Agents selling homeowners insurance must exercise careful riskmanagement and pay close attention to detail to avoid acts thatresult in errors and omissions allegations against them.

Making agency personnel aware of proper procedures in a numberof areas is essential to the successful operation of an agency. Thefollowing is a collection of suggestions to avoid E&Oclaims across various facets of agency operations.

Communications with Insureds

In General:

1. Use care when explaining or delivering "all risks,"comprehensive, and specific coverages. All policies haveexclusions. Explain them to the insured.
2. Confirm in writing the insured’s declination to purchaseimportant coverages or limits.
3. Explore every market—standard and excess andsurplus—before advising an insured coverage is not available.
4. Advise insureds in writing if needed coverage, previouslyunavailable, can now be written.
5. Do not indicate to an insured you can place a policy until youknow for certain it can be placed.
6. Do not place property coverages until you have physicallyvisited the premises to be insured.
7. Stay within your own field. Don’t try to be an attorney,accountant, engineer, etc.
8. If you don’t know, say so. Find out and report back inwriting.
9. Never reveal you are insured for errors and omissions.

Binders and Orders:

10. Prepare all binders immediately.
11. Indicate the time and date that the binder iseffective.
12. Indicate the company, the type of coverage, property to beinsured, limits, address to be insured and the correct name andmailing address of the insured.
13. Pick up the binder when you deliver the policy.
14. An oral request for a binder should be followed up immediatelywith a written binder, and the insured should be sent a copy.
15. All agency personnel should be informed of agency's binderprocedures.
16. When possible, use standardized binder forms.
17. Use agency binders to effect new coverages on existingpolicies.
18. Do not exceed your binding authority for either limits orcoverages.
19. Inform agency personnel of binding authority, and theprohibited and restricted lists of each company.
20. Binders should be executed in triplicate: the originalsent to the insured, a copy to the company, and an officecopy.
21. Never use a binder to provide free insurance. Advise theinsured that coverage is in force and will have to be paidfor.

Endorsements:

22. Prepare endorsements at once. If that is not possible,acknowledge request in writing and issue binder.
23. Indicate on the face of the office copy of the policy that thepolicy has been endorsed. Include the date and whethercoverage was added, deleted, or modified, e.g., increase in limitsin mid-term.
24. Determine whether and endorsement or a cancellation and rewriteof the policy is the best method to accomplish a change in thepolicy, e.g., assignment, change of address, agent, etc.

Expirations and Renewals:

25. A renewal policy should be issued and delivered prior toexpiration of existing policy.
26. Advise insured in writing if the renewal differs from theexpiring policy. If necessary, request that the insurer issue acorrected policy.
27. Cross-check renewal lists with office expiration records andcompany expiration lists.
28. The renewal list should be reviewed 60 to 90 days prior toexpiration, and the insured contacted so any changes can bemade.
29. Advise insureds in writing of non-renewal of policies insufficient time. Obtain replacement coverage when possible. Ifunable, advise the insured in time for the insured to obtaincoverage elsewhere. Many state insurance regulations oncancellations and non-renewals require at least 30 days priornotice of non-renewal for policies covering family automobiles,dwellings, or governmental properties.
30. Unless proper notice of non-renewal has been given, a renewalmust be issued.

Cancellations:

31. Valid cancellation can only be obtained by strictadherence to cancellation provisions of the policy and insuranceregulations on cancellations and non-renewals.
32. Policies cancelled by the insured should be picked up atonce.
33. If it is not possible to obtain physical possession of thepolicy, obtain a lost policy receipt signed by the insured.
34. Be certain that additional insureds, mortgagees, loss payees,governmental agencies, etc., are all included in the notice ofcancellation.
35. Check office copy of policy changes in address, assignment,etc., when a notice of cancellation is received.
36. Do not divulge reasons for cancellation unless requested to bylaw and with immunity from suit.
37. If a policy is reinstated, make sure that the insured is awareif there is a gap in coverage.
38. Never send an invoice on a policy that has been cancelled andthe earned premium paid thereon. Be certain accounts receivablerecords indicate clearly that the policy has been cancelled.Indicate on invoice that balances due on cancelled policies are forthe earned premium.

Claims:

39. All reported claims must be in writing and on claim reportforms. Often, insurers prefer ACORD forms. Use or devise atelephone report form and/or log.
40. Never indicate there is or is not coverage unless you areabsolutely certain.
41. Get the company’s answer in writing when requesting coverageinformation before relaying it to the insured or claimant.
42. Take the report and advise that you or the adjuster will be intouch with the insured or claimant.
43. Obtain the telephone number where the insured or claimant canbe reached.
44. Advise the company in writing of the reported claim as soon aspossible.
45. Advise the company at once of all reported claims. Use thephone in an emergency and follow up in writing.
46. Advise the insured of her or his responsibilities to protectproperty and to do nothing that will increase the loss. Lack ofcooperation on the part of the insured could result in the claimbeing denied.

Communications withInsurers

Binders

47. Company must be sent copies of all binders.
48. Binders must be cancelled in the same manner as policies arecancelled.
49. If the company requests cancellation of the binder, comply withthat request immediately and replace binder with anothercompany.
50. Never bind a company for coverage or limits beyond your bindingauthority or for which there is no authority.

Renewals:

51. Check renewals issued by the company with the renewal list sentto the company.
52. If you don’t receive a policy renewal by the expiration date,issue a binder or advise the company that the policy has beenrenewed with another company.
53. Check renewal policy for correctness. Do not assume it has beenprepared correctly.
54. Do not endorse an incorrectly prepared renewal. Request thatthe insurer issue a corrected renewal before delivery to theinsured.
55. Check renewals as to form. Form changes should be brought tothe attention of the insured.

Requests for New Policies:

56. Do not misrepresent the risk or withhold any underwritinginformation on new risk submissions.
57. Applications should be completed thoroughly. Applications maybecome part of the policy or else statements made therein maymodify or void the coverage.
58. Check the policy against the application for correctness.
59. Notify the insured immediately if the company declines coverageor modifies the coverage it is willing to write.
60. Company requests to alter or modify the coverage requested inthe application should be in writing.

Endorsements:

61. Check endorsements for accuracy.
62. Send the company copies of endorsements prepared in agencyas soon as possible. If endorsements can’t be prepared at once,prepare binders.
63. Use standard endorsement request forms whenever possible.

Office Procedures

64. Instruct office personnel that they must use your standardprocedures to handle claims, cancellations, endorsements, renewals,and orders for new policies.
65. All personnel must record in-person or telephone conversations.Use a telephone memo or a call sheet.
66. Handwritten records of communications are invaluable when anagency is questioned on performance or the lack thereof.
67. Check and re-check office personnel on compliance with standardprocedures.
68. Order, prepare and deliver policies, renewals, binders andendorsements as soon as possible. Insureds and agents often forgetwhat was ordered.
69. Review files on a scheduled basis with other members of theagency and, when requested, company representatives.
70. Establish a system to advise insureds of new policies andcoverages and changes in company underwriting attitudes.
71. Upgrade your personnel by their attendance at conferences,seminars and schools relating to their functions andresponsibilities in the agency.
72. Know your companies. Placing coverage in an unsound company mayresult in a claim against you as well as damage to your agency’sreputation.