Agents helping negotiate down insurance requirements

[cid]

From your experiences; is this an E&O risk? To be more specific, if your client is unhappy that a customer is requiring a higher limit, an additional policy(such as an OCP), or something of this nature, is it an unacceptable E&O risk for the agent to(at your insured's request)try and help them convince their customer to lower their requirements?

[independent guy]

Yeah, I'd say that would be an E & O risk, and I would never ever attempt it. I always try to sell higher limits, and to try and convince someone or some business to lower theirs doesn't make sense.

[LadyBroker]

Sometimes I see my retailers negotiate out the excess liability requirement, or the blanket AI requirement, or $2 million CSL on an auto...but here's the real test ---- if there's a claim, and YOU told the client he didn't need the coverage, what would happen?

Too many times we think our job is an order taker. Not true. Our mission is to be the Risk Manager....your client likely only sees the initial outlay of dollars for insurance....they don't see that if there is a loss, they are covered. That's your job, to explain it to them.

I have a client involved in a large construction defect claim on a commercial property. Our insured is not in any way involved in the actual damages (he painted the interiors, the loss was faulty plumbing and drainage). BUT he got named, and counter sued, and cross sued, and so on, because he was on the job. To date, our carrier has spent almost $300,000 in defense monies. When this claim closes, it is likely we pay $0 in actual damages. Ask your client if he has an extra $300,000 laying around for defense....my guess is no.

[lauren]

cid wrote "From your experiences; is this an E&O risk? To be more specific, if your client is unhappy that a customer is requiring a higher limit, an additional policy(such as an OCP), or something of this nature, is it an unacceptable E&O risk for the agent to(at your insured's request) try and help them convince their customer to lower their requirements?"

It appears that cid is asking if it's OK for agents to negotiate lower requirements from a certificate holder. This is not an E&O situation since you are not advising your insured to not purchase higher limits, you are trying to get a certficiate holder to approve your client's current coverages and you owe no professional duty to the certificate holder. This is done when we receive rather outrageous requests such as the $50 Million Umbrella aggregate wanted by a general contractor. An OCP policy in no way helps our client since it's only in the name on the requesting party, not our contractor. We have also negotated that our insured not provide Pollution or E&O coverages on a certificate. We of course recommend these items to our client but if they choose to not purchase, we will discuss with the certificate holder to see if the "requirement" can be waived, depending on the actual exposure. (Ie. a builder's risk requirement for our excavator)

You need however to stress to your insured that if the contract requires certain items they must be crossed out and initialed or they may be in breach of contract.

But basically, we are here to help our client which includes such certificate negotations.

[LadyBroker]

I disagree, Lauren. If you help your client negotiate lower insurance requirements, it's all fine and good until there's a loss....and if the loss exceeds the coverage in place, at whom do you think your client will turn and point his little litigious finger? Yep, it's you...the kind agent who helped to negotiate lower limits (actually, what that really means is lower premium for the client), and now he needs more limits, and he forgets why he wanted lower limits in the first place----that few thousand you saved him in premium can go right to your E & O deductible.

I know that sounds harsh, but your client doesn't care about his coverage until he needs it, and then he does not remember why he bought less. Of course, that's just my opinion, so take it for it's worth.

[lauren]

We are NOT advising our client to lower their limits, we are negotating with a certificate holder that is requiring limits or coverages that the insured has already chosen NOT to purchase. And to be fair, we sometime use a certificate holder request to encourage an insured to get the higher limits or additional coverages when it makes sense.

But a $50,000,000 aggregate on a policy, an OCP policy or a Builder's Risk policy for our excavator client, do nothing for our insured but cost them money.

[dhoskins]

Lauren is the only one that gets it! The client has already decided not to purchase higher limits. He does not want to spend the money for more insurance if he doesn't have to. You have already offered him higher limits and he doesn't want them. Get it? Now he wants you to call his Custmer and see if you can get the customer to accept lower limits on the Certificate of Insurance. There is absolutely nothing wrong with this. And there is NO E&O exposure.

[independent guy]

Lauren is the only one that gets it! The client has already decided not to purchase higher limits. He does not want to spend the money for more insurance if he doesn't have to. You have already offered him higher limits and he doesn't want them. Get it? Now he wants you to call his Custmer and see if you can get the customer to accept lower limits on the Certificate of Insurance. There is absolutely nothing wrong with this. And there is NO E&O exposure.

No, I get that (now, not in my first reply) but good luck getting them to reduce their requirements...

[jackweho]

That is akin to being a dual agent in Real Estate. You cannot serve two masters. How can you try to convice the one side to accept lower limits, while advising the client to purchase higher limits. Guess who is on the hook if there is a large claim? All fingers will point to the broker and a good lawyer (oxymoron) will attempt to show that the broker tried to get both sides to agree on lower limits to effect a sale, hence commission revenue for the broker.

[LadyBroker]

Your client is the excavator? I don't know, I am thinking he is the first guy on the hook for the CD claim, he's the guy who touched the land first.

Listen, I know clients don't like to buy high limits, and in reality, so often they don't ever have a $50 million claim. My only point to you, and I believe it so firmly, is that the client NEVER remembers why they don't enough insurance at the time of a loss...so be sure that you document your files 9 ways from Sunday. Clients are your friend until there is a problem, and then you are the enemy.