Insurance agents provide an invaluable service by protecting their clients against many exposures and risks. Insurance policies are designed to protect customers from lawsuits filed against them for events they may not have even considered. Business owners must insure for concerns related to property damage, bodily injury, and other causes of financial losses.
During the course of providing insurance solutions designed to address certain exposures, an agency may miss something important, a matter that can create an issue that could lead to litigation. It can be something as innocent as an oversight or some other form of mistake. An agent is after all human and can make mistakes, so having insurance agency e&o coverage will help alleviate a lot of stress when matters of this sort arise.
Issues that create vulnerabilities
In a case where an agent is provided a copy of a customer’s prior policy and agrees to match coverages, they now have a duty to match the coverage and policy limits. The agent should advise that customer that an exposure analysis is often done under these circumstances so that the appropriate coverage can be suggested.
A client may agree to the analysis but later doesn’t accept the recommendation of the agent. In the event that a loss occurs, customer now claims that they weren’t properly made aware that a policy was available to address a certain liability issue. This can result in a real problem if your client makes such an allegation and a claim is filed. Now there is the added burden of defense costs and the possibility of indemnification if you are found liable for failing to disclose certain information.
Customers that have had to file a claim, only to find out their coverage is not going to respond as they thought it would, will likely blame the agent for the situation as it exists.
While the agency does not feel that they are guilty of any wrongdoing, they will want to offer some degree of restitution. This is an example of an area where agents need to be careful and why insurance agency e&o coverage is essential to avoid having to pay costly claims out-of-pocket.