Error Omissions
Error Omissions
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Documentation, a Key Issue in E&O Claims Against Insurance Agencies

Documentation, a Key Issue in E&O Claims Against Insurance AgenciesDocumentation, a Key Issue in E&O Claims Against Insurance Agencies

There is a great deal of scrutiny when it comes to the performance of insurance agents and brokers as it relates to errors and omissions (E&O) allegations and claims. When evaluating a claim, questions arise as to the standard of care a customer should expect from his or her agent. The standard of care for insurance agents is established by state statutes and should be carefully reviewed as it varies depending on the state and the particular circumstances.

Questions also arise regarding the exact nature of an agency-customer discussion and what was offered to the client.   Without proper written documentation for each insurance transaction, you get into a “he said, she said” situation. You should document which coverages are being offered, and also be sure to get the insured’s signature on the documentation.

Look who’s filing claims and why:

Allegations involving Personal Auto, Homeowners and Umbrella insurance disputes account for about one in five claims. E&O claims can originate from policyholders or insurance carriers in addition to third parties. Policyholders typically file claims involving: bad faith dealings; failure to recommend needed coverage, failure to place requested coverage, failure to place coverage promptly, failure to increase/update coverage, failure to disclose/explain coverage limitations, verbal extension of nonexistent coverage, failure to notify of cancellation or non-renewal, and failure to place insurance with a solvent insurer.

Bad faith claims involve:

  • Breach of contract
  • Misrepresentation of policy or insurer
  • Misrepresentation of a material fact
  • Failure to disclose a material fact
  • Failure to promptly settle claims
  • Unfair or deceptive trade practices
  • False statements/False advertising

In recent years, E&O claims from insurance carriers against agencies are on the rise. These claims typically involve allegations of failure to: follow underwriting guidelines, revise or cancel coverage upon request, disclose material underwriting information, and report claims promptly. Additionally, there are bad faith claims and cases alleging that an agency exceeded its binding authority.

Third parties also sue for agency errors and omissions and typically involve mortgagee/loss payees, certificates of insurance holders, trustees, third-party beneficiaries, disgruntled stockholders of partners, and others.

Errors and Omissions insurance is key for all agencies and making sure you review your policies and procedures annually to help prevent claims should be a part of your risk management strategy. At Axis Insurance Services, LLC, we provide insurance agency E&O coverage to help protect you or your company from bearing the full cost of defense and damages for lawsuits that may occur. Please give us a all at: (877) 787-5258 to discuss your insurance program.

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Blogged on: September 20, 2012 by Mike Smith
Error Omissions
Error Omissions
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