Producer Tips for Avoiding E&O Claims Relating to Marketing & Selling

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E&O exposure can be created by anyone in the agency, including owners and managers, producers and CSRs. Each month, I will share some easy-to-use tips targeted at different positions to help reduce E&O exposure in your agencies. Sharing these with all agency staff can raise everyone's awareness of how to prevent claims, and open a dialog throughout the agency about improving business processes. I hope that you find these helpful and welcome your suggestions on any specific E&O topic you would like us to address.

• If you prepare your own marketing or advertising materials, be sure they don’t over-promise benefits of policies or services to be provided—have them reviewed and approved by an agency principal
• Avoid using terms such as "all risk," "full coverage" or "comprehensive," as they tend to imply coverage is broader than is actually the case
• Do not hold yourself out to be a risk manager if you are not qualified to do so
• Stay within your areas of expertise – in terms of coverage and types of accounts - E&O claims often happen when a producer ventures into unfamiliar waters
• Use a checklist or formal fact-finding tool to gather underwriting information
• Talk to the right person—the owner of the business is not necessarily the person in possession of the information you will need to provide a quote
• Confirm all preliminary conversation with the prospect in writing as soon after the conversation as possible and document the file accordingly
• Document if there were any areas of a prospect’s operations that were not reviewed and indicate the specific reason (e.g., the insured did not wish to have a particular area or entity reviewed) and include it in the file
• Include appropriate disclaimer language on all proposals (refer to sample proposal in the Additional Tools and Resources section)
• Provide sufficient detail so the prospect understands what is being proposed
• Identify any necessary steps the applicant must take before coverage can be put in effect, such as supplemental applications, loss control recommendations, etc. and notify them of that, preferably in a written form, and document the file accordingly
• Include coverage options and the cost of those options in all proposals, even if they are "indications" rather than firm quotes
• Recommend important coverages, such as EPLI, Flood, etc. and propose higher limits when appropriate, including an estimated cost of each, and document the file accordingly
• Do not make coverage decisions on behalf of the prospect
• Have the prospect initial or sign off on any recommended coverage that is being rejected and maintain that for the file. If the insured will not sign off on the declination send them a certified letter with an understanding that coverage was offered but declined.
• Advise prospects in writing whenever coverage cannot be placed, what the reason is, and what the process is for placing coverage in the future
• Confirm in writing whenever a proposal is rejected and include a reminder that no coverage has been provided
• Include an expiration date or time limit on all quotes and proposals

Linda S. Loving, CIC, AISM (lloving@iiav.com), VFSC Executive Vice President

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