Green Mountain Agent Magazine - Spring 2023

AVOIDING AGENCY E&O CLAIMS WITH SIGNED DOCUMENTS–SAFE,SAFER, SAFEST

By Virginia Bates

Mostagencyerrors&omissionsclaimshavesomecommonalityThisarticlepresentsa fewexamplesyoucanusetopreventapotentialclaimagainstyouragencywhen managingclientsignatures.

Allofthepotentialerrorsandomissions(E&O)problemsbelowhaveacommonissue. Canyoutellwhatthatis?

Youmailarenewalapplicationfromyouroffice,pre-filledwithlimitsfromyour agency’sautomatedsystem.Youraskinyouremailthatyourclientreviewthe applicationandsignit.Theclientemailsitbackwiththemessage,“Looksgood.No changes.Thanksforyourhelp.” Sevenmonthslater,theinsuredhasalossand learnstheirlimitsareinsufficient.

2. Noneofyourstandardcarrierswillwriteanewlyestablisheddaycarecenter.You placeitwithanon-admittedcarrierthroughasurplusbrokerwithwhomyouhave workedforyears.Yourinsuredcompletedtherequiredapplication,butyouhadto followupfortheaffidavitofnoticeoflackofaccesstothestateinsurance guaranteefund.Thecarrierissuedthepolicycontingentonreturningthesigned affidavit.Towardtheendofthepolicyperiod,thecarrierbecameinsolventandwas unabletorespondtoaclaimthatotherwisethepolicywouldcover.Theaffidavit maybecomecrucialindefendinganypotentialE&Oclaim.

3. Asatisfiedclientrefersaprospecttooneofyouragency’sproducers Theproducer hand-completedtheapplicationfornewbusiness The“priorlosses”sectionofthe applicationwasclearlymarked“none”Sevenmonthsafterpolicyissuance,the insuredsubmitsaclaim Althoughthelosswouldnormallybecovered,thecarrier deniestheclaimbecauseitdiscoversarelevantpastlossthatoccurredpriortothe policy’seffectivedate.Thecarrierrescindsthepolicybacktoitsoriginaleffective date.

1.

Anaccountmanagerroundsouta homeownerspolicywithapersonal autopolicy.Theaccountmanagerand clientdiscussanumbrella,buttheclient willnotaccepttheminimumliability limitsontheautopolicyrequiredforthe umbrella.Laterinthepolicyyear,the insuredhasaseriousautoaccidentfor whichthecurrentautopolicylimitsare insufficient.

Didyoufindthecommonelementin eachofthosepotentialE&Olosses?In eachcase,theclient’ssignaturewillbe crucialintheagency’sdefense

Didyoufindthecommonelementineach ofthosepotentialE&Olosses?Ineachcase, theclient’ssignaturewillbecrucialinthe agency’sdefense.

Inthefirstcase,theemailattachedinyour systemtotheclientfilewillbehelpful.Itwill bemorehelpfuliftheclientsignsthe renewalapplication.

Inthesecondcase,youwouldfeelrelieved ifyousavedtheinsured’ssignedaffidavit.

Inthethirdcase,theinsured’ssignatureon theapplicationwillprotecttheagencyfrom theinsured’sallegationthat“Itoldyou aboutthatpriorlossandyoufailedtoputit ontheapplication”

Inthefourthcase,thesignedapplication, alongwithadocumentedsystemactivity, willrecordthattheproducerdiscussed higherlimitsalthoughtheinsuredrejected them.

E-MailSignaturesareCommon, However…

Whilee-signaturesarecommonand convenientforboththeagencyandthe client,therearestillmanyoccasionswhere theinsuredcompletesanapplicationinpersonoremailsittotheagencyupon

signing.Itissafetosaythatallagencies realizetheneedtosavesignature documents.Manyof thoseagencieseither savetheemailedapplicationor“scanand attach”thein-personapplicationand shredtheoriginal.

Whileakeywordinmanyindustriesis “paperless,”reconsiderhowbestto documentandsecuresignature documentsItisnotuncommonforan insuredtoallegethattheagency“created” theevidenceandthatdocumentisnotthe actualsignatureoftheinsuredwhen confrontedwithalimitedorrejectedclaims settlement.Defendingthecasemayrequire theaddedexpenseofahandwritingexpert, becausewithoutthatexpert,theinsured’s testimonymayconvincethejury,resulting inaverdictagainsttheagency.

Therefore,thesafestoptionistosavethe originalhard-copysignature(orsecureit insteadoforinadditiontotheemailed copy).BrianButcher,JD,CPCU,Vice President-ClaimsCorporateSolutionsat SwissReoffersthisperspective.

“Ithinkitis…helpfultoobtainahardcopyof thesignedapplicationinthosesituations whereeverythingisdoneonline.Partofthe thoughtbehindmyrecommendationto printandsavedocuments,especially applications,wastohaveahardcopy showingtheinsuredhadsignedthe applicationandthatthesignaturewas his/hersignature,”Butcherrecommended DefenseCounselSpeaks

MyanecdotalsurveyofE&Odefense attorney’sechoesMrButcher’scomments Whenasignatureisanintegralpartofan agency’sdefense,attorneyssurveyed agreethattheypreferthemore“bulletproof”optionofahardcopy,“blueink” signature.

Inmoststates,theagentisresponsiblefor procuringthelimitsandcoverages requestedbytheclient.Therefore,itiswise tobeabletoshowwhattheinsured requested.AspointedoutbyMr.Butcher, “Thesignedapplicationisgoodproofin E&Oclaim,thattheagencyprocuredthe coveragerequestedbytheircustomeras

the signature is arguably the insured’s attestation as to what coverage they wantedandwhatlimitstheywanted.”

Updating Limits Crucial in Today’s Claims Environment

Currentlyandforthenearfuture,inflationis a huge factor in property and property damageclaims.Priorpolicylimitsareoften insufficientfortoday’srepair,buildingand settlements. “We often find ourselves in a situationwherethecarrierrenewsapolicy, sometimes for years,” Mr Butcher continued, “ without getting a signature again on an application This can be problematic where the cost of constructionhasrisenovertheyearsand the insured is suddenly ‘underinsured’ for thelosssustained.”

Often agencies “renew as is” and feel pressured for time to converse with their clients about updating limits and documenting those conversations with substantive activity notes and updated signedapplicationswhereneeded.

Attaching relevant emails, documenting conversations as date-stamped activities intheagency’smanagementsystemand followinguponopenitemsdiligentlyareall good documentation rules to keep the agencysafe.Inaddition,onedeviationfrom paperless–keepinghardcopiesofsigned applicationsandsimilardocuments–can be one additional precaution to keep the agencysecure

Virginia Bates is President of VMB Associates Inc which provides consultations on agency profitability, financial reporting, human resource development, compensation plans, and E&O security Bates conducts E&O for-credit auditsandagencyvaluations, andassistsinagencysales, perpetuations, and transitions She is familiar with a wide array of agency technology and is the founder of VMBHits.com which is a testing site to determine hiring desirability and educational needs of staff She regularly conducts classes on technical, sales and management topics