service and limit their exposure to claims relating to extreme weather events should consider the following three easy-to implement steps: 1. Communicate with the insured to ensure informed decision making. When meeting with insureds to prepare an application for coverage (or for renewal coverage), specifically discuss hurricane deductibles and the availability of flood insurance. Do this with every insured every time, no matter how sophisticated the insured is in relation to insurance matters or how long you have acted as the insured’s agent. 2. Document communications relating to hurricane damage coverage and deductibles and flood coverage. Make sure your file contains written documentation that you discussed hurricane deductibles and mitigation measures, reviewed hurricane deductible examples and relevant flood maps, advised as to the scope of flood coverage and informed the insured about NFIP plans. Having the insured sign a declination form for flood is powerful evidence that the insured made an informed decision about the availability of coverage. Consider writing to the insured to confirm your discussions and the decisions made by the insured about coverage. At the very least, document the discussion and the decisions made by the insured in an internal memorandum to be maintained in your file. Prepare this letter or memorandum reasonably contemporaneously in time to the meeting. 3. Preserve your documentation. Keep these records documenting your communications on hurricane and flood issues in your files. Insurance Regulation 67 requires agents to maintain a policy record file for
each policy, including hard copy and electronic work papers and written communications for the current policy year plus four years. In an earlier Anchor article, we suggested that this minimum regulatory retention requirement may not be sufficient to allow agents to effectively defend claims because many claims to which an agent may be subject have statutory limitation periods of up to 10 years. Agents should also be mindful of any contractual obligations imposed by their E&O carriers for retaining documents. Failure to maintain or preserve records in accordance with regulatory authority or pursuant to contract may relieve the E&O carrier from the duty to defend third party claims. These practices and policies should be established and communicated to all agency employees and enforced by management. What is covered is one of the biggest sources of anxiety for an insured during an extreme weather event. Agents should reach out to their customers to fully explain the coverages and exclusions and assist them in selecting the best product for their unique circumstances. Melissa E. Darigan (med@psh.com) and Jennifer R. Cervenka (jrc@psh.com) are attorneys with Partridge Snow & Hahn LLP, a Providence based business law firm. Ms. Darigan is a partner with the firm and Chair of its Litigation group. Ms. Cervenka is a partner with the firm and Chair of its Insurance group.
Second Quarter, 2012 17
The Anchor