E&O exposure on renewal

Rob · Post by **Rob** » Wed Dec 14, 2005 8:40 pm

On my commercial accounts, I have the customer sign my own proposal I created showing limits, deductibles, exclusions, premium, taxes, fees and a checklist of all other possible types of coverage that may recommended for their industry or for their own particular exposures, in addition to the Acord application or specialty application. On renewal, I submit a new application to the GA or carrier for a renewal quote. In many cases, the terms are the same as the prior year. Do you think it is necessary to have them sign the proposal showing limits, exclusions, etc and a coverage review/checklist AGAIN at renewal time. At this time I do but I tend to wonder if this is overkill and if I'm being too paranoid. What do you all do?

MODERN · Post by **MODERN** » Thu Dec 15, 2005 12:14 pm

Being in the Agent's E & O business, I can tell you that getting your insureds to sign the apps and getting a "sign-off" on any changes and new endorsements/exclusions can help you and your E & O carrier fend off questionable claims. The insureds will have a harder time proving that you didn't do your job if it's all there in black and white and their signature is on your proposal.

Don't forget your personal lines insureds either. Just ask the 100's of personal lines agents in the hurricane affected areas who now have multiple E & O claims because their insureds "didn't know they didn't have any windstorm coverage" on their property.

Rob · Post by **Rob** » Thu Dec 15, 2005 2:24 pm

Agreed. However, what about the case where there are no new forms/endorsements added or deleted from policy? I'm curious how extensive other agent's proposals are. For example, my first page shows the General Liability limits and premium and the second page has rating basis, classification, exclusions, additional insured explanation. Then page 3 has a definition of occurrence, products/completed operations, fire legal, deductible, etc. Then 3 additional pages which is a checklist of available coverages. So I'm wondering if this, along with the Acord, supplemental etc is overkill OR on renewal would it be ok to send just the first page showing the GL coverages and skip the detailed explanation of prod/comp ops etc since we provided that the first year. I'm thinking of changing to where I just send a 2 page proposal summarizing coverages, along with the application. Any opinions with this additional info?

goredsox · Post by **goredsox** » Tue Dec 20, 2005 11:42 am

I hope the proposals you have created for your customers to sign off on match exactly the legal wording of the policy and include everything that the policy states. If your proposals are missing anything, the customer can claim you didn't have them sign off on that particular issue, they didn't know about it and therefore you are responsible for the coverage.

Why rewrite what the policy clearly states and the ISO copyrights?

Rob · Post by **Rob** » Tue Dec 20, 2005 11:55 am

goredsox wrote:I hope the proposals you have created for your customers to sign off on match exactly the legal wording of the policy and include everything that the policy states. If your proposals are missing anything, the customer can claim you didn't have them sign off on that particular issue, they didn't know about it and therefore you are responsible for the coverage.

Why rewrite what the policy clearly states and the ISO copyrights?

The proposals are a summary and contain a disclaimer stating so and that it does not mimic the policy wording. I also list every exclusion and have them sign off on that. I also have them state that a specimen policy has been offered for review prior to purchase.

Are you saying that most agencies don't provide some sort of proposal summary? In other words, just an Acord application and thats it? Would it be reasonable to have them sign every exclusion? Probably not. Further, the proposals are for my file to protect myself and for the most part I have not had many customers ask for a copy. Seems to me that if all you have is an Acord in the file that you would be opening yourself up to "He didn't tell me that" type of E&O claim.

I'd like to get a multitude of opinions on this so other agents out there....chime in!

txinsurancemanager · Post by **txinsurancemanager** » Tue Dec 20, 2005 2:19 pm

I use a proposal of insurance for each renewal, even the smallest of insurance clients. I have no information on this, but I've always suspected that the most E & O claims come from the smallest commercial clients. Typically, these clients don't understand their coverage very well and as agents, we don't devote a lot of time to these clients - rather just "renewing as is", sometimes for years. Therefore, a proposal for them is very important. It's not difficult once the first one is done because typically it can just be copied from year to year, inserting the necessary changes. It's a good opportunity for agents to focus on the client each year as well, while editing the proposal for the renewal.

I add information on "notable exclusions" and show applicable sublimits. I have a disclaimer that the proposal is meant only to be a summary and quick reference of coverage and that the insured should refer to the policy itself for complete coverage information. I'd say my proposals are "medium detailed". If there's too much, the insured doesn't read it and I do want them to read it and discuss any questions they have with me. Naturally, if my client is more sophisticated about insurance, I'll give them a more detailed proposal.

I've not seen many producers get a "sign off" on the proposal but it's an excellent idea because a proposal is more informative for the usual insured than an acord app. I'll be adding a "sign off" section to my proposals.

Rob · Post by **Rob** » Tue Dec 20, 2005 2:34 pm

Txinsurancemanager

thanks for the reply. I have the same system as you (saving last years and then making necessary changes) and then have them sign off on each page.

scott · Post by **scott** » Wed Dec 21, 2005 7:13 am

As an insurance consultant I manage my client's insurance, working with hundreds of agents.

My clients pay premiums of between $10,000 and $2,000,000. The average is around $400,000.

When I manage a renewal I want the agent to come to the table with a summary of coverage that outlines policies, premiums, limits, and major exclusions. The summary and the policies help me understand the actual coverage in force. (I don't rely on the policy alone as, inevitably, there are endorsements pending, misfiled, or lost.)

It's silly to think that a summary has to recite every policy term and condition. It is an overview of the coverage "" nobody expects it to be more.

That being said, there are issues that get agents into trouble in the normal course of business. Not reviewing those would be an invitation to E&O -- coinsurance, flood exclusions, pollution exclusions, and the availability of increased amounts of coverage all come to mind. Offering coverage not currently purchased is also essential "" business income, employment practices, professional liability, umbrella.

BTW, some of the agents I deal with comment that they like it when I'm involved in an account -- I present another target to the lawyers when a claim doesn't get paid.