15 Dec Are Your Clients Getting a Divorce?
When one includes legal separation and divorce together, the latest statistics are that 20 percent of marriages end within five years and 32 percent end within 10 years. In your agency, have you ever had to deal with the situation of one of your clients going through a divorce? If not, it seems from the latest statistics that it is only a matter of time.
Separation/divorce scenarios cause a number of problems that ultimately became E&O claims. Bottom line, if you have clients going through a separation/divorce, this should be handled with tremendous attention to detail and solid communication. Coverage under various personal lines policies (auto, homeowners, umbrella, etc.) is based on the named insured and the residence. As a result, changes in the living arrangement can reduce/eliminate coverage. There can also be commercial insurance implications as well.
Certainly, one of the key issues is that most often the couple will want to keep things private and may not be overly receptive to divulging to you, their agent, what is occurring. In these situations, it is best to look for certain coverage requests such as the client requesting a renters’ policy or possibly a totally new second residence. Possibly, the notification to the agency might include a new garaging for one of the vehicles. An agent told me years ago that when he suspected that something was different, he would ask, “as your insurance agent, is there anything that would be important for me to know?” This is when some couples then divulged what was happening.
Whether you are dealing with the homeowners or auto coverages, the key is to communicate with both parties and arrange coverage for both individuals that is at least equal to what they had under one policy. Anything less than that should be explained, understood, and agreed upon. Letters should be sent to each informing them of the action taken by the agency and inviting questions or further changes that may be needed.
Most likely, these matters could become emotional. One E&O claim I am aware of involved the husband moving out and the wife contacted the agent to have the husband’s name taken off the policy. The agent promptly handled that request. The problem was that the divorce had not been finalized and thus the husband still had ownership interest in the homeowners policy. The house suffered a fire loss and guess whose name was not on the claim settlement check.
Agencies also need to be sensitive to who the named insured is and should not be taking any direction from an individual that is not a named insured. This could occur with various inland marine policies.
On the auto coverage, if there are teenage drivers with their own vehicles, it is important to identify where they will live, where the cars will be insured, and whose policy they will be listed on.
There are just some of the issues you will face when dealing with clients getting a divorce. It is suggested to discuss this issue at an upcoming staff meeting for everyone to fully understand the necessary procedures.