E&O Weekly Prevention
Strategies for the Professional Agent
  
December 6, 2012

 

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Letter from the Editor

 

AgentsofAmerica.ORG (AOA) announced this past Monday that it has started the development of two additional books to "A Comprehensive Guide to Avoiding E&O Claims

 

The release of Book Two is planned for the Spring of 2113 and will have multiple distinct chapters to clearly identify the E&O issues and exposures related to the typical new and renewal sales process within insurance agencies. Book Three is planned for release in the Fall of 2113 and will provide an extensive review of the errors and omissions exposures that agents need to be aware of when selling and servicing the majority of today's insurance coverage's. Both books will represent a collaborative effort by top E&O insurance attorneys and experts from across the country. Book One is finish and in production, it will be available for sale on Amazon & Barnes & Noble the week of December 17th.

 

Book Two provides E&O loss control insight and techniques arising from the sales and service of insurance products. The book will detail many of the E&O exposures for agencies during the pre-sale, sale and post sale periods addressing issues such as the legal duties of both the agents and their customers, education of both the staff and customers, account review, Exposure Analysis Checklists and the power of a signed application. SEE PROPOSED TABLE OF CONTENTS 

 

Book Three will detail the major E&O issues when writing coverages such as personal and commercial auto, homeowners, comprehensive general liability, commercial property, directors & officers, professional liability, flood, employment practices liability and umbrella. For all of the coverages discussed, best practices concepts will be provided. "Each of the various insurance coverage's has its own distinct issues that agents need to be aware of. This book will be a great resource for all levels of agency staff to assist them as they market and discuss these coverages with their clients" says Curtis Pearsall. SEE PROPOSED TABLE OF CONTENTS 

 

Professor James Kallman of St. Edwards' University will serve as the Editor in Chief. and will be working with the Editorial Board that includes Minneapolis E&O defense attorney Britton Weimer of Jones Satre & Weimer PLLC, Professor Andrew Whitman of the University of Minnesota's Carlson School of Management, Roy Little, President and CEO at Insurance Educational Association and Angelo J. Gioia Executive Director & Publisher of AgentsofAmerica.ORG., and E&O insurance expert Curtis Pearsall of Pearsall Associates Inc who will be taking on the charge of content and product development.

 

 

This week's edition of AOA E&O Prevention:

 

Table of Contents    

  

By Matthew S. Marrone, Esq.

 

Avoiding Cyber Loss in Sandy's Wake

By Lori Nugent, Esq.

  

Ruling May Dramatically Impact Future E&O Claims Involving Insurance Agents and Brokers

By Peter J. Biging, Esq

 

Insurance Agent Not Liable for Failure to Cover Boat

By Donald A O'Brien, Esq. 

 

                 

Check out this week's edition of World Risk & Insurance News at WRIN.tv.

  

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! Check out your CE State Requirements.

  

Also available is our most recent edition of "AOA Tips, Views, News & More," including our new feature "Insurance Resources." & "Recommended Reading".  Remember that membership in AgentsofAmerica.ORG is FREE! Also if you have any thoughts, comments or suggestions, please email me at info@agentsofamerica.org

 

"Bringing the Best Together"

 

Britton D. Weimer, Esq.


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AOA Tips, Views, News & More

 

You Don't Have to Anything Wrong to Get Sued! Do You Know How Your E&O Policy Will Respond?

By Curtis M. Pearsall, E&O Consultant and President of Pearsall Associates Inc

 

While I can certainly not speak to other professional liability classes, in the world of Agents E&O, this statement is extremely accurate. Actually, there are some E&O carriers that are reporting that historically, they are closing out close to 70% of their cases for no loss payment (there is typically defense costs on the overwhelming majority). What does this mean?

 

The majority of the cases develop when a customer (or other party) suffers a loss only to find out that there is not sufficient coverage. In their mind, they then seek out someone that they can "blame". More often than not, the agent is one of the first "names" they think of. But when the matter is resolved, in the majority of the cases, it is proven that the agents either did not do anything wrong and / or that they had a strong wall of defense when the litigation developed. Could the agency have any financial responsibilities even though they were "not guilty"? It depends.

 

Take the following claim to illustrate the point:

 

On June 8, 2010 Mr. Curt acquired property and his agent (Jones Agency) issued a binder to the ABC bank listing the bank as a lien holder. This binder was for 60 days and thus expired by its own terms on August 8, 2010. It is important to note that at no time subsequent did the bank request any further evidence of insurance. A policy was eventually issued and when the HO policy expired on its own in June 2011, Mr. Curt moved his business to another agency. In August 2012 (over a year later), the property is destroyed by fire and apparently Mr. Curt has no insurance and thus there is no policy where the bank is named as a lien holder. The ABC Bank brought action against the Jones Agency (the 1stagent) claiming that they should have received a notice of cancellation or nonrenewal and if it had, it would have actively sought it's own coverage to protect it as the mortgagee (this was not accurate as the policy expired on its terms, without cancellation or nonrenewal). The bank relied on a two year old expired binder as evidence of insurance at the time of the fire and proceeded with litigation against the agency. The agency had to retain defense counsel in order to establish that they were not the broker of record and hadn't been for over a year. In addition, the language contained on the binder clearly noted it was only good for 60 days. Since Mr. Curt had moved his insurance to another agency, the Jones Agency was eventually absolved of any wrongdoing. However, there were still defense costs incurred. Who paid these?

 

In this matter, the Jones Agency had E&O coverage with a $5,000 deductible which required them to pay defense costs as part of that deductible. As a result, the agency had to incur a $5,000 expense when they technically did not do anything wrong. While this did not sit well with them, this was the E&O coverage they had purchased.

 

What the above claims shows is that at the time of the claim, the party that has suffered the loss (the bank) is going to look to recoup their loss and if they can find a way to "blame" someone else, they may very well do that. In many cases, the bulls-eye will be on the agent's back.

 

Another potentially significant issue for agents to be aware of involves the manner in which defense costs can impact the limit of liability. Most E&O policies provide defense "in addition to the limit of liability" and thus, when E&O litigation develops, the defense costs incurred will not impact or impair the dollars available to pay any judgment against the agency. It is certainly possible for the cost of E&O litigation to be in excess of $100,000 and there have actually been some E&O claims where the defense was over a $1,000,000. With most Agents E&O policies, this expense would have been heavily (if not totally) borne by the E&O carrier and the limits of liability to pay any judgment would have not been impacted. However there are some E&O carriers (mostly those writing on a surplus lines basis) that have a different structure ("defense within the limit") to their contract.

 

If the E&O coverage was written with "defense costs within the limit of liability", the defense costs incurred in litigating the matter would reduce the limits ultimately available if a judgment is made against the agency. In other words, let's say the agent has an E&O policy with a $1,000,000 per claim limit. An E&O matters develops and $150,000 of defense costs is incurred. If the policy provides for defense costs as part of the limit of liability, there would then only be $850,000 left for any judgment. It is not difficult to see that based on the type of claim, this could result in "insufficient limits" left to pay any potential judgment.

 

Since agents can still be sued even when they technically didn't do anything wrong, the agency needs to well aware of how their E&O policy will respond. Do you know how your E&O policy reads in this regard?

 

Don't wait until after a claim to find out.

 

For additional information, contact Curt  at curtis@pearsallassociates.com or 315-768-1534

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Tips For Surviving the PPACA Doom & Gloom - Thriving in 2013 and Beyond!                                                                                            

By Philip Eide, President of BenefitPlace.biz

 

Quote - "One who gains strength by overcoming obstacles possesses the only strength which can overcome adversity." - Albert Schweitzer

For the past several years there has have been a barrage of information promoting "Doom and Gloom" for the Insurance and Benefits Industries.  While the introduction of PPACA/Obamacare started the systemic negativity, the Supreme Court Ruling gave it momentum, and now the Election Results have taken it into a further downward spiral.

 

In 2010 one reliable source predicted that over 50% of all Health and Life brokers would be out of business within 4 years!

 

The P&C markets have also been affected!  Several months ago we came across the following quote by Mike Jackoski - "PandC insurers have had a bad taste of doing business in 2012, and they realize they are dealing with a tough environment-one in which little or no organic customer growth exists to fuel corporate growth. Gaining market share means taking it away from someone else, so the level of competitiveness in the industry is high and will only get more intense."

 

The Industries - Health and Life (H&L) and Property and Casualty (P&C) - are facing many challenges and disruptive changes!  These include:

 

The ongoing Economic Recession!

Unemployment and Under-Employment!

Existing Regulatory Constraints!

A lack of guidelines for PPACA!

Uncertainty about State vs Federal Exchanges!

Shrinking Commissions and Capitated Payments!

Insurers dealing directly with consumers over the internet!

Increased Costs of Administration and Reporting!

Uncertainty about Taxation for Individuals and Organizations!

 

The above factors generated a "Wait and See" attitude.  Agents/Brokers - and their Clients -  have failed to initiate Innovative Strategies in the face of the Disruptive Change even at their own risk!

 

The time has come for Agents/Brokers - as well as other participants in the Insurance and Benefits Markets - to embrace the changes and take pro-active and innovative approaches for meeting client's needs!  The following measures might best serve Organizations and Individuals in serving Clients while attracting Potential Clients:

 

Accept - and even embrace - change!  Make the changes work for you!

Capitalize on the Markets and the potential Clients that are expanding with PPACA!

Examine a shift to a fee based model!  It worked for the Financial Services Industries!

Diversify!  Traditional H&L Brokers and can learn from - or join with -

 Voluntary/Worksite Brokers!  P&C firms can leverage their existing relationships to

 joint venture with the H&L and Voluntary/Worksite Specialists.

Leverage Expertise - Expand into markets that are new to you or that require specific

expertise by utilizing the services of Wholesalers, GAs, PAs, etc!

Shift from expensive and often wasteful "Outbound" marketing strategies, ie.

Advertising, Buying Lists, Cold Calling, Call Centers, Traditional 3 Day Trade Shows,

etc. to "Inbound" Marketing ! 

Leverage the Power of the Internet, Social Media, Search Engines, SEO, etc. as the basis for your "Inbound" Marketing Strategy!

 

In my Blog of June 6, 2011 I posted, "A Rebound in the US Markets - combined with expanding worldwide opportunities, a renewed emphasis on saving, and the preservation of income will open new markets for those in the Insurance and Benefits Industries who remain!  THE UNITED STATES IS, REMAINS, AND WILL CONTINUE TO BE THE BEST PLACE TO LIVE, WORK, OWN A BUSINESS, CREATE A BUSINESS, AND TO PRESERVE EARNED INCOME IN THE WORLD!"  I'll stand by that statement today!

 

For additional information, contact Philip W. Eide - max@benefitplace.biz or Call - 216.577.55

 


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Insurance Coverage Tip

By Alison Slezak of Martin & Company

aslezak@martincompanyus.com

 

New Commercial Auto Telematics Program

 

Auto insurers are always looking for new ways to better market themselves to consumers. Many insurance companies have begun to offer programs based on self-installed electronic devices in vehicles, which collect valuable driving data. This data can ultimately lower insurance rates for consumers since it is purely based on the insured's driving habits.  These devices have become very common with Personal Auto Policies, but one can expect to see more of these device programs being offered for Commercial risks as well. 

 

Recently, Utica Mutual introduced a Telematics Premium Discount Program for use with their Commercial Auto Program.  A discount is provided to the insured for implementing a risk management based Telematics Product. The Program works by first installing a micro processing device into the autos for the purpose of capturing raw data that is then transmitted to a central server. The data from the micro processing devices (the Telematics equipment) is then used as a risk management fleet safety tool to qualify for a Telematics Premium Discount.

 

Vehicles that are eligible for this Program include Private Passenger, Light Trucks, Medium Trucks, and Heavy, Extra-Heavy Trucks or Truck-Tractors.   

 

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

Martin & Company's Market Trends & Updates  or contact Alison at 

aslezak@martincompanyus.com or(610) 325-4455

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Social Media Tip

By Cynthia Cavoto of Firebrand Social Media

 

When Is The Right Time To Redesign?

 

If you run a website, chances are you often wonder whether it is the right time to do a total redesign of the layout of your website. Here are some points to consider:

 

Are you thinking of a redesign just for the sake of it? If you answered yes to that question, it is not yet the right time to do a redesign. Remember, a design serves a specific purpose. If you are not sure whether to do an overhaul of your site, keep in mind that your current design might have a specific purpose that you might not know about. You will lose that function if you do a redesign.

 

On the other hand, if your website has had the same website design since 2000, perhaps it is high time to do a redesign. The last thing you would ever want to happen to your site is when visitors leave your site without taking a look at your content just because the design is old fashioned. If this is your case, here are some points to ponder before doing a redesign.

 

Redesigning your website is like performing plastic surgery on it. Your website loses its current identity (for the better or worse) and your regular visitors might not recognise your new design at first glance. You risk losing them just because they thought they landed on the wrong page. Hence, it is very  important that you retain a characteristic feature from your old layout. Perhaps it is the logo of your site; perhaps it is the same text style for the title for your site.

 

To play it safe, put a poll on your site to let your visitors do the talking. If they think it is necessary for the website to have a fresh look, give it to them!

 

This month's EBook is entitled, "57 Email Link Building Tips Part 1

 

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.

 

Articles 

A1

Exploring the Concept of Fiduciary Duty         

By Matthew S. Marrone, Esq. of Goldberg Segalla LLP    

 

Last year, appellate courts in both California and New York handed down decisions addressing whether an insurance agent or broker owes a fiduciary duty to its client. Workmen's Auto Ins. Co. v. Guy Carpenter & Co., Inc., 194 Cal.App.4th 1468 (2011); People ex rel. Cuomo v. Wells Fargo Ins. Servs. Inc., 2011 WL 534198 (2011). That these cases were heard in two of the country's most populous states is reflective of the current political and business environment affecting insurance (and other) professionals. Whether the claims are advanced by governments, companies, or individuals, insurance agents and brokers are increasingly subjected to efforts to hold them to ever-higher standards. 

  

  

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Each day since Sandy made landfall along the Atlantic coast, our clients have discovered more difficulties left in her wake. Some challenges are easy to see. Others are less apparent, but may cause serious damage. Perhaps no domain reflects this dynamic more than data security and cyber liability. By taking precautions now, serious cyber losses can still be prevented. 
 
Read More...

  

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Firebrand Social Media   

  

  

  

  

  

  

  

  

  

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By Peter J. Biging, Esq. of Lewis Brisbois Bisgaard & Smith, LLP

 

In New York, generally, the rule is that insurance agents and brokers have a duty to procure the coverage requested by their clients or advise of their inability to do so within a reasonable time. In regards to their "duty to procure," the rule, as well, generally is that they have no duty to advise or guide their Client regarding specific coverage or limits to put in place absent "special circumstances" or a "special relationship."

 
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By Donald A. O'Brien, Esq. of Hinshaw & Culbertson LLP

 
Defendant insurance agent provided an insurance policy application to a policyholder, who was seeking homeowner's insurance. The application requested information about any boat to be covered by the policy. The policyholder left the application blank where it inquired about a boat. Later, when the policy was renewed, the agent asked the homeowner whether he had a boat. The policyholder answered "no." Plaintiff victim was injured when she was run over by the policyholder driving his uninsured boat. The victim sued the policyholder, and when the insurance company denied coverage under the homeowner's policy, the victim and the policyholder entered into a consent judgment under which the policyholder assigned his claim against his insurance agent for failure to procure insurance on the boat. The policyholder testified that he had never read the policy and just assumed that the boat was covered. He admitted that he never asked questions because he never intended to insure his boat. The trial court granted summary judgment in favor of the agent and the Michigan Court of Appeals affirmed.   
 
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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. Copyright 2012