Volume 25, Number 9
Issues to Consider Concerning Agency Technology
We regularly receive phone calls from independent agents with questions on a wide variety of topics. Quite often the topics relate to concerns about an agency or brokerage’s technology. Because technology issues seem to be a primary area of concern for many independent insurance agents and brokers, we are sharing in this issue of The E&O Report some of the more common technology questions we regularly receive.
Almost half of all new errors and omissions claims, incidents and lawsuits we defend for independent insurance agents and brokers involve, in one way or another, certificates of insurance. As such, it is important to have copies on file of the actual certificates issued by the agency or brokerage. Unfortunately, some agency management systems will only save the text and date the certificate is issued. As such, each time a certificate is reprinted, a new date for the certificate is shown. When this happens, there can be a problem in defending an E&O claim or lawsuit because the reprinted certificate will not be a true and accurate copy of the original certificate issued by the agency or brokerage. This might also be an issue with applications, binders and evidence of insurance. If the agency management system does not save an exact copy of the certificate, the agency or brokerage should keep a scanned or hard copy of the document actually issued in the insured’s file.
In order to rectify the problem, we recommend agencies and brokerages scan every certificate they issue and attach the scanned copy to an insured’s electronic file in the agency management system. However, if your agency or brokerage is unable to complete this task for any reason or your office only maintains paper files, we then recommend you print out and retain a paper copy of the certificate actually issued. By doing so, you will preserve a copy in the form the certificate was actually issued and be able to present it if an issue or claim arises.
Electronic delivery of policies and other insurance documents is another area of technology where we frequently receive questions from agencies and brokerages. If you attend one of the loss control seminars we present, you might hear us say one of the best defenses available in E&O claims and lawsuits is the insured’s duty to read his or her insurance policy. However, in order to rely on this defense, the policy must be sent to the insured prior to the loss. In connection with this defense, you might also hear us discuss the legal presumption of mailing that exists in the courts. That is, if the mail is sent pursuant to an established office practice and procedure, it is presumed by the courts to be received by the recipient. It is for this reason we suggest insurance policies be mailed to insureds. Many insurance agencies and brokerages are now delivering policies and other documents to insureds in electronic form and not on paper. For this reason, we often receive inquiries from agents and brokers as to whether they can safely send insurance policies to insureds by e-mail instead of U.S. mail.
Unfortunately, at this point in time, there is no presumption of receipt for e-mail that is similar to the presumption for items sent via U.S. mail. Nevertheless, there are still ways an agency or brokerage may safely send electronic copies of policies to insureds in lieu of mailing. If an agency or brokerage desires to e-mail policies to an insured, or deliver them by some other electronic means, the agency or brokerage should first obtain the insured’s written consent and understanding that from this point forward their policies will be sent electronically and, as a consequence, they will not receive a paper copy. In New York, an agency or brokerage is required to obtain an insured’s prior written consent before delivering insurance policies electronically. However, even when a signed acknowledgement is not required, it is a good practice for an agency or brokerage to obtain one before delivering insurance documents electronically. A sample of the language contained in the authorization to be signed and dated by the customer relating to electronic delivery of insurance documents should read to the effect of the following:
This is to acknowledge that as of the date set forth below I have requested that the _____ agency provide me with electronic copies of my insurance documents. In addition, I further acknowledge my understanding that until such time as I specifically request in writing to the agency that this procedure be changed and the agency acknowledges its receipt of that request, I will only receive electronic copies of my insurance documents and I will not receive paper insurance documents.
We also suggest that when the policy is forwarded to the insured via e-mail, the agency or brokerage should attempt to receive back from the insured an affirmative response acknowledging the insured’s receipt of the e-mailed policy. An agency or brokerage should never rely on simple automatic reply receipts to confirm that an e-mail sent was in fact received. Such replies are sometimes falsely generated by e-mail server configurations. Also, antivirus software can delete and quarantine attachments preventing the recipient from receiving the attachments, and anti-spam software can also automatically delete e-mail or classify it as junk mail. Therefore, the best practice for any agency or brokerage to follow in order to prove receipt of a policy sent via e-mail is to request the recipient provide a response. There are also several website vendors that provide the ability to deliver documents through a download confirmation site. The way these websites work is as follows: the policy is uploaded to a website, the website sends an email to the insured to download the policy from the website and then when the insured downloads the policy, the website sends a confirmation back to the agency that the policy has been accessed and downloaded.
If technology is used incorrectly by an agency or brokerage, it could hinder the defense of an E&O claim or lawsuit. However, the prudent insurance agency or brokerage can use technology in a way that can help it be more efficient, provide better customer service and protect itself against a potential E&O claim or lawsuit. Please feel free to contact us to discuss these and other technology issues that could affect your agency or brokerage as we move further into this new world of technology.