16 Mar How Much Does E&O Scare You?
It is not uncommon to find agency staff that are absolutely petrified of E&O, and this can include agency owners. While being scared of E&O may result in staff doing the right thing, I won’t say that being scared of E&O is a good thing.
Yes, E&O can be somewhat intimidating to agency staff. A major goal of E&O Plus is that through its various approaches including the annual reviews, agency staff will understand the “why” behind E&O loss prevention. By better understanding the “why,” agency staff will hopefully embrace E&O loss prevention and understand how they (and the agency as a whole) can make real inroads into minimizing their E&O claims potential. And, by the way, embracing E&O loss prevention will also result in additional sales. I guarantee it.
At the end of the day, an agency needs to sell insurance and being petrified of E&O could cause one to hesitate to talk with customers for fear of an E&O claim lurking around the corner. The key is to respect E&O and to fully understand the world of E&O, what drives an E&O claim and what the agency can do to meet this challenge head on.
Over the course of any given year, around 50-60 percent of E&O claims against agencies are closed for no loss payment. What this statistic clearly shows is that agencies focused on E&O loss prevention (but not scared of it) can make a significant impact on minimizing the potential for the agency to be found legally liable if an error or omission occurs.
Anyone that has gone to an E&O class in their career has no doubt heard the phrase “Document, Document, Document.” Yes, documentation is super important – but there is much more to the equation.
E&O is based on the premise of legal liability, so just because the agency committed an error or omission does not necessarily mean that the agency is negligent (the legal standard for agencies is heavily built on the premise of negligence). One key element within this legal standard includes the agent being responsible for securing the insurance the client requested, and if the specific type of insurance requested is not available, the agency should promptly advise the insured. As an example, if the client did not ask for cyber coverage and the client suffers a cyber loss, there is a good chance the agency will not be found negligent for not providing it. This could be impacted if the agency is found to have a “special relationship” with the client.
Some other key issues include:
- Perform your role based on the manner in which the agency has detailed it in the agency procedure manual. In the world of E&O, consistency is one of the main goals.
- Be aware of the words / phrases you use. Agents can be held responsible for what they say and what they put in writing. Choose your message carefully.
- Ensure that you know your insurance products.
- Document. A significant issue is ensuring that conversations with the client are memorialized back to the client in writing. Live by the adage, “if it’s not in the file, it didn’t happen.” Thus, documentation in the agency system should be handled promptly and with sufficient detail.
- Exposure analysis (both for new and renewal business). In any given year, your client’s exposures may change, and this process is designed to identify any changes or issues that your clients are experiencing for there to be conversation on how to address those exposures. Agencies truly serious about minimizing their E&O exposure should make a strong commitment to addressing this key issue, especially with producers.
- Client accountability. This includes requiring that the client sign the application attesting to the accuracy of the information. When a client declines various coverages / limits, confirm this decision back to the client. At the time of an uninsured loss, there is certainly the possibility the client may change their story.
- Be honest in all your dealings.
By understanding and respecting E&O, each person in your agency truly can make a difference.