E&O Preventions: The Devil is in the Details

May 10, 2018

Smart Choice and CalSurance Associates welcome you to the Smart Choice E&O Prevention Newsletter, your resource for loss prevention education.

Illustration of a woman with a giant pencil checking off steps put in place by an errors and omissions prevention system for independent insurance agents. Each quarter, you will receive timely and relevant E&O loss prevention tips you can start using immediately to keep yourself protected while conducting business.

The Devil is in the Details

Claim Scenario:

An insurance agent received a notice of claim and copies of a lawsuit filed against one of his clients. The agent promptly prepared a fax to be sent to the carrier along with the suit papers, gave it to his secretary to send, and left the office for a meeting with a prospect. The secretary placed the documents in the fax machine, hit the "send" button, and later filed the fax confirmation and other documents in the claim file. When the client called to ascertain the status of the claim 30 days later the agent discovered that the original fax had not gone through to the insurer and resent the documents.

The carrier immediately retained defense counsel who learned that the plaintiff had been granted a six figure default judgment due to the defendant's failure to timely answer the complaint. Defendant's motion to vacate the default was denied, and a decision was made to settle the claim rather than appeal. A claim was subsequently made against the agent for failure to timely notify the client's carrier of the claim.

E&O Prevention Tip:

Errors of omission — including simple lack of attention to seemingly insignificant details — can have significant consequences. In this scenario, although the agent had initially delegated responsibility for forwarding the claim to the carrier he bore ultimate responsibility to follow up to make sure that his instructions were properly carried out.

Standard agency procedures for handling claims, cancellations. endorsements, renewals, etc. must be established and all agency personnel (including agents) must be made aware of them. Compliance with those procedures should be mandatory for all personnel and should be checked, re-checked and continually monitored. In this case a simple diary system could have disclosed that no carrier acknowledgement of the claim had been received, the error discovered, and notice could have been forwarded in time to prevent the default.

Visit www.calsurance.com/smchoice for more tips and E&O program information.

CalSurance Associates, A Division of Brown & Brown Program Insurance Services, Inc. Domiciled in California, CA License #0B02587

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