02 Feb Proposal Disclaimers Are for Your Protection
Your agency has just been hit with an E&O claim. The client is alleging that they didn’t have enough insurance to cover the loss. The matter involves one of the kids off at college renting an apartment (and thus probably not covered by mom and dad’s homeowners policy). The client is blaming you for not having proper insurance. What would be a part of your defense? Hopefully, the application was signed by the client. When signed, clients are held accountable for the contents of the application.
In addition, the inclusion of the following disclaimer in the proposal would certainly help your defense:
“In evaluating your exposures to loss, we have depended upon information provided by you. If there are other areas that need to be evaluated prior to binding coverages, please bring them to our attention.”
This disclaimer serves to protect the agency by noting that the client is responsible for providing the agency with accurate information. If they never told you they had a son in college and that he was renting an apartment, how is this your fault?
At the time of an E&O claim, the agency proposal is an admissible document and thus part of the documents available to both parties. The goal is for the agency proposal to help your position. If the disclaimer was not noted in the proposal on the above scenario, your defense would not be as strong.
Some folks (especially producers) may ask, “Why include disclaimers if the client never reads them?” Or, “I am trying to sell the account, why would I want to include these legal disclaimers?” Whether or not the client reads them may be irrelevant. The key is that the proposal includes the disclaimers, and should a problem develop, the agency can use the proposal.
What are some of the typical (and necessary) disclaimers for P&C and benefits proposals?
- “Information contained in this proposal is intended to provide you with a brief overview of the coverages provided for reference purposes only. It is not intended to provide you with all policy exclusions, limitations, and conditions. The precise coverage afforded is subject to the terms, conditions, and exclusions of the policies issued.” This is designed to alert the client that the proposal is not a substitute for the policy when determining coverage issues.
- “Specimen forms are available upon request.” While it probably preferred to actually include the various specimen forms, many of these forms can be very lengthy. This disclaimer advises the client that if they wish to see the actual forms that are part of the policy, those forms will be provided if requested. This seems to take on a heightened importance on coverages such as cyber, employment practices liability, D&O, and E&O where there is no real standardization of the forms or coverages written through the E&S marketplace.
- “Higher liability limits may be available. Please let us know if you would like a quote for increased limits.” When your agency is quoting limits, it is important for the client to know that the limits noted on the proposal are not the only limits available.
- “Exclusions and limitations include, but are not confined to, the following: (list exclusions).” As we all know, virtually every insurance policy has exclusions, and many have some type of limitations. By listing the more noteworthy exclusions, this could very well prompt discussion on what coverage is necessary to address those exclusions. This creates a sales opportunity. Bottom line, this disclaimer notifies the client that not everything is covered.
- “The rates quoted for these benefits may be subject to change based on final enrollment and/or final underwriting requirements.” This is a common benefits disclaimer and is designed to place responsibility on the client to notify the agency if there have been any changes to the census data previously provided.
I can appreciate that agencies are sensitive to the length of their proposals, but including the necessary disclaimers in your proposals could make a crucial difference should an E&O claim occur.