02 Dec Disclaimers — Do They Really Work?
In one of my recent blogs, I mentioned that at our E&O Plus Quality Management Seminar in September, someone asked, “Do disclaimers really work?” The answer from one of the Swiss Re attorneys was, “They don’t hurt.”
As your reviewers, we also suggest that you confirm this, suggest alternatives, memorialize conversations to avoid mistakes or misunderstandings, include wraparounds, and ensure the file can tell the story.
A little history on disclaimers. The first recorded use of disclaimers dates back to the 1400s. It was borrowed directly from the Anglo-French word “disclaimer,” which basically means to disavow or to disown.
It’s essential to acknowledge that disclaimers are not a one-size-fits-all solution; however, they do play a crucial role in risk management. Using disclaimers proactively demonstrates a commitment to transparency and helps establish clear expectations between your agency and the client. When properly documented and communicated, they can serve as valuable evidence in case of questions or disputes that arise later on.
What are they? Essentially, it is a communication piece for the prospect or client that provides information about the limitations of the services or products offered. It may also outline the responsibilities of a prospect, client, or agency.
Why should we include them? The purpose is to reduce legal liability exposures and limit liability by clearly defining the client’s responsibilities, which can be particularly useful if the document is signed.
So, the last question is, why don’t we include them? Throughout the decades, I have heard numerous excuses: “I am trying to sell the coverage, all these disclaimers are so negative,” or “The prospect doesn’t read them,” or my favorite, “They never return it.” I actually agree with the statements, but it is not about them. Templates and disclaimers are designed to protect you and the agency.
Disclaimers can take many forms, such as written statements, footnotes, or verbal notices, depending on the context and medium. It’s essential that disclaimers are not hidden in fine print but instead are easily accessible and understandable to the intended audience. Ensuring this visibility helps reinforce their purpose and improves their effectiveness.
Where are they needed?
- Communication – Why do we remind the clients they need to speak to us? Have your clients ever bought or done something that you had no market or binding authority for? One of my favorite clients was notorious for that.
- Proposal – Attaching the “wraps” is mandatory.
- Questionnaires/Checklists – One of the most important steps in the discovery process. Use the tools.
- Excess and Surplus Lines – Non-admitted vs. Admitted – No Guaranty Fund.
- Claims – Insured doesn’t want to turn in a claim after they reported it? Our job is to explain the consequences.
These are just a few of the processes that require disclaimers. A significant portion of this plays a larger role in the new Concentric Model. We identify, offer, and suggest; they make the choice. As my father used to say, everyone has the right to transfer risk contractually through an insurance policy or by identification or hold harmless. They also have the right to self-insure. It is their choice; our job is to offer suggestions, document their decisions, and provide disclaimers. I had no idea my father was so ahead of his time.
In reality, what they potentially may become is part of your defense in a potential E&O incident or claim. While disclaimers may not offer absolute protection, they may serve as an important tool for clarifying intent and limiting liability. Their effectiveness often depends on how clearly they are worded and whether they are prominently displayed. Ultimately, using disclaimers adds a layer of precaution that can be beneficial in various legal and business situations.
We have been working hard on updating the E&O Plus Operations Guide resources to provide you with sample templates for numerous situations, from marketing to whether you can fire a client.
Our disclaimer when using our templates: “These are only suggestions, please make them yours and run them by your legal counsel for approval.” See, we even use disclaimers!