In recent years, the blame game has become very popular. Theobject of the game is to find somebody to blame; it does not reallymake any difference who this is, as long as it is not the personlooking for a victim to blame. Insurance professionals areguaranteed losers and at all costs should avoid involvement in thegame. Your position in any given insurance transaction makes youthe perfect target.

Most folks involved in any given transaction feel completelyjustified taking their shots at the middleman when something doesnot go exactly as planned. This is especially true for theinsurance person because even if you win, you lose. Consideringlost clients, time wasted, and the emotional distress of beinginvolved in litigation, it is a zero-sum game.

Serving as an insurance agent/producer/broker has become a “hardhat” job. There are at least three different approaches tosuccessfully blame the insurance representative. On one hand, wehave the client whose position is, “He should have known what Ineeded.” On another hand, we have the insurance company, whoseposition is that its agent did not follow instructions or exceededhis authority. Finally, we have the legal community, which cannotproceed without finding fault. If all else fails and you cannotavoid litigation, I suggest following the often-recommended advice,“The best defense is a good offense.”

Constructing the agency defense is like building a bombshelter–which is not something you can do when the planes areoverhead. Likewise, building a proactive defense is not somethingthat is done once you know a problem exists. Rather, your strategymust be well planned in advance and heeded when needed. The keyword is “heeded,” because most insurance pros have created greatmission statements and customer service protocols only to find thatthe best-laid plans have been ignored.

A proactive defense

Probably the single most important factor in creating your bombshelter is to understand your relationship with your clients.Surprisingly, the most trouble comes not from your most valued andlong-standing clients, but rather from new clients or clients withwhom you do not have a trusting relationship. This issue isbecoming more critical as the sale of insurance products becomecommoditized: Price often is the only factor except when theuncovered claim occurs.

The standards of care relating to your long-standing clients areclear: the agent or agency has an enhanced duty to advise andcounsel these clients. Your responsibility to newer andprice-conscious clients is definitely murky. Theoretically, in moststates you have no clear duty to advise and counsel these clients.My advice is to ignore the theory and operate on the premise thatyou have unlimited responsibility toward all of your clients.

Keeping in mind that your duty is unclear, it is crucial thatyou inquire and investigate the needs and requirements of yourprospective clients, gain access to the current insurance programand analyze the program in relation to your understanding of theclients' needs and requirements. It is essential that you provideyour prospect information about available coverage. Remember, it isnot your duty to provide coverage for every contingency; it is yourduty to advise what it is that you can provide.

The final piece of your defense is documentation. Even thesingle producer has access to computer programs to keep track ofits clients and the interaction with them. You would be amazed howmany cases that have turned on the fact that although the agencyhad an information management system, somehow in this particularsituation a crucial piece of information had been omitted.

The flip side of agency documentation is client documentation,especially with newer clients. This information should contain theinitial request for coverage by the client, the coverage you soughtto obtain, and of course, an explanation of the final product.Everything that you did or tried to do should be put in writing,not only on your information management system, but incorrespondence with the new insured.

How you and the agency holds itself to the public is a factorthat is overlooked by many insurance producers. If you holdyourself to be an expert in some particular field, provideconsulting services for a fee or hold professional designations, itis probable that the standard of care required will be higher thanusual. Recently I was involved in a case in which the insuranceagency advertised itself as “insurance experts” and supported thisclaim with the fact that everybody in the agency had been awardedthe CIC professional designation. The judge decided the case infavor of the client at a settlement conference because the agencyhad advertised itself as an insurance expert–and so they were heldto a higher standard to advise and counsel their clients.Therefore, the next step in the construction of your bomb shelteris to make sure that you really are what you think you are.Remember, nobody can be all things to all people.

The final piece in the construction of your protective structureis to recognize that the two most important duties of any insuranceproducer are to follow the instructions of their clients and theinstructions of their principals. Secondly, is the duty to providethe insurance you have agreed to procure. In both instances, thereis no room for interpretation; therefore, it is critical that youfully understand what you are being asked to do and what you haveagreed to do. These two concepts very often are quitedifferent.

I am involved in litigation where the producing agent standsaccused both of failing to follow the instructions of his clientand failing to follow the instructions of his principal. If theallegations are accurate, he also is guilty of failing to procurethe medical insurance that he has agreed to acquire on behalf ofhis client.

The litigation arose from the suggestion by the agent to replacean existing small group major medical contract. The basis forsuggesting the replacement was better coverage at less cost.Incidentally, both were true; however, there were significantdifferences between the two contracts. The producer's instructionsfrom the client were to make sure that the client did not have lesscoverage. The instructions from the insurance company to its agentswere to make sure that when selling replacement insurancecontracts, all differences are carefully explained. At this pointin the proceeding, it appears that the producer failed at both. Heis now in the insurance version of “no-man's land.” He has lost avaluable client because of the dispute, and the insurance companyhas walked away from him because he did not follow instructions. Incase you are wondering, the agent has very low limits of E&Oinsurance and it is quite possible that the agent who set out to dothe right thing for his client could be in a world of trouble.

Now that we have completed our bomb shelter, it would be nice ifwe could crawl in and be protected from all the contingencies thatinsurance people face on an almost daily basis. Sorry, but thiswill not work. The following admonition appeared recently in theDefense Research Bulletin:

All licensed insurance agents have a responsibility to theirclients, that expands as the agent or agency presents itself as aninsurance professional with special expertise in a specific area ofinsurance protection. The greater the expertise, the greater theright of the insurance client to rely on the chosen insuranceprofessional. Courts have made clear that an agent holding himselfor herself out as a professional will be charged with greaterresponsibility than simply filling out application forms. Thereforeit is imperative to realize that in reality the insurance salesmanno longer exists.

Boiling this legalese into a single sentence, it simply meansthe more professional and expert we become, the more responsibilitywe undertake. The best offense is to approach each transaction witha sense of service and self-preservation. The best way toaccomplish this goal is to treat each client individually byselling the right product at the right price.