E&O Weekly Prevention
Strategies for the Professional Agent
December 20, 2012


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Letter from the Editor


As America and the rest of the world reflect on the school shooting in Newtown, Conn., it has reignited swift debate about guns and their legal status. Our thoughts and prayers go out to the families and friends of those affected by this tragedy. We also must not lose sight of the fact that we live in a world that chooses to ignore that an increasing number of our population is affected by "Mental Health" issues and until we acknowledge that we have this problem, we will continue to read the headlines in the newspaper and evening news. While stricter gun control laws need to be considered, it will only be through education that can we reduce the stigma surrounding mental health issues and encourage early interventions and successful treatment.


AgentsofAmerica.ORG eBook, "Insurance Agency Risk Management : A Comprehensive Guide to Avoiding E&O Claim - Book One" is now available!  


Written by Experts for today's insurance professional, "A Comprehensive Guide to Avoiding E&O Claims" addresses issues that Insurance Agents & Brokers encounter every day. One of the most important assets an agent has is their reputation; it takes years to build a business and only one mistake to ruin it. "Book One" is a practicable guide and resource that every Insurance Agency should read and use as an effective risk management tool.


On behalf of our Editors and staff we want to wish you and your families a happy Christmas holiday and a wonderful New Year!



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


Table of Contents    




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"


Angelo J. Gioia 




AOA Tips, Views, News & More


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

By Curtis M. Pearsall, E&O Consultant 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 lienholder. 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 lienholder. 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.


Curt regularly provides free E&O tips for agents on his blog www.agentseotips.com. Contact at curtis@pearsallassociates.com or 315-768-1534.




Executive Success: Dealing with Difficult People

By Michael Beck of Michael Beck International, Inc.


There's no avoiding it.  You're bound to come across someone who's difficult to deal with.  It's inevitable as soon as you add different personalities, experiences, and backgrounds to the mix.  They may be someone we report to or someone who reports to us.  Or they may be a peer, a vendor, or a client.  The bottom line is that it's going to happen and generally can't be avoided.  If we are to be effective as a leader, we must become good at dealing with those difficult people.


Whoever they are, they usually cause anxiety, frustration, concern, and/or anger in us.  The irony is that when we become anxious, frustrated, concerned or angry, we ourselves, can become difficult to deal with.  Consequently, it is imperative that we become adept at dealing with them.  Occasionally we can avoid the person altogether, but more often than not, it's a relationship we have to address.


One course of action is simply to tolerate the other person.  This course of action (or more accurately, inaction) is one which avoids confrontation and maintains the status quo.  Productivity remains consistent and there's no risk of workplace "drama".  Unfortunately, by not dealing with the situation, you end up perpetuating a number of counterproductive dynamics.  You end up expending valuable energy by "tolerating" an unsatisfactory situation.  It affects your attitude, your thoughts, and your productivity.  Additionally, in your attempt to shield or isolate yourself from this person, they end up feeling neglected and unappreciated.  When that happens, they tend to "check out", becoming complacent and apathetic - simply going through the motions at work.  It's not a very fruitful course of action.


There's one other negative dynamic that exists when we tolerate a difficult person.  Although it may feel like the issue is between the two of you, in fact, a difficult person affects your entire team.  When you allow a difficult person to persist, it reflects on your leadership style and your values.  This, in turn, negatively impacts your ability to lead effectively.  Additionally, the age-old adage holds true, "One bad apple spoils the barrel," as will be evidenced by the people who'll come forth voicing their relief once the difficult person is gone.


Another course of action might be to reflect on our own behaviors and attitudes, and decide to change ourselves.  While this occasionally may be appropriate, generally it's not.  (A good test is to observe whether there are many "difficult" people on your team.)  In fact, our initial reaction to this course of action might be, "Why should I be the one to change?  It's clear the other person is the one with the problem."  Not only would that be valid, but it sheds some light on how to handle the situation, because if our thought is to ask the other person to change, their reaction would most likely be the same.  "Why should I be the one to change?"  This of course poses a problem because in fact, that person generally IS the problem.


The answer to this dilemma is to have an honest and transparent conversation with the person.  As a leader, we have the opportunity and an obligation to develop people and help them grow.  We need to be compassionate, yet strong.  We need to be empathetic, yet work change their perspective.  We accomplish this by acknowledging the situation and by asking good questions.  This course of action helps us understand their perspectives and motivations.  By doing this, not only can you positively impact their enjoyment of and satisfaction with their work, but you'll help them to be more effective and productive.  If nothing else, you'll help them gain clarity about themselves and then help them (in a positive way) move on to another opportunity which better suits their skills and their perspectives.


Mastering the ability to effectively deal with difficult people will enhance your leadership effectiveness and enrich the lives of the people around you.


Michael Beck is an Executive Strategist and specializes in business strategy, executive development, and leadership effectiveness.  Connect on LinkedIn: www.linkedin.com/in/mjbeck  and visit www.michaeljbeck.com to learn more.  Permission to reprint with full attribution.  2012 Michael Beck International, Inc.




Ask the Customer a Question Without an Apparent Answer to Gauge Their Involvement

By Mark Hunter the "Sales Hunter"


Too many times we find ourselves engaged in a conversation with a prospect that we think is going to lead to a profitable outcome, only to have the person be focused 110% on price.


One of the best strategies you can use to measure a customer's orientation to price is to engage them in a strategic discussion. If the customer is strategically focused, you have a much better opportunity to maximize price.


With this being the case, the sooner you can determine the level of their strategic thinking, the better off you'll be. Asking a customer a question to which neither of you has an answer is one of the best approaches I've found to determine where a customer is coming from.


A customer who is not strategically focused and is going to base their decision on price or some other non-differentiator is going to blow off a question of this type. They will view the question as being a distraction to their buying process.


On the other hand, a customer who is strategic in their thinking is going to feel engaged being asked a question like this. Although they won't know the answer to it, they will still many times provide you with a response that opens up the conversation.

Customers who are strategic look to be challenged in their thinking, and they value having discussions with people who they see as real thinkers.


Another key reason why it is so important to determine early in a sales process if the customer is strategic or tactical is it will help you to better understand the the person's timeframe. Tactical buyers view each transaction as a single event and, therefore, are very short-term oriented in their thinking.


Strategic buyers view things long-term and place value in connecting transactions together. For you this is huge, as it can help you in crafting the proposal in terms of timeframe and the long-term potential a customer might be worth.


Copyright 2012, Mark Hunter "The Sales Hunter." Sales Motivation Blog.


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, to receive a free weekly email sales tip, or to read his Sales Motivation Blog, visit www.TheSalesHunter.com. You can also follow him on www.Twitter.com (TheSalesHunter), on www.LinkedIn.com (Mark Hunter), and on his Facebook Fan Page, www.facebook.com/TheSalesHunter or call 402.445.2110.



This Week's Poll Question


As the insurance market hardens, carriers will typically modify / restrict therir underwriting guidelines. Please note which of the following is more applicable:


Within the last 6 months:


a)   At least 2 of your personal lines carriers have issued a modification / restriction of their underwriting guidelines.

b) At least 2 of your commercial lines carriers have issued a modification / restriction of their underwriting guidelines.

c)  At least 2 of your personal lines and commercial lines carriers have issued a modification / restriction of their underwriting guidelines.

d) Your agency has not seen any modifications / restrictions of the underwriting guidelines of either your personal or commercial lines carriers/



A1How To Avoid Liability For Comments Posted on Your Company's Website
By David J. Shannon, Esq. of Marshall Dennehey Warner Coleman & Goggin, P.C.  




As social media continues to expand on the internet, more and more businesses are developing and setting up their own websites. These websites can include public Facebook pages, social media forum pages, and blogs. With such increasing popularity, businesses must understand the legal ramifications of owning and running a website and allowing third party individuals to post messages or content on the site. 



















Court Affirms Contribution Rights Against Nondefending Additional Insured Carrier Based on Shifting Burden of Proof

In St. Paul Mercury Insurance Company v. Mountain West Farm Bureau Mutual Insurance Company, 210 Cal. App. 4th 645 (2012), the California Court of Appeal affirmed the contribution rights of plaintiff settling insurer for a general contractor against defendant nondefending additional insured carrier.




Firebrand Social Media   












Writing Accidental Death and Dismemberment Insurance in New York in Light of the Affordable Care Act

By Sandy Smith, Esq. of Wilson Elser Moskowitz Edelman & Dicker LLP


The Patient Protection and Affordable Care Act (PPACA) does not apply to "accident only" insurance. (See 42 USC 300gg-91(c)(1)(A).) As a result, insurers writing "accident only" insurance do not have to comply with the mandates imposed by the PPACA, including but not limited to the Medical Loss Ratio (MLR) rule. In substance, the MLR rule requires insurers to disclose the amount of premium being spent on health care as well as the amount of premium being allocated to administrative expenses, including agent compensation and marketing. Where the insurance company spends less than 80 percent of its premiums on medical care (or less than 85 percent for large groups), the company must refund the applicable portion of premium to the insured.






PhoneDog v. Kravitz Settlement Points to Need for Agreements on Ownership of Social Media Accounts     

By John A. Snyder, Esq. of Jackson Lewis LLP


Last December, PhoneDog, a mobile phone website, sued Noah Kravitz, after he resigned from the company, alleging that he improperly took control of his Twitter account and approximately 17,000 Twitter followers when he left. While at PhoneDog, Kravitz's Twitter account was @PhoneDog_Noah. After he left, Kravitz changed the account to @noahkravitz but kept his followers. PhoneDog did not have a written policy regarding ownership of the Twitter account. PhoneDog sued Kravitz after he left, seeking damages of $2.50 per follower per month. After Kravitz's motion to dismiss was denied, the case recently settled under terms that allow Kravitz to maintain his Twitter account and followers, however other settlement terms were not disclosed so the question of how much a Twitter follower is worth remains unanswered.


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