Listen Twice as Much

08 Sep Listen Twice as Much

“We have two ears and one mouth so that we can listen twice as much as we speak.” – Epictetus, a Greek Stoic philosopher (50 – 135AD) 

Somehow, I doubt that Epictetus was talking about insurance agents back in his day, but actually, his words of wisdom are definitely applicable today. 

When you look at the standard that agents are held to in our legal system, there is a key issue that has often come into play. When we look at some of the elements of the agent’s legal liability standard, it is important to comment that E&O cases are going to be very fact–sensitive and as a result, the outcomes are potentially difficult to predict until all of the facts are known. While many states apply the role of an insurance agent as an order taker, there are circumstances that could raise that standard to one of a special relationship. 

There are many key elements that could come into play. For example, an insurance agent is not required to: 

• Provide an insurance policy that would cover all possible contingencies. This is often applicable when a client tells their agent to cover them for whatever can happen. I am not sure if this type of policy exists.
   
• Advise an insured with respect to coverage options. As noted, the agent’s role is somewhat of an order taker. The client asks for “x” and you get them “x.” Depending on other details, the courts may consider that the agent did their job. Having said that, it is certainly suggested to provide the client with coverage and limit options as this will probably result in additional sales.
   
• Advise the insured as to every exclusion contained in the policy. Actually, noting some of the more significant exclusions on the proposal has been shown to be a successful sales technique. If an agent were to list some exclusions, there should be a notation such as, “Exclusions include but are not limited to the following.”  

There is one critical duty in which agents should pay particular attention. When the client asks for specific coverage or for a policy without a specific exclusion, the agent does have a duty to inform their client if they cannot obtain the requested coverage. Over the years, there have been numerous E&O cases where this principle came into play. One involved a request for a D&O policy without an “insured versus insured” exclusion. The broker got the client a D&O policy, but the exclusion had not been removed. As a result, a subsequent claim was not covered and the broker was found liable. 

A key E&O case a few years back involved the client asking for coverage that would cover, among other things, some very specific situations. The agent secures a policy for the client. When one of the very specific situations occurred and the claim was denied, the agent is sued. During the trial, the agent looked to put the blame on the client citing the duty that clients have to read their policy. On the stand, the agent essentially stated that if the client would have read their policy, they would have seen that the policy did not provide the coverage they asked for. It was ruled that when the client asks for specific coverage, unless they are advised otherwise, they have every reason to believe the policy secured provides the requested coverage.   

So what does this mean? Agents need to listen to what the client is asking for and they need to make a reasonable effort to secure that coverage. However, if they can’t, they need to let the client know. Maybe this is why they have two ears and one mouth.