Hi, Santa. 

It's Brian, your favorite agents and brokers errors & omissions claims handler, writing after a year of diligently navigating the complexities of E&O claims. 

As we approach the holiday season, I wanted to share my wish list with you. If you could grant these requests, it would go a long way toward ensuring fewer claims and making my agent friends very happy.

Here are four things on my list:

1) Thorough review of new policies. To get a better price for their clients, agents often move their clients from standard to excess & surplus lines markets or change carriers. Unfortunately, this practice is fraught with peril. The terms and conditions of the new policy often differ from those of the prior policy. It is crucial to ensure these transactions do not inadvertently make coverage more restrictive or less favorable.

When a policy is procured with a new carrier, the terms and conditions of the policy can change, potentially leaving gaps in coverage that were not present in the previous policy. For instance, E&S policies often come with different terms compared to standard policies. Without scrutiny, agents might overlook critical changes. If the new policy doesn't match up with the prior policy, these lapses can lead to significant E&O claims being presented against the agent or broker.

Agents can avoid an E&O claim by comparing the terms and conditions of the new policy with the previous one to ensure consistency, clearly explaining any changes in coverage or limitations to clients, and maintaining detailed records of all communications and policy comparisons.

2) Review umbrella policies for uninsured motorist and underinsured motorist (UM/UIM) coverage. Many umbrella policies do not include coverage for UM/UIM. The failure to include UM/UIM coverage on an umbrella policy can be the source of significant E&O claims presented against the agent or broker because the underlying injuries are usually severe, which often engender jury sympathy and large verdicts at trial.

UM/UIM coverage provides vital protection in cases where the at-fault party is either uninsured or underinsured. If this coverage is not adequately addressed in an umbrella or excess policy, clients may face substantial out-of-pocket expenses in the event of a severe accident. Ensuring these coverages are included and sufficient can prevent significant claims disputes and protect clients and agents and brokers.

Agents can avoid an E&O claim by confirming that UM/UIM coverage is included in umbrella and excess policies where applicable, explaining the importance of UM/UIM coverage and how it benefits clients, and regularly reviewing and updating policies as client needs and legal environments evolve. If the client doesn't want the coverage, document this with the client in a letter or email.

3) Implement a robust diary system for follow-up. Effective follow-up is crucial to managing risks and ensuring that no critical issues are overlooked. Without a reliable follow-up system, agents might miss important deadlines or fail to address issues in a timely manner. This can lead to missed opportunities to rectify potential coverage gaps or address client concerns, ultimately increasing the risk of E&O claims. A robust diary system helps track activities and ensures all necessary actions are taken.

Agents can avoid an E&O claim by employing digital tools or software to track and manage follow-up tasks and deadlines, scheduling periodic reviews to ensure that all follow-up items are addressed, and maintaining regular contact with clients to keep them informed and engaged.

4) Document, document and document. The final and perhaps most crucial wish on my list is a strong emphasis on documentation. As the saying goes, “If it's not in writing, it didn't happen." Comprehensive documentation is essential for defending against E&O claims and ensuring clarity in all transactions and communications.

Proper documentation provides a clear record of what was agreed upon, communicated and executed. In the event of an E&O claim, well-maintained records can be instrumental in demonstrating that all procedures were followed correctly and that clients were fully informed. On the other hand, inadequate documentation can prove disastrous in E&O claim defenses.

Agents can avoid an E&O claim by documenting all client communications, policy changes and transactions; implementing standardized forms and checklists to ensure consistency and completeness; and storing documentation securely to ensure it is easily retrievable when needed.

By addressing these key risk management practices we can significantly reduce the risk of E&O claims for my agent and broker friends, which I know would make them very happy.

Thank you, Santa, for considering these requests.

Sincerely,

Your Favorite E&O Claims Handler

P.S. I'm still waiting on the pony I asked for in 1965.

Brian Butcher is a claims expert employed by Swiss Re Corporate Solutions America Holding Corporation. Insurance products are underwritten by members of the Swiss Re group of companies (“Swiss Re").

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of Swiss Re and/or its subsidiaries and/or management and/or shareholders.