22 Oct Which Way Are the Scales Tipping?
You have all probably heard the expression, “You don’t have to do anything wrong to get sued.” This is why, when we discuss E&O loss prevention, we will never tell you that we can prevent E&O claims from happening. No one can, and thus, our focus is primarily on increasing the odds of the agency prevailing when it does happen. Said another way, we want to educate you and your colleagues on how to “tip the scales of justice” in your favor.
I don’t believe it is difficult to tip those scales; E&O loss prevention is not rocket science. A significant element involves applying the E&O best practices, which is the foundation of the E&O Plus approach. The more significant element is the execution of those best practices. It is executing 100% of the time, not 75%, not even 90%, every single time. When you don’t apply and execute the best practices, the scales of justice are not in your favor. This is why it is so critical for agencies to implement a solid auditing approach. This is when agencies will take that next step to enhancing and solidifying their E&O culture.
For your benefit, here are some of the key best practices:
- The Standard of Care is how agencies and their staff market, promote and communicate their product and brand. Anyone dealing with prospects and clients needs to realize that they can be held responsible for what they say and write. Agencies also need to be careful what words they use on their websites. This can quickly tip the scales against the agency.
- Exposure Analysis (new and renewal): What causes most E&O claims to happen is primarily when the client suffers a loss that is not covered. Understanding the client’s exposures and offering insurance solutions makes a huge difference. If they don’t buy it, you offered it and have documentation that the client rejected it (you do have this documentation, don’t you?). Since clients’ exposures change, asking what has changed can lead to discussing various insurance products.
- Documentation. With few exceptions, any discussions with the client should be documented not just in the system but also in writing back to the client confirming the discussion.
- Solid use of the agency proposal format or wrap document: Proposals have often been a key issue in determining what direction an E&O claim goes, so using the agency-approved template with all the necessary language and disclaimers is vital. Deleting disclaimers should not be allowed. They are in the proposal for your protection. These disclaimers have had a positive impact on many E&O claims.
- Policy checking: Unfortunately, carrier-issued policies may occasionally contain a mistake or two (or three or four). Thus, the key is to identify the errors and correct them. The issue will not be completely fixed if your agency outsources this task. When your agency receives the discrepancies from the outsourced vendor, they should be promptly reviewed and addressed. I am not in favor of sending policies to clients before they have been checked.
Taking some editorial privilege from the 1947 slogan by Smokey the Bear – “Only you can prevent wildfires” (this is the generation I grew up in). Only you can decide whether the scales of E&O justice are tipping in your favor.