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.
An agent sold a life insurance policy to a client, with whom the agent regularly conducted other business activities. The client elected to make quarterly premium payments. The beneficiary of
the life policy was a trust setup on the clients’ behalf. Sometime later, the client moved and advised the agent of the address change and requested that they make the change in their records, without specifying that the life insurance carrier be notified.
The client failed to make timely premium payments and cancellation notices were sent by the life insurance carrier to the client’s prior address. The agent was not provided with cancellation notices, nor was there a duty (in this state) for the agent to make changes on a life policy. Ultimately, after multiple notices were sent, the life policy was cancelled and the client pursued action against the agent and the carrier for failing to advise the trustee and/or life carrier of the address change, leading to the policy cancellation. The client sought paid premiums, commissions, and the cost differential in procuring a new life policy due to the client’s advanced age.
- As an initial matter, an agent should always be aware of the duties owed to a client, pursuant to applicable laws/regulations. Participation in continuing education courses and industry events will assist agents in staying current on these issues along with supervisory guidance.
- When a client requests an agent conduct activity on the clients’ behalf for which there is no duty owed, the agent should seek guidance as to whether the activity should be conducted, not only taking into account business/customer service considerations, but also whether they will be taking on potential risk that did not previously exist.
- Upon receipt of a change request from a client, it is critical to thoroughly document the scope of the request, the agent’s response, and what activity will or will not be conducted. If there is no duty to conduct an activity that has been requested, it would behoove the agent to send clarification in writing to the client advising of the inability to conduct the task and referring them to the appropriate person to coordinate the changes. In this scenario, the agent should have advised the client, by a letter or e-mail message, to contact the trustee and/or the carrier to make the address change. REMEMBER it is critical to have written proof of client communications, particularly with respect to matters that might be outside the scope of an agent’s duties.
- Disclosures and issuing paperwork should clearly outline the duties of the client, including responsibility for premium payments and changes to information.
- In this case, the client made a vague request for the change of address. Of course, the agent likely had a duty to update their own records; however, as the life policy was also sold through the agent, the agent should have advised the client whether or not the agent would also be processing the address change for the life policy on the clients’ behalf and confirmed same in writing. Additionally, if the agent did receive notice from the carrier of the pending cancellation, the agent should have contacted the client to ensure the client is aware of their responsibility to make the applicable changes.
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.