1. E&O Basics for Personal Lines
Patrick Deem, CIC
Risk Management & Consulting Services

2. I Don’t Care What You Buy As Long As You Make
Different Approach
Checklists
Survey Forms
Manage Customer Expectations
I Don’t Care What You Buy As Long As You Make
An Informed Decision

3. Common Law duties of agents

4. history
Agents Sought to be Considered Professionals like Accountants and Attorneys
Specialization Requires Higher Standard of Care
Insurance Agents Often Stand in a Fiduciary Capacity & Should be Required to Use Their Expertise with Every Client
Agent Should Be Held Liable for Negligence Just as an Attorney, Architect or Any Other Professional

5. Degree of care - Customers
Follow Instructions
Act in Good Faith
...Unless Special Circumstances Create Additional Obligations
Calling to Remind Them to Make a Payment
Suggesting Coverage
The More You Do for a Customer,
The Higher the Degree of Care
We All Try to Create Special Circumstances –
It is What makes Us Different

6. Customer Expectations
Customers Don’t Read Their Policies
Rely on Us for Advice
Agent is Blamed When Things Go Wrong
Standards Help Manage Customer Expectations

7. Obligations to Insurance Companies
Law of Agency
Protect Their Interests
Notify of All Material Facts
Do Not Exceed Authority

8. Company Expectations Relationship is Different Today
More Likely To Sue Agent If They Are Forced to Pay a Claim
It’s Only Business

9. Responsibilities to other parties
Negligence
An Implied Contract to Procure Insurance That Benefits That Person
Adding a Loss Payee, or a Mortgagee
Third Party Claimant
Release Signed by Customer Allowing Third Party to Sue Agent

10. Texas court case
"An agent owes his clients the greatest possible duty. He is the one the insured looks to and relies upon. The insured looks to the agent he deals with to get the coverage he seeks, with a sound company who can and will promptly pay claims when they are due. It is his duty to keep his clients fully informed so that they can remain safely insured at all times." 

11. Common E&O Mistakes

12. Types of mistakes – Westport E&O Claims Data
Procuring Coverage – 12.88%
Negligent Misrepresentation – 10.54%
Failure to Pay Claim – 9.0%
Adequately Explain Policy – 8.48%
Recommend Coverage Type – 7.71%

13. Line of business - Texas
Homeowners %
Nationally – 11%
Auto – 10.5%
Nationally – 12%
Why?

14. Texas Catastrophe Exposure
Natural Disasters Uncover Errors that May Have Gone Unnoticed
Desperate People Do Desperate Things
Increased Litigation in Property Claims May Spread to Agents
Massive numbers of Claims

15. Legal Authority

16. Types of Authority Express – Outlined in the Company Contract
Implied – Necessary to Carry Out Express Authority
Apparent – The Consumer Assumes You Have the Authority Based on Your Ads or Actions
Issuing Binders – Implied
Advertising You Represent an Insurer or a Coverage When You Don’t
Saying Coverage is Bound When You don’t have the Authority to Bind it

17. Client Life Cycle

18. Westport Statistics
Almost one in Five Claims Are Related to New Clients
Number of Personal Lines E&O Claims in Texas is Higher than the National Average

19. New clients - homeowners
Don’t Imply Your Quote Has the Same Coverages as the Expiring Policy
Do Try to Determine The Insured’s Exposures
Establish Agency Standards – Is Everyone Asking the Same Questions?
Don’t Quote “Apples to Apples”

20. General Questions
If You Lost Everything, What Would Do Want to Be Certain Your Policy Covers?
Or, What Do You Want This Policy To Do?

21. Agency Standards – Insurance to Value
Always Recommend the Dwelling be Insured 100% to Value
Remind Customers that the 100% Amount is Actually Insuring Their Equity
Consider Restating the Premium in Cost Per Thousand
Consider a Higher Deductible
$100,000 - $1,000 = $10/1000
$20,000 more insurance, plus more ALE plus more contents plus more coverage for other structures for $200

22. Business in the home More People are Working Remotely
They May Have Employer’s Property Along With Their Own
Five Different ISO Endorsements
Best Option May Be a Business Policy
E&O Exposure is NOT asking the question

23. Limitations for certain property
Endorsements Available
Scheduling Property is Also an Option
HO – Texas Not the Best Option
Use HO – Agreed Value Loss Settlement

24. Water Damage One of the Most Confusing Coverages in the HO Policy
Customers Do Not Understand Why a Claim is Denied for a Slow Leak When They First Noticed it Today

25. Not Covered by HO Policy
Constant Seepage or Leakage
Water Backup Through Drains
Underground Water Pressure
Flood
Mold Damage/Clean-up for Property Not Damaged by Water

26. Personal injury Should Offered to Every Customer
Essential for Those Who Have Children Or Post On-Line Comments
Growing Number of Lawsuits
Cyberbullying

27. Personal auto standards

28. limits The Higher the Better
A Ford Dealer in Austin has 100 vehicles with an MSRP in excess of $50,000
Medical Costs are Continuing to Rise
Discuss a Personal Umbrella

29. Use of vehicles Company Cars Use in Employer’s Business
“Available” Autos
Uber/Lyft
Delivery

30. Physical damage
Establish Recommended Deductible Level for Most Savings
Ask About Custom Equipment, Particularly for Pickup Owners
Ask About Auto Rental
PP $1,500 coverage
PP – Additional Amount

31. Renewal and Mid Term Servicing

32. Renewal Develop Schedule to Regularly Review Customers
Update Information
Repeat Recommendations if Necessary
Discuss New Exposures (If Any)

33. Other Items

34. Avoid Jargon PIP Comprehensive Replacement Cost – Rebuilding Costs
Scheduled Items
Percentage Deductible

35. Key to effective E&O
Document

36. Emerging Challenges The 80-20 Dilemma Failure to Cooperate
Public Adjusters & Hail Litigation
Lifestyle Profiling
Specialized Forms

37. Questions?