23 Mar Have Any Unsupported Umbrellas?
Your first thought is probably no, we will not write any unsupported umbrellas. I recently spoke to an E&O Plus member with that same position. However, the agency staff member went on to state that while writing an unsupported umbrella was not their position, somehow, they found themselves with at least a handful of accounts where all they wrote was the umbrella. They weren’t quire sure how it happened, but chances are it involved one of the following scenarios.
Scenario One
Is there a chance that the first policy you wrote for a client was the umbrella? The situation could be that the client gives you their business and the first account to come up for renewal is the umbrella. The client places that line with your agency, promising to place the other lines as they come up for renewal. My advice on this scenario – don’t do it! An agency should always look to write one of the primary underlying lines of business first. That would be the auto and homeowners (in personal lines) or the GL and auto (in commercial lines).
Scenario Two
The more likely scenario is where the agency writes all coverages, the client later decides to move some of those underlying coverages to another agency at renewal time, and the agency does not catch that this has created a problem. Using personal lines as an example, they move the auto at one time and the homeowners at another time, leaving your agency with just the umbrella. I am confident that there are no E&O Plus agencies that intentionally want to only write the umbrella coverage.
Bottom line, unsupported umbrellas are an E&O claim waiting to happen. As I noted in the March 24, 2020 E&O Plus blog, umbrella carriers require certain minimum underlying limits. If, for example, a $500,000 CSL auto is required and the underlying auto is only at $300,000 CSL, in the event of a claim where the umbrella coverage would come into play, the umbrella policy would respond as if there was a $500,000 CSL, thereby resulting in a gap of $200,000 that would not be paid. This would then, most likely, result in an E&O claim against the agency.
So, my question is: does your agency have any unsupported umbrellas? To discover the answer to that question, utilize your agency management system. Some systems allow you to put in various scenarios such “umbrella but no auto and no homeowners.” This filter will hopefully allow you to quickly determine if your agency has this issue. In the event that you find your agency with unsupported umbrellas, I encourage you develop a plan to void your agency of this exposure.