sap our strength, hamper creativity, and negatively impact our ability to communicate effectively. Each of these factors, of course, affects our effectiveness as a leader.



three3 Steps to Hire the Best People for Your Training or Apprenticeship Program  

By Michael Mercer, Ph.D. 


Warning:  Only put people in your training program who are ultra-likely to complete or "pass" the program - and then will stay with your organization.    


More companies are creating and operating training programs or apprenticeships - mainly to train people for jobs requiring technical skills.  Reason:  There is shortage of people possessing crucial technical skills, including:
~ "blue-collar" technical skills - e.g., equipment maintenance, welding, and more

~ "white-collar" technical skills - in computers, healthcare, laboratory work, and more





didDid you know your company could be Unionized?

By Dianna D. McCarthy, Esq. & Robyn Silvermintz, Esq. Winget Spadafora & Schwartzberg, LLP. 


On April 30, 2012, most private sector employers will be required to post a notice explaining employees' rights under the National Labor Relations Act (the "Act"). The legislation was passed due to the National Labor Relations Board's (the "Board") concern that most employees are unaware of their rights under the Act. The Act guarantees that "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities". The Board was concerned that employers were not required to inform employees of their rights under the Act. Thus, the posting requirement will increase employees' awareness of their rights under the Act.







Ernest Agent






 Click here for Free Property and Casualty Ideas




theThe California Trial and Appellate Courts Found Contrary to the Jury's Finding of Sufficient Evidence

By Wendy Wilcox  


In the last quarter of 2011, the California Court of Appeals in Brennan v. Townsend & O'Leary Enterprises, Inc. (2011)199 Cal. App. 4th 1336,held there was insufficient evidence the alleged harassing behavior was pervasive or severe enough to create a hostile work environment based on gender.


excessExcess Policies Not Triggered Unless Full Limits of Underlying Coverage Are Actually Paid 

By William Rusteen, Esq. of Tressler LLP


In Citigroup, Inc. v. Federal Insurance Company, No. 10-20445, 2011 U.S. App. LEXIS 16316 (5th Cir. Aug. 5, 2011), the Fifth Circuit concluded that, where the plain language of an excess policy requires complete exhaustion of an underlying policy, excess coverage is not triggered until the limits of the underlying coverage have been paid in full by the underlying insurer.   


Read More... 



howHow to Generate Leads from Existing Customers

By Mark Hunter "The Sales Hunter" 


Too many salespeople fail to realize the potential that exists from their regular customers with regard to being able to generate new leads.  Generating leads with existing customers is much easier than it may appear at first glance.  


Read More... 




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AA Dangerous Precedent: Architect Faces Criminal Charges in Design of Home
By Brian K. Stewart, Esq & Ryan P. Harley, Esq. Collins Collins Muir + Stewart LLP 


In what appears to be an unprecedented move, a German architect was recently charged with involuntary manslaughter after a fire in his home resulted in the death of a firefighter. 

On February 16, 2011 at a little before 11:30 p.m., a fire broke out at a large Hollywood Hills home designed and built by Gerhard Albert Becker as his personal residence.  Tragically, a 61 year old Los Angeles firefighter named Glenn Allen lost his life battling the blaze.


Read More...  



electronicElectronic Claims Reporting, Advantages and Pitfalls
By Treacy Duerfeldt


Electronic claims reporting has been available for commercial policyholders via the web for many years and is pretty widespread.  Improvements in reporting completeness and accuracy are realized by a company's HR or Risk Manager.  This was made possible as web forms required certain information to be completed and could perform cursory accuracy checks for valid dates, locations, etc.   Web forms also avoided double entry errors or errors in reading handwriting. 


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