27 Feb Aren’t You a Professional?
If you were to stop and ask 100 people on the street, “Are insurance agents professionals?” it would be interesting to hear the answers. When many think of “professionals,” occupations such as medicine or law would probably come to mind. Of the 100 people you ask, their answer may be based on their feelings toward their agent, whether they have heard from them in a while or, possibly, their experience with a recent claim.
Actually, one’s thoughts may vary, contrasting their opinion before they experienced a loss and their opinion after. I guess that before a claim occurs, the public would not feel that insurance agents are professionals. However, they may then look to convince the courts that they are professionals. Why? Because that creates a higher standard of care (more on the difference in a minute).
I believe insurance agents are generally considered professional primarily because the courts have concluded that these “insurance professionals” will be held to certain legal standards. These legal standards can vary from state to state. The premise of an Agents E&O (professional liability) policy is one of legal liability. This means that just because the agency made a mistake and the client suffered a loss, it does not automatically make the agency legally liable. There are essentially two main theories of what constitutes an agent’s duty.
Order Taker
Basically, the main theory is that an agent is an order taker. Many of you have probably heard this. Essentially, this means the agent is responsible for providing the client-requested coverage. So, producers, you must listen to what the client is requesting. The agent must advise the client if you can’t get the requested coverage. Failure to do so has been a key element in the client’s defense should an uninsured loss occur, and the client alleges that they requested the necessary coverage to cover the loss. There have been many E&O claims (some became landmark decisions) involving this fact pattern.
One key E&O case many years back involved the client asking for coverage covering some very specific situations. The agent secures a policy for the client. When one of the very specific situations occurred and the claim was denied, the agent was subsequently sued. During the trial, the agent looked to blame the client, stating, “If the client had read their policy, they would have noticed the exclusion.” The court ruled that when the client asks for specific coverage, unless they are advised otherwise, they have every reason to believe the policy secured provides the requested coverage.
A very important premise that all agency personnel need to note and understand is that “agents can be held responsible for what they say and what they put in writing.” Telling a client that a specific exposure is covered “when it is not” is a formula for disaster and one that will bite you (you know where) if a problem develops. This premise includes statements made in marketing pieces or on websites as well. You don’t want to state, “We will make sure you are properly covered,” because the client is responsible for the coverage they buy or don’t buy at the end of the day.
This speaks to the need for quality and timely documentation in the agency file and hopefully memorialized back to the client to ensure a common understanding. You don’t want the client to have better documentation than the agency.
Special Relationship
There is also the concept of special relationships, which probably applies to many E&O Plus agencies. If a special relationship can be proven (this is up to the plaintiff’s attorney to prove), the agent may be held to a higher standard involving a duty to take some affirmative action rather than just follow the client’s instructions. There is no magical formula to determine a special relationship, but it could involve issues such as how long you have insured the client and how much of their insurance program you insure. It could also apply if additional compensation is involved. Avoiding keywords such as “expert” or “specialist” is also advised.