E&O Weekly Prevention
Strategies for the Professional Agent
January 10, 2013


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Letter from the Editor


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


"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.



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


Table of Contents    


By Dario J. Badalamenti, Esq. 



Check out this week's edition of World Risk & Insurance News at WRIN.tvListen to Insurance Expert George Nordhaus "Monday Call".
Also check out "Ten changes carriers must make to improve Agency Management".



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


Evolving Trends in Professional Liability Claims Against Insurance Brokers

By Marc J Zimet, Esq. of Jampol Zimet LLP


While the general rule of liability for insurance agents and brokers is that an agent or broker is only responsible for procuring for its client, the coverage specifically requested by the client (Jones v. Grewe), the duties imposed on brokers have dramatically increased over the years. In short, brokers are no longer looked at as salespeople selling someone else's product, but rather, professionals responsible for advising clients properly as to what it is they need and procuring for them, products that meet that need.

While this seems like a stretch, we wouldn't think twice of a doctor or lawyer being liable to a patient or client who came in to his or her office and said "please give me a knee replacement" or "please transfer all of my assets to the Southern Confederacy." The doctor and lawyer owe a duty to find out if the patient needs a knee replacement or whether the client really understands the import of his request to transfer assets to the "Southern Confederacy." It is new for us to understand that a broker too has a professional duty to "diagnose" the client's needs and to do what's best for the client, even when that means educating the client.

Take for example, the 2009 case of Williams v. Hilb, Royal & Hobbs Insurance Services (177 Cal.App.4th 624.) In that case, Hilb, Royal was found liable to Williams, the owner of a Rhino Lining Franchise, for failing to sell to Williams, a policy of workers' compensation insurance. What made this case interesting was that Williams had never asked Hilb, Royal for a workers' compensation policy, a fact that Williams conceded. Nonetheless, the court in that case found that because Hilb, Royal represented itself as an expert in the needs of small business owners, Hilb, Royal breached its duty to Williams by not at least trying to sell to Williams, a policy of workers' compensation insurance.

Williams had just purchased his first Rhino Lining franchise. Rhino USA referred him to a broker who had considerable experience with Rhino Lining franchises. When Williams called her and requested a meeting, she told him a meeting was not necessary since she was the expert on Rhino's insurance needs. Williams did not request any specific type of insurance. He put himself completely in the broker's hands, asking only for whatever insurance she thought was needed to operate the business. When she faxed him an application form entitled "Designed specifically for Rhino Liners Dealers," he filled in only basic information, leaving all portions relating to insurance coverages blank. The broker knew that workers' compensation insurance is mandatory in California and was aware that some Rhino workers had dangerous jobs. Yet she did not procure workers' compensation insurance for Williams. During his third year in business, one of Williams' employees was seriously injured in a catastrophic fire while on the job.

The broker claimed that in her first telephone call with Williams she had discussed with him the need for workers' compensation insurance, but Williams told her he would purchase it elsewhere. However, the broker never provided Williams a written quote for workers' comp insurance, did not write him a letter confirming that workers' comp insurance was offered and declined, did not write a memorandum to the file, and did not make a record of her telephone call with Williams about workers' comp insurance.

One of Hilb, Royal's defenses was that Williams was comparatively negligent because he did not read the insurance policy. The court rejected this argument, saying that even if Hilb, Royal could prove that Williams had failed to read his policy, such failure would not necessarily show that Williams had acted negligently. The court cited a previous case for the proposition that "an insured should be able to rely on an agent's representations of coverage without independently verifying the accuracy of those representations by examining the relevant policy provisions." (Williams, supra, p. 643, citing Clement v. Smith (1993) 16 Cal.App.4th 39, 45.)

The court in Williams found that the broker had violated her duty to her client. Even though the general rule under the seminal case of Jones v. Grewe is that an insurance agent does not have a duty to volunteer to an insured that the insured should procure additional or different insurance coverage, there are three situations that are exceptions to the Jones rule: "(a) the agent misrepresents the nature, extent or scope of the coverage being offered or provided . . ., (b) there is a request or inquiry by the insured for a particular type or extent of coverage . . ., or (c) the agent assumes an additional duty by either express agreement or by `holding himself out' as having expertise in a given field of insurance being sought by the insured . . . ." (Williamssupra, pp. 635-636, citing Fitzpatrick (1997) 57 Cal.App.4th 916, 927.) The broker in Williams fell within exception "c". The court held her to a higher standard because she held herself out as having expertise in a given field of insurance, namely, insurance for a specific type of small business.

The broker could probably have protected herself if, immediately after that telephone call, she had sent Williams a letter confirming that she had told him he needed workers' compensation insurance and that he had declined to purchase such insurance through her. It would have been even better if she had enclosed with the letter a written statement to that effect, for him to sign and mail back to her. If the broker had done that, and had retained the signed statement in her file, this case might have gone a different way.

Whether a broker's statements create expanded duties depends on the description of expertise provided by the broker. In the 2011 case of Wallman v. Suddock (200 Cal.App.4th 1288), the court for our own Second District Court of Appeals affirmed that more is required than just the insured's assertion that they purchased insurance from the broker and followed his advice for several years. Rather, in evaluating whether the heightened duty applies, a court will look to evidence of what the broker said that gave rise to the insured's reasonable belief that the broker is an expert in certain types of insurance matters.

For additional information, contact Marc at mzimet@jampolzimet.com or (213) 689-8500


HR Consulting & More

By Aaron Peterson of CenterPointe Solutions Inc.


Individuals may feel that they have to fend for themselves when trying to find affordable health insurance or to resolve problems with existing coverage.  People should read up on New Consumer Assistance Programs that explain to consumers they will receive new rights and benefits under the Affordable Care Act. New resources are being allocated to state governments in the form of new grants which will allow states, to help strengthen and enhance ongoing efforts in the states and local communities to protect consumers. For more information follow this link: http://www.healthcare.gov/index.html



For additional information, contact Aaron at aaron@mycpsinc.com or 800-340-5856



Solutions For Workplace Mental Health

By Deborah Dutton Lambert and Dr. Daina Dennis


An Employee Assistance Program is a company's first line of defense for creating a mental health receptive workplace.  Employee Assistance Programs (EAPs) can provide early identification and treatment for employees struggling with mental health conditions.  When used effectively, EAP's can help a company reduce costs associated with untreated mental health conditions.  An EAP alone is not enough to address this issue, rather it is an essential component of a mental health receptive workplace. To determine the right EAP for your company, you can access an EAP Buyer's Guide for free by going to the following website:http://www.eapassn.org/files/public/EAPBuyersGuide.pdf


For additional information on the Encompass Program or to contact Deborah Dutton Lambert or Dr. Daina Dennis




Success in Sales is Not Due to What You Sell. Success in Sales is About How You Sell

By Mark Hunter the "Sales Hunter"


As 2012 comes to an end, it's time to assess who or what is responsible for your success or lack of success.


Your success is due to you and it's time to take responsibility for it - and to quit trying to say the reason for a lack of success is due to what you are selling.


Recently Zig Ziglar passed away and I can't help but remember how much he used to talk about this. He was a firm believer that it's your attitude that will determine your success.


When we complain about how we aren't able to close more sales due to a lack of new products or pricing that is too high, the only thing we're doing is making an excuse.


Excuses might work when you're a kid growing up, but sorry, as adults making a living selling, spending time making excuses isn't going to help close any more sales. If we are going to be successful, we have to first look at ourselves.


2012 is quickly coming to a close and yes, we need to keep pushing as hard as we can to close as many sales this year as possible. It's also time to assess what are some of the things we need to change to increase our level of success in 2013.

First thing to look at is yourself and your own attitude.


If you don't believe 110% in yourself and the manner in which you can help customers, then how do you expect customers to believe in you? It starts with you, not with what you sell.


Who do you associate with? Are you associating with negative people?

I've talked a lot about this before, but it's important to mention again. Far too many salespeople start their day hanging out in the office comparing notes with other salespeople. The problem is the "notes" they're sharing wind up being nothing but a series of complaints.


The list could go on and on, but you know where I'm going. It's you. It's not what you sell.

Starting in January I'm putting out each Monday a 2-minute video designed to help you reshape the year. It's free and it's my way to help you make 2013 your best year ever. Click on the below sentence to find out more:

Yes! I want the Monday Sales Video to Get My 2013 to a Great Start!


Copyright 2012, Mark Hunter "The Sales Hunter." Sales Motivation Blog. For additional information, contact Mark at 402.445.2110.  or Mark@TheSalesHunter.com



Claims Leakage - Plugging the Hole with Predictive Modeling

Part 4 of 4: Final Case Studies and Recap           

By Ronald T. Kuehn FCAS, MAAA, CPCU, ARM, FCA, Blaine Marles, FCAS, MAAA, & Todd Dashoff ACAS, MAAA, ARM of Huggins Actuarial Services Inc.


Part 1 - http://agentsofamerica.org/pr_detail.php?id_art=765

Part 2 - http://agentsofamerica.org/pr_detail.php?id_art=845

Part 3 - http://agentsofamerica.org/pr_detail.php?id_art=881


The final set of case studiesof potential claim leakage deal with changes in management. Often, when a new person is hired from outside of a company to manage the claims function, he will have his own ideas on how claims should be handled, much like when a new football coach is hired and proceeds to implement a new style of offense and/or defense. Whether the new style is successful depends upon whether it is clearly communicated to the employees actually responsible for its implementation on a day to day basis; i.e. the players, who in the case of the claims department are the employees who actually are responsible for handling and settling claims. This problem has been discussed in the preceding sections of this article. However, there are also cases where the new manager's style of operation clashes with the existing style of the executives of the company, to whom he is considered an employee. The following two examples demonstrate how claims leakage can occur in these situations.



















Hurricane Sandy Reveals "Silent" Insured to Homeowners; Guidelines Issued to Help Victims

By Paul R. Wallace, Esq. of Hinshaw & Culbertson LLP

In October 2012, Hurricane Sandy rolled into the Northeast United States, causing property damage in the billions of dollars. Although the waters have subsided, power has been restored, and the process of rebuilding has begun, it remains uncertain who will ultimately foot the bill for this catastrophic loss. 




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