When you are on the receiving end of a professional liability complaint, you may feel attacked, insulted or the victim of a random legal dart hurled at your business.
Identifying the top 5 E&O claims shows accusations are not random – and gives you and your practice a great guide to reducing the factors that can lead to complaints.
Failure to Procure Coverage Leads the List
Nearly 1 of every 4 errors alleged involve failure to procure coverage, according to the Independent Insurance Agents & Brokers of America. Take a look at the group’s top 5 E and O claims:
- 24 percent – failure to procure coverage
- 7 percent – failure to adequately explain policy provisions
- 6 percent – failure to adequately identify exposures
- 5 percent – failure to recommend coverage type
- 5 percent – inaccurate or incomplete information provided to carrier
Although these numbers are not limited to Life and Health Agents, it is noteworthy that failure to procure coverage accounts for more claims than the next four most common errors and omissions accusations combined. This frequency seems out of whack until you consider all the things that can go wrong even with the best of intentions.
Clients may talk about changing a life insurance policy and assume they gave you the green light when it was not clear. You may recommend a change because a client’s risk profile has changed – a new baby, death of a parent or different job – but the client didn’t take your suggestions.
In an office with multiple agents and staff members, clients may think their wishes are clear after speaking with more than one person but who has the ball is unclear and it lands in the wrong bucket or bounces out of sight.
Additional Sources of E and O Complaints
The study identified several additional professional liability claims against insurance agents. In order of frequency, there were seven such sources:
- Failure to provide timely notice of claim to carrier
- Negligent misrepresentation
- Failure to add additional insured/loss payee
- Failure to duplicate prior coverage
- Alleged failure to pay claim
- Failure to recommend adequate value or limit
- Failure to notify customer of policy cancellation
As we noted, the data was not limited to Health and Life Agents and also included agents who handle property and casualty lines. A few of the above claim triggers are more typical in policies with annual renewals, such as property insurance, business lines or even auto insurance.
Regardless, poor communication is often the root cause – whether an actual error was committed or not. Triple check for clarity and client intent and document everything, including policies, riders and other provisions your client declines.
An unhappy client may still file a claim, but you and your E & O carrier will be in a better position to fight it.