Insurance agents and brokers have long been targets of error and omission lawsuits. It’s also true that the majority agents and brokers have sought advice of counsel as to win a lawsuit. They may often be told that the duty of an insurance agent or broker is to easily be an order taker, i.e., that they need to utilize their best due diligence to acquire the coverage requested. In order to avoid enhanced standards of care, they probably may even be told not to supply advice, not to offer risk management advisory services or evaluation, and never to make representations or guarantees they will’t keep. The usual of care in most states is that agents and brokers aren’t obliged to make recommendations or provide advice.
While that is actually true, is that this really the most effective plan of action? Will it can help you win a lawsuit or will it prevent one? Is this recommendation from counsel even practical?
The actual fact is, if all you probably did was obtain the coverage requested, and offered no advice or counsel in any way, the likelihood is that a claim against your client which may otherwise have been covered goes to be denied. Thus, there may be a high probability you’ll, the truth is, be sued anyway.
Which is best: winning a lawsuit or not having one in any respect?
Most insurance agents or brokers already know more about insurance than the common consumer just by having passed the state examination (not to say taking required pre-licensing courses). So how can the common consumer ask you to acquire the suitable coverage they may need? How could they even understand or read an insurance policy to find out whether that which has been provided or been quoted will meet their expectations?
As everyone knows, there are even numerous attorneys that may’t understand insurance policies!
Insurance is much more complex than it was once I first began my profession within the insurance industry in 1975. Back then, a typical business needed only a handful of insurance policies: a Business Property policy, Business Liability policy, Business Umbrella policy, Staff’ Compensation, and maybe worker profit coverages corresponding to major medical insurance etc. That was about it. Most policies were written on an occurrence basis and, most of the time, they were written using ISO standardized forms, which everybody knew and had studied with the intention to even obtain a license.
Those days are long gone! Along with the foregoing five policies, businesses might have Environmental Liability insurance, Employment Practices Liability, Directors and Officers Liability Coverage, Tech & Media Liability, Errors & Omissions Liability Insurance, Cyber Liability, and other sophisticated coverages. As well as, these policies are written on a “claims made” basis, versus an occurrence basis, adding to the complexity. Such complex coverage triggers include claims made forms, or claims made and reported forms, some with prior act limitations, prior pending and continuity limitations and reporting requirements. Lots of those policies or trigger issues didn’t exist in 1975 but they sure do now!
Once more, any insurance agent who has been within the business for any length of time goes to know more about those coverages than the common consumer. Offering no advice, and being only an “order taker” from someone in search of coverage that obviously knows lower than you do hardly seems the most effective path to a joyful customer.
So how do you avoid litigation and still provide your clients with what they might need? That’s the dilemma facing the insurance agent or broker who could win a lawsuit by giving no advice, but can avoid a lawsuit by doing so.
How persistently have we heard from an aggrieved policyholder that his agent “promised him the most effective coverage” or probably the most “complete coverage” available? How often have we heard customers say that they desired to be covered for “the whole lot” and weren’t? Obviously, it’s inconceivable to be covered for the whole lot, and it’s inconceivable to have limits equal to each potential loss. That’s simply not obtainable even when it may very well be afforded.
Then how must you cope with such situations especially when a client says, “I need to be covered for all my exposures and I need the most effective policy possible?” Obviously that should be addressed and answered versus merely being shrugged off.
Most lawsuits against Insurance agents and brokers arise from inadequate training, lack of uniform policies and procedures, lack of consistency, time constraints, and a principal failure to speak. It boils right down to providing reasonable financial security and explaining the coverages and exclusions to your customer. Providing financial security is the important thing. You’ll be able to only do this by really delving into the insured’s needs and explaining how you’ll be able to or can’t satisfy them especially once they balk at a price.
Typically only an experienced agent or broker is acquainted with the ins-and-outs of insurance, or the varieties of things that may and infrequently do happen. For those who do the whole lot possible to avoid what can go incorrect, you won’t be sued. This includes delinquency on premium payments, ensuring all contingencies are obtained prior to binding, and even asking the pertinent questions whenever you hear the standard, “It’s simply a reputation change nothing else has modified.” Businesses don’t change names; they alter structure. Failure to delve into that might give rise to insuring an entity that not exists while not insuring the one which does.
Once we don’t give advice, we don’t avoid losing a lawsuit. What’s higher, fighting it out or not having a lawsuit in any respect?