21 Jul Let Me Think About It
Virtually all agencies are aware of the need to confirm client decisions regarding limits or coverage. This level of documentation will be key if a problem arises and the client denies the conversation ever happened. Without a doubt, the memorialization of these conversations has played a key role in the defense of agencies in many E&O matters. But what if the client does not make a decision? They don’t say they want the coverage, but they also don’t state that they are declining it.
Let’s say that your agency provided the client with a proposal for a package policy, business auto, workers’ comp, cyber, and an umbrella. The client commits to binding everything but the cyber. They just aren’t sure they see a big exposure in the cyber area, or they may feel they are adequately addressing the exposure. They simply state, “Let me think about the cyber and I’ll get back to you.” Your agency proceeds to bind everything but the cyber. You note in the system that the cyber is not bound because the client wants to think about it. Are you good to go?
Fast forward a couple of weeks. The client calls you to bring to your attention what appears to be a cyber-attack against them. They include in the conversation that they are so glad they decided to purchase cyber coverage. This is when you bring to their attention that they did not purchase the cyber because they wanted to think about it. The client adamantly states that you must be mistaken adding that they purchased everything you proposed. This develops into a he said, she said type of discussion, and probably an E&O matter at some point.
Could this scenario occur in your agency?
One of the lessons to be learned is the harsh reality that after a client has a loss that is not covered (or not fully covered), their memory is not going to be a sharp as you would hope. Did they know they didn’t buy the cyber? Probably. Are they going to readily admit it? Not likely.
Client accountability should be a central element of an agency’s strong E&O culture. This will ensure that when a problem develops, the agency has quality documentation to support its position. The client should not be able to allege fault with your agency when you did nothing wrong. So, using the above scenario, what should the agency have done? The essence of the conversation between the agency and the client should have been memorialized in writing back to the client. An email such as:
“Thank you for honoring our agency with your business. It is greatly appreciated. We have bound the coverage discussed with the exception of cyber, which you indicated you want to think about and are not ready to purchase cyber coverage at this time. If I misunderstood you, please contact the agency as soon as possible.”
This type of documentation will serve the agency well if the client alleges down the road that they thought they purchased cyber coverage. Once again, client accountability should be a goal for the agency.
It would be nice if the client purchased every coverage you proposed, but in reality, that does not always happen. So, when the client wants to think about it, make sure your agency has a procedure that details the expectations for solid documentation of the coverage that was purchased and the coverage that was not.