E&O Claim Scenario: Disability Insurance – Are You Certain What You Are Selling?

Sharpen Your Skills With Our E&O Claim Scenarios

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

 

FACTS:

An agent sold the Claimant (a dentist) an individual disability policy and a business overhead expense (BOE) policy for her practice through ABC Insurance Company. Based on the agent’s prior experience with disability policies he had issued through other carriers, the agent believed the business overhead expense coverage would pay the salaries of the Claimant’s regular employees during a period of disability. This was how he explained the coverage to the Claimant. The Claimant became disabled. While the BOE policy paid for the practice’s overhead, ABC Co. declined to pay for her employees’ salaries. Upon review, ABC’s policy clearly excludes employees’ salaries from coverage. The employees’ salaries came to $20,000 per month.

In addition, the agent represented that the individual policy he sold the Claimant would cover her for disability up to age 65 as was his experience with prior policies he had sold. The policy actually only provided benefits for the later of 10 years or to age 55. Because the dentist became disabled at age 46, she would only get benefits to age 56. The dentist lost policy benefits after age 56 which would have been $3,800 per month to age 65.

The Claimant filed a claim seeking to recover the benefits she thought she would be receiving.

 

What Do Insurance Agents Need to Know?

• Agents often place policies with several insurance companies in order to suit their clients’ needs. Agents need to be careful that they are comparing “apples to apples” when looking at different companies’ policy offerings to ensure they are representing the terms and conditions accurately.
• Agents should carefully read the policy they are selling and consider confirming their understanding of the terms with the carrier before placing the coverage with the client.
• Due to evolving exposures, agents should regularly evaluate the needs of their clients in order to determine the appropriate coverages.

 

 

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 authors in light of market, regulatory and other conditions which may change over time. Aspen does not undertake a duty to update this information.