E&O Claims Scenario: The Claim of the Missing Application

Sharpen Your Skills With Our E&O Claim Scenarios

We believe that insurance professional can improve the service that the client receives by sharpening their professional skills by looking over case studies and scenarios that have led to E&O claims.

Facts

The agent took an application for a $100,000 term policy insuring the life of the client. The application was completed, but the client was not provided with a conditional receipt or binder. The agent gave the application to his assistant to be processed with the insurer. The client died several weeks later in an automobile accident. His wife, who was intended as the policy’s beneficiary, submitted a claim to the insurer. The claim was denied, because the insurer had not received the application and there was no record of having issued the policy to the client.

The Intended Beneficiary Sued

The wife commenced litigation against the agent, alleging that he was negligent in failing to procure a life insurance policy for her deceased husband.   After the complaint was filed against him, the agent discovered that his assistant placed the original application in the client’s file. There was no record of having submitted it to the insurer. The assistant was no longer employed by the agent. When contacted, he had no recollection of the client or the application. The insurer submitted records for the applicable time frame, which established that it had never received the client’s application. The insured also confirmed that the client was otherwise insurable.

The Case Was Settled

Evidence gathered in this case established that the agent was negligent in handling the client’s application, by failing to ensure that his assistant actually submitted it to the insurer. The agent’s failure to provide the client with a conditional receipt or binder also prevented the claimant from having any recourse against the insurer. Settlement was reached at any early stage of the litigation for $100,000, which was the full value of the policy that the client intended to procure.

What the Agent Could Have Done

The agent placed too much reliance on his assistant. He should have undertaken the various elements of the application process himself, or used better methods to supervise his employee. The agent would have also benefitted from the use of check lists, and other reminders to keep track of his client’s account, in order to ensure that all necessary materials were submitted to the insurer.

 

Disclaimer

This material is provided for informational purposes only and should not be construed as legal advice. The information contained herein does not necessarily represent Aspen’s views, and reflects the opinion of the author in light of market, regulatory and other conditions which may change over time. Aspen does not undertake a duty to update this information.