14 Nov Does a Signature Make a Difference?
To truly answer this question, it is appropriate to look at various issues dealing with the legal liability of an agency. In more specifics, what defenses could the agency invoke that would potentially swing the scales of justice in their favor?
When an agency is involved in an E&O claim matter, virtually all aspects of the agency file will come into play and be able to be reviewed by both the agency’s attorney and the attorney for the plaintiff (your client).
Oftentimes, the application used to quote/secure coverage will be one of the key pieces. There are several defenses that are potentially available to the agency, including but not limited to the following:
- The plaintiff failed to give accurate information to the agent.
- The plaintiff misrepresented certain facts to the agent.
- The plaintiff signed a policy application containing incorrect information.
Using that as the backdrop, let’s look at different scenarios and what impact they could have on an E&O matter:
– Scenario #1: The agency completes the application by asking specific questions. The client never sees the app, and coverage is quoted and placed. The client sustains a loss, and the carrier alleges misrepresentation of information on the application and looks to rescind the coverage. Could the above defenses be used? Possibly, but the client is likely to prevail since they really never knew what the agency put on the application.
– Scenario #2: Same as above, but the client is asked to review (this is key) and then sign the app. The same loss occurs, and the carrier once again alleges misrepresentation of information on the app. The outcome would probably be drastically different from the first scenario since the client signed the app. It doesn’t mean the agency still can’t get sued, but their defense is stronger.
This scenario clearly shows the importance of securing a customer’s signature on an application. The basic premise is that if accurately completed and signed by the applicant, an application possesses tremendous power in the event of some form of E&O litigation. The key issue is that the client fully knew the contents of the entire application.
Some may argue that getting the client’s signature is difficult or the application does not require a signature. With the various signature technology platforms, getting a client’s signature has probably never been easier.
On the second issue (app doesn’t require a signature), this should not negate the importance and effort to secure the client’s “John Hancock.” It is possible that when completing an application, the answers to the questions could not be as clear and succinct as you would like. Also, as Chris Burand pointed out in his excellent session at the E&O Plus conference, many applications (he cited cyber as an applicable one) contain poorly worded questions. So, how about the following?
After completing an application, provide the application to the prospect/client (either hard copy or electronic version) with a statement such as:
“Thank you for your time today. Due to the extreme importance of the application in quoting/securing coverage, I am providing you with the application as I completed it. The answers must be accurate, so I would appreciate your review of the questions and answers to ensure they express an honest response. If everything looks in order, please respond to me with any changes. If you could review and respond by xx/xx, that would be greatly appreciated.”
I remember a survey a few years back indicating 1 in 5 adults feel it is okay to mislead the insurance carrier on their personal auto exposures. Can you see how getting a signature could make a significant difference? And obviously, never (never, never) sign the insured’s name. Handwriting experts have found their way into E&O claims.
Securing a signature on an application has tremendous power. Is this your agency’s practice?