08 Oct Boss – We Might Have a Problem
You just got off a call with one of your clients. They contacted you to advise you of a loss they just suffered and wanted to report it to the insurance company. Based on the details presented, you have doubts about whether that claim is covered. You indicated you would report it to the carrier, and they would advise them on their position. Hopefully, you didn’t commit to whether the loss would be covered one way or the other since, at the end of the day, that decision is solely the insurance company’s. In a short time, the carrier advises your agency and client that the loss will not be covered.
This scenario could occur for a variety of reasons. Possibly, the client refused to secure the coverage that would have provided protection for the loss. There may have been an exclusion that came into play. Whatever the reason, the client is upset since the loss was more than just a minor issue. Is this where it all ends, and you and your client move on? Possibly, but possibly not.
When one looks at the leading cause of E&O claims, the #1 allegation is currently (and has been for the last 50+ years) “failure to provide the proper coverage.” The client suffered a loss and alleged it is your agency’s fault for not providing the necessary coverage. For example, if the uninsured loss is the lack of rental reimbursement coverage, it is questionable whether the client will pursue some form of legal action. If the uninsured loss is in excess of $10,000, the odds of the client hiring an attorney are significantly higher. So, what is the exact number of times the client will fight the issue? While that is difficult to say, you might want to give some very serious thought to advising your manager that you have a client who has suffered a sizeable uninsured loss. A word of advice – if you think the issue will just go away, think again. This is why it is always good to get in front of these scenarios and look for guidance and direction from your management. They may feel it is prudent to contact the E&O carrier and look for their thoughts on the next steps to take.
You have all heard the expression – “Better safe than sorry.” I doubt it referred to the suggested handling of uninsured claims, but it applies. Just because the client suffers a loss not covered by their insurance program does not mean that your agency was negligent. Remember, agencies can be sued even if they did nothing wrong. The resolution of the matter could be influenced by the level of documentation or some form of correspondence where the client was advised of the coverage they had and what they didn’t have.
So, the next time your client suffers a loss that is not covered, look to advise your management of the issue. They may want to review the file with you. They may want to contact the client, and there are other possible scenarios. But you can feel confident that you did the right thing and did not look to hide the issue.