20 Sep How Would You Respond to This Client Question?
It certainly seems with increasing frequency the number of insurance articles that speak to a recent court decision and the judgments being awarded. Actually, some courts have awarded the plaintiff more than they were even asking for with some staggering numbers. Some refer to this as an element of ESG (Environment, Social & Governance).
This issue needs to be factored into limits that clients are securing for their various general liability / management liability / excess coverages. Are the limits they have been carrying still appropriate?
I would imagine that from time to time, clients question their insurance agent, probably the producer that handles their account, on the issue of liability limits. As a side note, there is a good chance that internal support staff handling the account might also be questioned on this issue.
In my many visits to the agencies I am honored to work with, invariably, when we discuss liability limits, one of the staff will impart a real-life story to me when the client asks them if the current limits are sufficient. Maybe the best response would be, “I don’t know.”
You may ask what prompts me to bring up this issue. It involves an actual claim suffered by a client whose limits were insufficient. When the limits are insufficient to cover a loss, E&O litigation is typically right around the corner, and that is exactly what happened. It appeared thru the discovery the client posed the question to the producer (this is a non-E&O Plus agency) at renewal time, “I have $5 million of coverage. Is that enough?” The producer’s response was this: “In all my years in the business, I have never seen a claim involving your type of business that was over $5 million.” That seemed to appease the client, and they continued to carry the $5 million of coverage. Well, as luck (actually bad luck) would have it, the client suffered a loss in the $8 million area. This resulted in an uninsured exposure of roughly $3 million. Since what is not covered is the most common fact pattern generating E&O claims, the client sued the agent, and if I had to guess, they have a pretty good chance of winning.
As mentioned multiple times in this blog, agencies should strive for a solid level of Client Accountability. At the end of the day, the client chooses their limit and is, thus, accountable for whether it is a good or a bad decision.
It probably would have been best for the producer in this scenario to add some additional words to the end of his perspective. Maybe something like – “In all my years in the business, I have never seen a claim involving your type of business that was over $5 million, but I can’t sit here and tell you it will never happen. It could happen tomorrow. Let me give you some limit options for you to consider.” If the client proceeded to stay with the $5 million, that was THEIR decision.
So, when a client asks, “are my limits sufficient?” how do you respond? Discussing this topic at an upcoming department meeting might not be a bad idea.