Assurex E&O Plus | Using A Carrier Proposal?
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Using A Carrier Proposal?

04 Jan Using A Carrier Proposal?

Posted at 09:00h in Pearsall’s Perspective – E&O Plus Tip of the Week by

Over the last couple of years, the agency’s use of carrier proposals has become much more common. This trend is especially applicable with small commercial accounts or accounts in the personal lines division. Using the carrier proposal has several advantages, including:

  • Greater efficiency. Retyping the carrier proposal onto the agency letterhead takes time and effort. Every agency is looking for some gains in efficiency, and this approach is a plus.
  • Accuracy is enhanced. If an agency retypes the carrier proposal onto the agency letterhead, there is certainly a greater possibility that an error is made in transferring the information. 
  • Support from the carrier. If there was an error in the carrier proposal and the agency used that document, I would believe that the carrier would agree to provide the coverage created by the error.
  • Greater depth of information. There is a good chance that the carrier proposal has greater depth to the information provided, enabling the client to understand the proposal more clearly.

Unfortunately, there is also a disadvantage to strictly using a carrier proposal. This disadvantage, however, is easily addressed.

Typically, the carrier proposals do not include common disclaimer language. As stated numerous times in this blog and during the E&O Plus reviews, this disclaimer language can play a key role in defense of the agency should a problem develop. So, suppose the agency is sending the client/prospect the carrier proposal. In that case, it is highly suggested the agency include some of this disclaimer language in a document commonly referred to as a “wrap” because it envelops the carrier’s materials with protections for the agency.  

What are some of the disclaimers that should be included?

  • “This is a convenient coverage summary, not a legal contract. The actual policies should be reviewed for specific terms, conditions, limitations, and exclusions that will govern in the event of loss.”
  • “Higher liability limits may be available. Please let us know if you would like a quote for increased limits.”
  • If the carrier is non-admitted, that fact should be stated with the additional statement regarding the absence of guaranty fund protection.
  • Since it is common for agencies to include other coverages for the client to consider on the proposals, the “wrap document” should include a statement of “other coverages to consider include but are not limited to the following.” I have seen many agencies modify their agency proposal to enable the carrier proposal insertion easily. 

Proper use of the carrier proposal can lead to some positive gains, and the inclusion of a “wrap” document can also aid in defending the agency in an E&O matter.