Specimen Forms – Are They Adding or Deleting Coverage?

16 Jun Specimen Forms – Are They Adding or Deleting Coverage?

In my previous days of managing an E&S operation, an account I remember working on was a GC (General Contractor) that was building homes in a new development. We applied to one of the more popular E&S markets and got back a fairly attractive premium proposal. As we reviewed the proposal, we noted that the E&S market included a reference to a variety of endorsements in the proposal. It was questionable what one of the endorsements did, so we asked the market for a specimen form. It was a good thing we did, because the endorsement precluded any coverage if the insured (the GC) built more than 10 homes in any one development. Since the GC was building ALL the homes in the development, it was questionable what coverage was even being provided. We then realized why the premium was so attractive. 

What if we had not requested that endorsement and the client suffered a loss that was not covered due to the endorsement? Bottom line, it didn’t become an issue because we never even considered the proposal from that E&S market. 

In virtually every proposal your agency receives from a carrier or E&S wholesaler, there are references to a multitude of endorsements. It’s fair to say that it is difficult to know exactly what an endorsement does based on its name. Does it add coverage? It possibly limits coverage, or in the case mentioned above, it severely excludes coverage under specific conditions. With some of the endorsements, one has to wonder what coverage the policy even provides. 

Many agencies have a library of the various endorsements used by their carriers and wholesalers. They can reference these forms and review them to better understand what the endorsement does. Since the edition dates of some of these forms can change, it is pertinent that this library be kept up to date to identify any change in the language and the subsequent coverage.  

As some of the agencies I am honored to work with are aware, I advocate that the proposal include copies of these forms for the client to have the opportunity to review. If the client is provided copies of the endorsements and a problem develops, it would be hard for them to argue they didn’t know what coverage they had or didn’t have. However, it has been argued that including a copy of every specimen form in every proposal would kill a lot of trees as it can add 50 pages (or more) to a proposal.  

The approach many agencies take is including a statement in the proposal like, “Specimen forms are available upon request.” This is fine with a few conditions: 

• The agency is aware of what the various specimen forms do in the way of adding, restricting or limiting coverage. This becomes especially important when the agency is getting proposals from various markets to better evaluate coverage differences along with premium differences. 

• If after reviewing the various forms there are significant issues the client needs to know, those issues are brought to the client’s attention (in writing). 

• If the coverage is secured, encourage the client to review their policy including any and all forms. 

Bottom line, agencies should have a firm (and stated) position on how specimen forms are to be handled and the appropriate staff should be aware of the agency position.