Insurance agents spend their careers managing the risks and exposures of their clients, yet they often neglect their own risk management needs. Agents are often sought out as experts in risk management and reducing exposures, but they aren’t immune to risk themselves. Even with careful planning and management, insurance agencies are still subject to a number of Errors and Omissions (E&O) exposures.
Here are some of the most common E&O exposures that insurance agencies face.
One of the most common E&O claims against insurance agencies is for failure to procure coverage, which occurs when an agent does not acquire a specific policy that was asked for by the client. Typically it is due to paperwork error or accidental omission, but regardless of reason, it can create a costly burden for the client if a loss occurs that they believed they were covered for. To make up for the financial burden, the client will then turn around and sue the agent or agency.
Another example of a failing to procure claim is when an agent fails to recommend a specific policy to the client. While most insurance agents strive to recommend policies to cover all known client risks, they aren’t necessarily responsible for managing all risks in their capacity as an agent. A client may go after the agent or agency with a claim in order to recoup some of their losses, but this situation falls more under ill-advised business practices than errors and omissions. However, if the agent identifies themselves as an expert in a specific market or they are taking on a risk manager role, they may be held liable for this type of omission.
Even if the claim is unfounded - for example, if the coverage would not have covered the loss anyway - the agency or agent would still have to pay to defend the case. E&O coverage for insurance agencies can help pay for defense costs, and settlement costs, if necessary.
False information on certificates is often the result of an administrative error. Sometimes agencies take shortcuts and submit certificates that were completed by admins, vendors or subcontractors without checking them first, which can result in reduced, cancelled or invalid coverage. Ultimately, the fault would be on the agency for not ensuring the validity of their certificates prior to submission.
When faced with an professional liability lawsuit, E&O coverage combined with a strong risk management approach can soften the blow for insurance agents and agencies.
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.