09 Jun Can They Sue Me for What I Don’t Have?
About 10 years ago, I was teaching an E&O class dealing with the E&O exposures of personal lines. On day two, we started discussing personal umbrellas. I asked the group, “When would you propose umbrella coverage to a client?” It seemed like a reasonable question, but I was very much surprised by the response of one agency staff member. Her response was, “I size the person up to determine their assets when they come to meet with me.”
I then proceeded to ask the rest of the class how they felt about that approach. A member of another agency was quick to chime in. She commented that her agency had a client that recently graduated from college and was somewhat in debt because of student loans. So, this person’s assets / net worth was probably a negative number. They proceeded to buy 100/300 for their BI limits on their auto policy. Unfortunately, the client was in a severe accident and was found liable to the tune of a $500,000 judgment. The client’s wages were garnished until the $500,000 judgment was paid. This is on top of the student loans that needed to be paid.
So, can they sue you for what you don’t have? Yes, they can – and they will – when warranted!
There are some important lessons to be learned from this real-life story:
- Don’t presume that a client can’t afford certain coverage. Educate the client on the coverage and its importance. Include a quote that essentially forces them to make a decision. Bottom line – Do not make the decision for them. After all, can one really assess the net worth of a client just by looking at them? Don’t think so.
- Do not “recommend” a limit. While it may sound good, what if the client suffers a $2 million loss, but you had recommended (and the client purchased) a $1 million umbrella? Could they allege that they relied on your “recommended limit” of $1 million and now it is not enough? This is one reason why the umbrella quote should include multiple limit options or at a minimum, a statement that additional limit options are available upon request.
- The bulk of the exposure in a personal umbrella probably involves the auto exposure. That is the area where the high-level judgments tend to occur more often that with the homeowners coverage. Does someone’s net worth determine how good of a driver they are?
- When the agency is discussing umbrella coverage with a client, it is appropriate to bring to their attention that with an umbrella, they are protecting not only their current assets but their future assets as well.
Most would contend that every client should have an umbrella, and I am definitely one of those people. Does every client in your agency have an umbrella? Consider using your agency management system to identify clients that do not have umbrella coverage. Most systems allow you to build in certain filters such as “auto, homeowners, but no umbrella” then use this to ensure that these clients are at least offered an umbrella (with a subsequent increase in their limits if necessary). This will not only serve as valuable protection for the agency should a problem occur, but there is also a good chance you may just write more business – because after all, they can sue you for what you don’t have.