| March 2017|
Volume 29, Number 3
The Importance of E&O Loss Control
Here’s something we observed over the years from our work with thousands of insurance agencies and brokerages. The ones truly committed to errors and omissions loss control are less likely to face an E&O claim or lawsuit. Or, if they are involved in a claim or lawsuit, they fare much better than the others. True commitment to E&O loss control is not just a once-a-month reading of The E&O Report or attending a yearly E&O seminar. It requires an engrained part of the agency or brokerage’s culture in order to receive all the program benefits. That is, an agency or brokerage’s E&O Loss control program must be established and practiced consistently each day and by all employees.
Please also feel free to let us know about any issues or topics that you may want us to address in future issues of
The E&O Report. Many of the topics we write about in
The E&O Report originate from issues agents and brokers bring to our attention through telephone calls and emails. If you have any ideas in this regard, please reach out to
Jim Keidel and let him know what you have in mind. From our experience, an issue that one New York insurance agent or broker is facing may actually be much larger and affect many other producers across the state.
The fundamental idea behind E&O loss control is that insurance agencies and brokerages should be able to reduce or eliminate those practices most likely to cause or contribute to E&O exposure. The key is to identify the areas where E&O claims most often arise and teach employees practices to follow that reduce problems. Over the years, we addressed some of the most frequent sources of E&O claims and lawsuits through our writings and seminars. As a result, significant progress has been made in reducing claims. We can point to recommendations we made that squeezed out potential exposure to insurance agencies and brokerages in the areas involving additional insureds, certificates of insurance, binders, applications, proposals and the entire process of documentation.
From an E&O standpoint, faithful readers of The E&O Report know the most desirable practices on virtually every transaction that takes place within the agency or brokerage. This knowledge covers the various processes that are followed by employees in every aspect of the business of an insurance agency or brokerage. They include marketing/prospecting, completing applications, preparing proposals, delivering policies, servicing policies, reviewing renewal options and handling claims. We have said many times in the past that the most successful independent insurance agencies and brokerages are all firmly committed to following good E&O loss control practices. Those agencies and brokerages know the philosophy of implementing good E&O loss control practices must not only be endorsed and encouraged by management, but those practices must be regularly monitored to help ensure they are consistently followed by all employees on a daily basis.
Agencies and brokerages that regularly follow good E&O loss control practices are aware of the many benefits those practices produce. The benefits not only include reducing the likelihood of an E&O claim or lawsuit, but the added benefit of helping sell more insurance. It’s a major reason why E&O loss control is treated with the utmost importance among the most successful insurance agencies and brokerages. Think about it – if you offered each customer the insurance options they need in the event of a loss, that same customer will have a hard time asserting a claim that the agency or brokerage was negligent or breached a contract in failing to offer those coverage options. Many loss control techniques help to sell broader coverage or higher limits of coverage thereby enhancing profitability, protecting the customer in the event of a claim and helping shield the agency or brokerage. The use of coverage checklists is a perfect example of an E&O loss control technique that not only helps protect the agency from an E&O claim or lawsuit, but it also helps sell more insurance.
Another benefit helps put the agency or brokerage in closer contact with the customer. This increases the level of customer service that is provided. It has long been our belief that service is one of the most important aspects of any E&O loss control plan. We have seen that when customers, from the smallest to the largest, are provided with exceptional service by an insurance agency or brokerage, there is a much less likelihood that the customer will make an E&O claim, or bring a lawsuit, if a problem arises. One of the fundamentals of E&O loss control is that by providing exceptional service to customers, insurance agencies and brokerages may be able to reduce the chance that a customer will file a claim or lawsuit.
A comprehensive E&O loss control program should be all-encompassing. Everyone within the agency or brokerage, from the receptionist, CSR’s and producers, all the way up through management, should follow good E&O loss control practices daily and understand the importance of doing so. The agency or brokerage will not only reduce the likelihood of an E&O claim or lawsuit but provide customers with better service while growing the amount of insurance sold. We encourage every agency or brokerage, no matter its size, to develop and implement a strong E&O loss control program, ensuring it is regularly followed by all employees on a consistent basis.
Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at firstname.lastname@example.org. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.