E&O Prevention
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April 26, 2012


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Letter from the Editor

Letter from the Editor


Check out this month's edition of "AOA News, 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. This month we have added three new authors/contributors to "News, Views, Tips & More", James Warters, Donald Dzubak and  Ron Hedges. Esq., I am certain that you will find their information both informative and educational. Also check our our new Feature, "Insurance Resources"


AgentsofAmerica.ORG announces a new Strategic Partnership with the Preferred Group, Inc.


Preferred is a full service independent reinsurance intermediaries firm that has three main practice areas:


  1. Traditional reinsurance placements for insurance companies
  2. MGA/MGU/Program Administrator specialty insurance program development and placement      
  3. Reinsurance and/or fronting paper for alternative risk entities - captives, RRGs, etc.


At Preferred, they understand that relationships drive business. They are a client-focused intermediary with both the depth of experience and the contacts in the insurance and reinsurance industry to achieve results that best meet our clients' requirements. They are an independent and employee-owned that enables them to take a long-term view of our relationships and business opportunities. They work with a wide range of clients, from large, well-established insurance companies to small start-up opportunities.  


Jim Warters, VicePresident and North East Regional Manager for Preferred Reinsurance Intermediarieswill be writing a column each month, entitled, "First Perspective - A Reinsurance Market Overview"Jim's primary objective will be educating our readers about the reinsurance market but also about reinsurance impact on primary carriers, insurance producers, managing underwriters and insured's. Over the next several months he will also provide basic information on the "forms and functions" of reinsurance both from an historic perspective and as manifested today.   Also see Jim article this month on "Reinsurance Basics Part 1" 


AgentsofAmerica.ORG has partnered with WebCE, a leading nationwide provider of Continuing Education for insurance professionals to provide you with state-approved self-study CE courses to satisfy your CE requirements online! WebCE delivers over a half million courses annually, and offers the largest nationwide catalog of courses approved to satisfy state-specific subject requirements. In addition, we have also created a new featured for our readers, entitle Insurance Resources, which includes a number of useful links including:

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.


"Bringing the Best Together"


Brit Weimer


 AOA News, Views, Tips & More 


E&O Tip

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


Are you electronically delivering policies?   Also see Curt's article this month, "Is Automation your Friend or Foe in Preventing E&O Claims".


This has certainly become much more common over the last couple of years - probably because of the gains, both financially and efficiency, that agents have been able to enjoy.


Typically, on issues involving information sent by the agent or contact made by the agency to the customer, the burden of proof falls on the agency. Thus, the agency will need to prove that delivery was made. This could be especially important since in most states, one of the defenses that agents typically can benefit from is the duty of the customer to read their policy. Obviously, for them to be able to read their policy, they need to have received the policy. Without proof of delivery, it is questionable whether this defense could be raised.


It is always recommended that agents include a cover letter when they mail the policies to the customer. With electronic delivery, the issue is basically the same. An agency should include in the e-mail a cover letter advising the customer to essentially review their policy and if they have any questions or if there is a need for corrections of some type, that they should contact the agency promptly.


Be certain to secure insured's consent to receiving policy / endorsements electronically and that they understand that this is how they will be communicated with. This is certainly very important.


At times, you may not be sure if your e-mail was received by the customer. It could potentially have gotten caught in their filters. As a result, to ensure delivery, include a request in the e-mail asking your customer to respond acknowledging receipt of the policy / endorsement, etc.  When you send the e-mail, put something on diary that if for some reason, you don't get this return acknowledgement, you should then personally contact the customer. Make sure these activities and responses are noted in your agency management system.


As with any type of automation, the manner in which the agency deals with the automation can determine whether it proves to be beneficial to the agency if an E&O claim were to develop.


For additional information, contact Curtis at curtis@pearsallassociates.com or visit Pearsall Associates.





Insurance Coverage Tip  

By Kristin Toto of Martin & Company



Global Security Issues Yield New Kidnap & Ransom Insurance Products


As U.S. business continues to emerge into new markets and becomes virtually borderless across the world, companies in any industry that engage in global business can potentially encounter various security-related issues while traveling abroad.


In response to the increasing prevalence of security-related events, Property & Casualty Insurance Carrier, CNA, has developed a new Kidnap, Ransom & Extortion product that broadens the typical K&R coverage. They now offer coverage extensions to address issues such a threat to damage an insured's property, threat to disseminate or divulge trade secrets and threat to inflict bodily injury without an accompanying ransom or extortion demand. Coverage extensions also include evacuation for a business traveler, disappearance of an employee while traveling on business, child abduction from the company premises without a demand for ransom, and various others.


CNA has also teamed up with red24, global security company based in London, that will assist with these security-related issues on a worldwide basis.


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



Insurance Product Research & Development * Martin & Company

Tel: (610) 325-4455 * Fax: (610) 325-4405





firstFirst Perspective - A Reinsurance Market Overview   

By James A. Warters of Preferred Reinsurance Intermediaries


This month's insight is: Don't expect the P&C market to turn until the larger carriers begin to report negative cash flow from their operations. That point is not far in the future - underwriting losses are growing, "redundant" reserves are gone, return on surplus is declining and personnel (and other costs) have been trimmed to unsustainable levels. Somewhere a butterfly's wings will flap...Also see Jim's article this month on "Reinsurance Basics Part 1"


Contact Jim  at 973/586-3105, 973/586-3145 (fax) or JWarters@PreferredRe.com





Financial Tip of the Month

By Mike Brady of the Brady Financial Group, LLC.   


When considering an agency acquisition make sure you identify a resource to assist with due diligence. Acquiring an agency can be an effective way to grow your business but only if you have spent time performing the necessary due diligence that this type of transaction requires.  Most agency owners' focus on the positive impact an acquisition can have on their book of business such as revenue growth, expense reductions due to efficiencies gained, new market relationships, etc. What owners sometimes fail to consider are areas such as ; integration of the new accounts, staffing changes, corporate records, tax implications of the transaction, regulatory matters, financial statement impacts, carrier agreements and Human Resource issues to name a few. Collectively these all fall under the due diligence umbrella. You don't want to learn about issues after the purchase, make the time and dollar investment up front to fully understand what you are buying.


Contact Mike at mike@bradygrp.com or Visit Brady Financial Group(484) 653-6280




E&O Loss Prevention Tip


Description of Claim:

Issues which can arise when replacing coverage.


Allegations against the Agent: The agent was asked by a bar owner to replace his liability coverage which was being non-renewed by its current carrier. The agent located a market and replaced the coverage for the insured with an effective date of January 13, 2009. Unbeknownst to the agent, the policy that he placed contained an assault and battery exclusion on the policy.


The insured's prior policy did not contain a similar exclusion but the agent never reviewed the previously policy. The insured requested that the agent get the same or better coverage than the expiring coverage.  The agent represented that the replacement coverage matched the prior coverage but never reviewed the policy and never pointed out this exclusion. The insured's reported a claim to the carrier on February 08, 2009 and the claim was denied based on the assault and battery exclusion on the policy.


The underlying loss: The insured's bartender was involved in a physical altercation with a patron. The patron received a broken nose at the hands of the bartender and, as a result, the insured was sued over the incident. 


Damages: $16,000 for the cost in defending the insured


Brought to you by:

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




To Get Noticed On The Internet For Your Services, Post On High Ranking (PR) Industry and Other Relevant Sites. - New Feature

Donald J. Dzubak of Parasol Financial & Insurance Solutions


Is there a webpage you go to because you find the content helpful and newsworthy? Consider identifying and posting to high ranking PR (Page Rank) sites to get your name out there. These sites have a high traffic and reader volume. Harvard Business Review, Technorati and Search Engine People are a couple examples of such sites. Also see Don's article this month. "A Comprehensive Approach to Generating Quality Insurance Leads for Your Business" 


Contact Donald J. Dzubak, Vice President Sales and Marketing - www.ParasolLeads.com - don@parasolleads.com or 1-651-730-6619



E-Discovery. What You Don't Know? 

By Ron Hedges, Esq. of Ronald J. Hedges LLC


Do you know that social media can bite you? Courts have considered whether social media posts may constitute libel and whether, under principles of agency and authority, you may be liable for posting by your employees or representatives. Moreover, do you know that the NLRB (National Labor Relations Board) is addressing disciplinary actions by employers over employees' posts? 

Employers must set rules for social media use and, at the same time, understand that wmployees have rights too.

Contact Ron at 201-341-3635 or r_hedges@live.com





Poor Listening Skills Sabotaging Your Sales Career?

By Mark Hunter the "Sales Hunter"


Do you truly listen to your customers?


The reason I ask is because it seems that listening is a skill that is emphasized as important, but unfortunately is not actually put into practice - at least to the extent it could be.And if you aren't really listening to your customer, you could miss vital information that not only will affect your sales success, but more importantly will affect your relationship with that customer.  Let me give you an example that seems subtle on the surface, but is profound.  One word can make all the difference.  Not long ago, I was doing some consulting work for a pharmaceutical company. In an effort to understand this particular client's business, I shadowed one of their sales representatives for a day.As she and I were visiting various doctors' offices, there is one particular encounter that sticks out to me.  As we went into the office, the sales representative asked if a certain doctor was available. The receptionist's answer?  She said, "He is not here. He is in the hospital."  Without even skipping a beat, the representative jumped in asking when the doctor would be back in the office and would it be okay if we stopped by later that afternoon.With a somber look on her face, the receptionist said, "No. He had a stroke last night and his condition is not good."Did you catch the word that the representative missed in the initial encounter with the receptionist?The receptionist said the doctor was in the hospital, not at the hospital.A doctor who is simply making rounds is "at" the hospital, which is what the sales representative assumed, even though the receptionist clearly said "in."  Granted, this is an extreme example.But it is ideal to make a point that as a sales representative, you always need to be listening with keen discernment.The very best salespeople are consistently paying close attention to not only what each customer says, but how this information creates a bigger picture of what is going on with that customer, their needs, and so forth.  One word can make all the difference, as can the tone of the customer's voice or the context of when something is said.  Key is to listen, ask good follow up questions and keep thorough notes on each meeting you have with a customer. Your sales career and your customer relationships deserve this sort of attention.


Mark Hunter, "The Sales Hunter," is a sales expert who speaks to thousands each year on how to increase their sales profitability.  For more information, visit www.TheSalesHunter.com. You can also follow him on Twitter, on LinkedIn, and on his Facebook Fan Page, or call 402.45.2110. -Mark@TheSalesHunter.com




RiskSmart Solutions - Risk Management Tip

By Charles T. Wilson of RiskSmart Solutions  Also see his article, "Personal Insurance Traps" 


There's lots of policyholder confusion about the differences between personal and business risks and the relevant insurance coverage's that are needed. They just don't get it or misunderstood their broker's soothing statement that "your umbrella covers everything."  The negative consequences can be pretty scary.


Brokers need to realize this important gap in understanding and teach new customers about what's "business."  Pay attention to business property, off-premises exposures for property and liability, business entertainment in the home, part-time "employees," auto use with business clients, etc.  And don't forget to point out the very limited coverage afforded for service on Charity boards (bodily injury and property damage only).


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



Result From Last Month's poll question: 


Would you place your business with an insurance carrier even

when you do not have full errors and omission coverage in 

place.(i.e. - Placing business with a B rated carrier when your 

coverage does not provide coverage for carriers less than B+)


Yes                                                        12%

No                                                          80%

Depends on the circumstances                  8%



This month's poll question:


Do you obtain and keep a copy of expiring policies when your

agency is replacing coverage?





Social Media Tip

By Cynthia Cavoto of Firebrand Social Media.


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


Visit Additional Blogs: Most site owners update their business blog religiously with keyword rich material, sustain that critical reader connect by answering blog comments, suggestions and inquiries without fail and measure blog metrics consistently to trace their high ranking upon the top search engines. But, most do not use the complete spectrum of 'blogosphere' available to them through participating within discussion upon blogs that belong to other individuals. Visiting additional blogs then commenting, sharing field inputs, praising, or sharing your own experience which might add value to a post includes a no-cost, quick,


This month's EBook is entitled. "YouTube Insights for Audience"


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. or  cynthia@firebrandsocialmedia.com




How much is enough?

By Treacy Duerfeldt, Claims Captain


How much information is enough to get a claim started?  Under what circumstances should medical attention be more of a priority than information surrounding the claim?  Timing can be everything.


First, employees need to know that your company claims reporting process puts their needs first.  Employee needs are commonly put second when a claims process.


If employees don't see their needs at the center, claims reporting processes may be dismissed or circumvented.  At the same time, enough information is needed to give direction to the HR department and the insurance people to give appropriate priority to claims and the employees involved.  With the basics and quick notification a injured employee (or even a third party) can see that the injury will be taken seriously and professionally.  Additional information can be obtained after initial medical treatment but the basics including date/time,  supervisor on duty, place, seriousness of injury, and what briefly happened is needed to get started.  Lastly, quick pictures are easier and better at telling the story than words.....not just a picture of an injury if appropriate, but also the conditions and workplace environment.


If a life is in imminent danger, it's a 911 and damn the forms until after medical treatment is assured.  How does your agency provide for a claims reporting process consistently with policyholders?


TIP: Claims reporting procedures may sound good in theory but should be field tested and allow for exceptions when there's imminent danger or harm.





Motivational Quotes and Joke-of-the-Month

Michael Mercer, Ph.D., provided AoA with Motivational Quotes and Joke-of-the-Month.  He wrote the book "Hire the Best & Avoid the Rest." 


Dr. Mercer created 3 pre-employment tests that many companies use to assess job applicants.  You can read about the 3 tests, or subscribe to his "HIRE THE BEST Newsletter" at www.Pre-EmploymentTests.com. Also see Dr. Mercer's article, "How to Avoid Impulsive Hiring".




"Don't be impatient.  Remember, you can't warm your hands by burning your fingers."

- John Mason, in his book "Believe You Can," page 156


"Your own soul is nourished when you are kind.  Your soul is destroyed when you are cruel."

- Proverbs 11:`7


"The media industry pours forth an unremitting diet of gloom, but their pessimism should be disregarded.  No great advance was ever achieved by negative thinking."

- Luke Johnson, writing in "Financial Times"


"No nation ever taxed itself into prosperity."

- Larry Kudlow, Ph.D., economist & host of "Kudlow Report" TV show




When did . . . porches become "decks" . . . noodles become "pasta" . . . hobos become "homeless people" . . . lazy bums become "slackers"?



Table of Contents


By Curtis Pearsall, CPCU, AIAF, CPIA


Personal Insurance Traps

By Charles T. Wilson, CMC, CRM, RPLU


Reinsurance Basics 

By James A. Warters of Preferred Reinsurance Intermediaries  


The Great Coverage Shift

By Todd Dashoff, ACAS, MAAA, ARM of Huggins Actuarial Services, Inc


How to Avoid Hiring Implusive

By Dr. Michael Mercer, Ph.D


A Comprehensive Guide to

By Donald J. Dzubak of Parasol Financial & Insurance Solutions


By Michael Beck of Michael Beck International, Inc


Brinker Meal Restaurant

by Darin L. Wessel, Esq


Insurance Carrier Owed No Duty 

By Devin C. Maddox, Esq. of Tressler LLP


By Frank M. Ward, III, Esq. of Hinshaw & Culbertson LLP 


isautoIs Automation Your Friend  

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


This is actually a very common question posed by insurance agency staff. Basically, the answer is - "it depends". While most aspects of automation are designed to assist your agency and to enhance your efficiency, the bigger issue from an E&O standpoint deals with whether the specific aspect of automation is utilized consistently and effectively in your office.  





PersonalPersonal Insurance Traps 

By Charles T. Wilson, CMC, CRM, RPLU   


As an insurance customer, there's lots of confusion about the differences between personal and business risks and the insurance claims that can bite you.

  • "I just sell and train for Amway - I don't take payments directly so I don't need extra coverage....
  • ""My broker says my umbrella covers anything that could go wrong...."
  • "I really don't have any business property or equipment in my home office - I use it for personal too...."   

Read More... 



ReinsuranceReinsurance Basics 

By James A. Warters of Preferred Reinsurance Intermediaries


In many ways, reinsurance is an enigma with a frequently esoteric language, a chameleon-like ability to change structure and, at least according to an occasional regulator, a Medusan capability to turn otherwise viable markets to stone. However, at its most fundamental level, reinsurance is a simple concept.


In this and future articles I will share the basics learned over almost four decades as a reinsurance underwriter and broker. I will try to avoid the words "often, sometimes, frequently, usually, etc.," by referencing what I consider to be "standard practice." Doubtless, others will disagree and their comments are solicited. 



TheThe Great Coverage Shift 

By Todd Dashoff, ACAS, MAAA, ARM of Huggins Actuarial Services, Inc.


In the last few years, the numbers of individual-owned physician practices covered by commercial property-casualty insurance companies has been shrinking.  For the period 2005-2008, the percentage of hospital-owned medical practices grew from 25.6% to 49.5%, according to the 2008 Physician Compensation & Production Survey.  In 2010, the number of physicians switching to hospital employment exceeded the number of first-year physicians in medical practices. 



HowHow to Avoid Hiring Implusive, Troublemaking People  

By Michael Mercer, Ph.D.


A pre-employment personality test that assesses applicants' dependability can help managers avoid hiring impulsive people.


Why should you avoid hiring impulsive people?  Because impulsive employees create trouble by doing harmful behaviors at work.  They 

-  dislike following rules - including for quality and safety
-  cause accidents
-  say rude, inconsiderate comments - to customers and co-            workers


Read More... 



AA Comprehensive Approach to Generating Quality Insurance Leads for Your Business 

By Donald J. Dzubak of Parasol Financial & Insurance Solutions

If you've been attempting to boost the quality of insurance leads coming in, but you find you're coming up short, then it may be time to reassess your marketing strategy. If you are indeed in this category, then consider evaluating what you're currently doing and what's working and what's not working to make changes and updates as needed.    


Read More... 






 Click here for Free Property and Casualty Ideas 





ExecutiveExecutive Effectiveness: Becoming an Effective Leader 

Prepared by Michael Beck of Michael Beck International, Inc


Recently on LinkedIn I posed three questions that resulted in some very interesting conversations.  Here they are:


1. An executive is only a leader if people choose to follow.  How can you tell whether people are following or just doing their job?

2. Everyone says leadership is important, but why does it make a difference?

3. If an executive produces a good bottom line are they a good leader? 



MealMeal and Rest Break Obligations Clarified By California Supreme Court 

By Darin L. Wessel, Esq


On April 12, 2012, the California Supreme Court issued its long awaited opinion in Brinker Restaurant Corp. v. Superior Court.


Of prime importance to California employers, the Supreme Court held that with regard to the statutory obligation to provide non-exempt employees with meal/rest breaks, "an employer's obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done."   


Read More... 



InsuranceInsurance Carriers Owed No Duty to Defend Under Claims-Made General Liability Policy for Breach of Contract Claim or Shareholder Lawsuit 

By Devin C. Maddox, Esq. of Tressler LLP.


Defendant UMF sought defense from Essex Insurance Company under a claims-made general liability policy for shareholder and breach of contract claims arising from corporate financing transactions. The Illinois Appellate Court affirmed the lower court's decision granting summary judgment in favor of Essex on grounds that: (1) the shareholder claims did not concern injuries occurring entirely within the policy period as required under the policy; and (2) the breach of contract claim did not constitute the type of injury expressly covered under the policy. Essex Insurance Company v. Sweports, Ltd., et al., No. 1-10-3386, 2011 Ill. App. Unpub. LEXIS 3021 (Ill. Ct. App. (1st Dist.) December 6, 2011).


Read More...  









sevenSeventh Circuit Offers a "More Perspicuous Formula" for Interpreting the Pollution Exclusion
By Frank M. Ward, III, Esq. of Hinshaw & Culbertson LLP

Brief Overview

The U.S. Court of Appeals for the Seventh Circuit held that the pollution exclusion precluded coverage for injuries resulting from a village delivering tap water contaminated with perchloroethylene (PCE) to its residents even though the village was not the producer. In the process, the Seventh Circuit recast the Illinois Supreme Court's test for interpreting the pollution exclusion.
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