E&O Prevention
Strategies for the Professional Agent
June 25, 2015

Agents of America


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AOA News, Views, Tips & More

Tennessee Court Rejects "Failure to Procure" Claim Against Agent

By W. Burke Coleman, Demotech, Inc.


Agents owe various duties to their clients.  At the heart of the agent-insured relationship is the expectation that the agent will procure for the client the requested coverage using reasonable care and diligence, or inform the client of his inability to do so.  Absent any further "special relationship," agents generally have no duty to advise the insured of the adequacy of coverage.  But policyholder beliefs about their insurance coverage do not always align with the coverage actually provided by the policy.  In many cases a dispute arises between the insurer and insured over the nature of certain policy provisions or the reasonable expectations of the insured.


Cybercrime on the Rise: Targeting Banking Institutions and Insurance Companies

By Jonathan L. Bing, Esq.  Melissa K. Ventrone, Esq. and James L. Ansorge, Esq. of Wilson Elser et al


Security experts are warning that 2015 is the "Year of the Healthcare Hack" as media outlets continue to report on a number of high-profile companies that have recently experienced attacks by cybercriminals seeking valuable personal information. Anthem Inc., the second-largest U.S. health insurer, made public a massive breach of its database containing nearly 80 million records of both customers and employees, leading to investigations by state and federal authorities. Primera Blue Cross subsequently reported that it was the victim of a network intrusion, resulting in the breach of financial and medical records of 11 million customers.

Independent Agents: Pay Special Attention to Your "Special Relationship" Clients*

By Brent Winans of Clear Advantage Risk Management


Independent insurance agents-chances are the courts in your state will say that you have a greater responsibility to give insurance advice to some of your policyholders than to others. Who are those policyholders, and what services should they be receiving from your agency?


First, let me address a common assumption that I believe is usually incorrect. You may believe that you always have the duty to advise your clients about the coverages and limits that they should carry. 

Brokers Have no Duty to Inquire Where Burden Placed Upon Insured to Disclose

By Marc J. Zimet, Esq. of Jampol Zimet, LLP


Insurance brokers have numerous duties owed to the insurers they work with and insureds they supply insurance to. These duties can vary depending upon the type of insurance being procured and whether the broker is specialized in his or her field. Brokers with expertise in specialized areas of insurance owe to their clients a heightened duty of care. A broker 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. (Kurtz, Richards, Wilson & Co. v. Insurance Communicators Marketing Corp. (1993)12 Cal. App. 4Th 1249.) 


Connecticut May Require Businesses to Offer One Year of Identity Theft Protection Services Following a Data Breach, Joining Other States in Strengthening Notification Laws

By Joseph J. Lazzarotti, Esq. of Jackson Lewis P.C.


Following a string of states across the country that have strengthened their data breach notification laws in recent months, Connecticut is about to amend its law to require, among other things, that businesses provide one year of identity-theft protection for persons affected by the breach. Many businesses already extend such services to breach victims, but, if enacted, Senate Bill 949 would mandate covered business incur this expense. According to Connecticut's Attorney General, George Jepsen, this change would only set "a floor for the duration of the protection" and his office may continue to "seek broader kinds of protection," reports the Hartford Courant.


California Court Holds Unforeseeable Injury From Malpractice Supports Dismissal

By Edward F. Donohue III, Esq. and Marissa Morimoto, Esq. of Hinshaw & Culbertson LLP


Kumaraperu v. Feldsted, 2015 WL 337761 (Cal. App. May 26, 2015)

In an unusual departure from existing precedent, a California court held that an injury from an attorney's legal advice may be so unforeseeable as to warrant dismissal.


In Kumaraperu plaintiff client sued defendant attorneys for negligence in advising her to draw a check on an account that she owned, but on which she was not a signatory. The trial court granted a dismissal motion on the grounds that the client, who had been charged with criminal forgery, had not been found factually innocent of forgery. The appellate court affirmed but on different grounds. It found that the prosecution itself was such an unusual consequence of the advice as to be unforeseeable as a matter of law.


Application Exclusion Broadly Eliminated Coverage for All Claims "Arising From" the Same Ponzi Scheme

By Elizabeth L. Musser, Esq. of Tressler LLP


In its professional liability insurance application, a securities broker-dealer disclosed one claim by an investor who lost money in a real estate investment Ponzi scheme, but failed to disclose other potential claims. The California Appellate Court concluded that claims "arising from" the same Ponzi scheme were all excluded from coverage, despite the fact that the claims involved different investment properties and different investment advisors. Crown Capital Sec., L.P. v. Endurance Am. Specialty Ins. Co., 235 Cal. App. 4th 1122 (Apr. 10, 2015).


Exceptional Circumstances are Required for Relief in a Claim for Bad Faith

By Rebecca Haworth, Esq. and Jeffrey L. Kingsley, Esq. of Goldberg Segalla Global LLP


In a favorable decision to insurers on the issue of bad faith, the New York Northern District was recently called upon to determine whether an insured under a Homeowner's policy had stated a viable cause of action. In Ripka v. Safeco Ins., 2015 U.S. Dist. LEXIS 67595 (N.D.N.Y May 26, 2015), the District Court made it clear that New York courts will not, except in very limited circumstances, award tort and punitive damages in addition to contract damages against insurers who deny claims.


Are New Jersey Courts Modifying the Affidavit of Merit Requirements in Professional Malpractice Cases?

By Jeremy J. Zacharias, Esq. of Marshall Dennehey Warner Coleman & Goggin, P.C


Key Points:

  • To support claims of professional negligence liability, an affidavit of merit must be issued by a professional who is licensed within the same profession as the defendant.
  • This "like-licensed" requirement applies even where the relevant professional licensure laws overlap to some degree.
  • This case does not change the affidavit of merit requirements found in medical malpractice cases.

U.S. Supreme Court Rules Against Abercrombie in Religious Garb Case - Sets New Standards of Employer Liability

By Philip R. Voluck, Esq., Keith J. Gutstein, Esq. and Julia J. Hu, Esq. of Kaufman Dolowich & Voluck, LLP


On June 1, 2015, the U.S. Supreme Court issued an 8-1 decision in EEOC v. Abercrombie & Fitch Stores, Inc., long awaited by the business community. The decision holds that an employer may be liable under Title VII of the Civil Rights Act of 1964 ("Title VII") for refusing to hire an applicant or discharging an employee based on a "religious observance and practice" even if the employer does not have actual knowledge that a religious accommodation is required. According to the Court, "knowledge" is irrelevant - "An applicant need only show that his need for an accommodation was a motivating factor in the employer's decision." The decision is disturbing on a number of levels in that it imputes liability to employers even if they did not have actual knowledge of the religious practice.




Letter From  the Publisher

Protecting Your Reputation


As every Insurance Agent knows, their most important asset is their reputation, it takes years to build and just one mistake to ruin. Understanding the issues is the first steps in avoiding E&O Claims. AOA has created a three book series dealing with 56 different E&O topics and issues agents face every day. Enter promo code
WPD20 at checkout for an additional 20% discount.


Book One - 

A Comprehensive Guide To Avoiding E & O Claims


Book Two - 

E&O Exposures in the Sales Process

Book Three - 

E & O Exposures By Line of Business

Demotech, Inc.

Since 1985, Demotech, Inc. has served the insurance industry by assigning accurate, reliable and proven Financial Stability RatingsŪ (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer.  You can search the most current FSRs here.


Do You Need Continuing Education?

Complete your entire State-Required CE Online with WebCE! AOA 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. 


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