Q: An insured is under scrutiny by media and news outlets for what the reporters are alleging is improper employee terminations. The news is readily available. If the insured's agent sees the news, is there any duty on the agent's part to report the potential claim to the insurer?

Response 1: In court, an agent’s knowledge is considered knowledge of the insurer. Read what their policy says about claims reporting. Many policies—and most agent errors & omissions policies—require reporting the insured to report a claim.

Response 2: Your obligation to the carrier is to report all losses or claims to the carrier per the terms of your agency contract. It is also your obligation to the client to report all losses they report to you to the carrier. In the situation, there is neither a loss nor a claim and are under no obligation under that circumstance.

If your contract with the carrier included language that said you needed to report any known possible situation that could result in a loss or a claim, it is unlikely you would have signed it. It is also not at all likely that any agency-carrier contracts have such language. You have enough work to do without worrying about this.

Response 3: At this point, it is only hearsay evidence. Contact the insured if you are concerned and inquire whether you need to file a claim.

Response 4: Ask your E&O insurer what your legal duties are to the agency, client and to the carrier that might defend a claim. Are you an appointed agent to the insurer or is it a brokered deal to an insurer directly through a wholesaler? What do your agency and brokerage contracts state as to your duties to insurers, wholesalers and clients?

It would be a good faith service to your client to contact them and inquire if there is a potential claim to be filed. You could remind the client that employment practice liability insurance policies have strict reporting provisions—that might not be known to the client. While that could be good for the client, your agency E&O lawyers might advise otherwise, not wanting you to create a special relationship. Check with your E&O lawyers.

Response 5: You must discuss with the named insured first, as they are the only legal representative with standing in terms of the policy. I would talk to your insured and advise that it would be a good idea to report the incident. That gives the carrier time to start assembling the claim file. Then make a note in your file that this potential incident has been discussed along with any notes from that conversation.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.