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.
The agent sold the client a disability income policy, which provided benefits of $5,000 per month until age 65. The client became disabled when he was 55 years old, and the insurer commenced payments under the policy. However, the client subsequently learned from another agent that the insurer had an optional rider available, which provided for increases in disability benefits to coincide with inflation rates and increases in the cost of living. The agent had not offered this rider to the client when the policy was issued. The insurer would not allow it to be purchased after a disability had commenced.
The client filed a lawsuit against the agent, asserting that he was negligent in failing to offer the rider when the policy was originally sold. The agent advised that he was unaware that the insurer had offered such a rider. The agent worked for another insurance company, which, according to the agent, did not offer such “cost-of-living adjustment” riders to disability income policies. Following commencement of the lawsuit, the agent was surprised to learn that the insurer he worked for did in fact offer such a rider and he admitted that he did not ask the insurer about such options when the client applied for coverage.
In light of the agent’s admissions, which established that he failed to explore disability income insurance options which were available to his client, settlement of this matter was commenced at an early stage of litigation. The client eventually agreed to a structured settlement, which provided extra income above the disability benefits being paid by the insurer. The agent contributed $85,000 towards the structured settlement.
What the Agent Should Have Done
The agent failed to keep himself abreast of new product offerings and relied upon his familiarity with one insurer’s products, which he later learned was incorrect. It is the agent’s responsibility to stay current with new industry developments and products and to ascertain which product best suits the needs of his client. It is also imperative that the agent document that available benefit options were offered to his clients and indicate which options are rejected as well as accepted. Many claims are made by clients claiming that certain options were not offered. When an agent disputes this claim, stating that the options were offered but rejected without any supporting documentation, the agent invariably loses the case and must pay a settlement or a judgment.
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.