When Is A Customer Not A Client?

Scottsdale, Arizona

It seemed like a nitpicky practice tip, but an experts advice that a “client” should be called a “customer” demonstrated the high level of concern over agent and broker errors and omissions exposures at a recent conference.

“Do not refer to the customer as your client,” warned Wayne Cesario, director of claims for Western Heritage Insurance Company in Scottsdale, Ariz. “It may seem like semantics, but if theyre your customers, thats a different obligation than if theyre your clients.”

His observation came during a session on agents and brokers E&O at the Mid-Year Educational Conference of the National Association of Professional Surplus Lines Offices, Ltd., held in Scottsdale.

The underlying message of Mr. Cesarios entire talk was that insurance producers should simply sell requested products (to customers), not advise (their clients).

The main duty producers have is to deliver the products that customers specifically request, he said repeatedly. Once they start to advise, remind and consult, producers implicitly accept duties that they arent legally required to perform, he said. Producers who expand their duties in this way need to do so with full understanding of increased exposure, he said.

Supporting his main theme, Mr. Cesario also gave a detailed list of specific practice tips. Among them were the following:

If you want to be known for your customer service, do it by emphasizing that you follow the customers instructions.

Do not promise to consider all of the customers insurance needs.

Avoid vague promises to provide complete, sufficient or full coverage in response to a customers request. Get the customer to be specific about coverage requested, policy limits desiredand confirm it in writing.

Do not hold yourself out as an insurance “expert.” This could establish an implied assumption of duties.

Do not promote yourself as an insurance adviser. Instead, offer the customer coverage options and terms and conditions that meet the needs that they communicated to you.

Avoid unsolicited trips to the customers premises to assess changes in the insurance risk.

“That doesnt mean you cant go to the customers place of business,” Mr. Cesario said. But go there for a specific reason. “Dont start to look around and point out some potential hazards and advise them on different coverages,” he said. “Once you do that, you have assumed the duty to get the correct coverage.”

Do not participate in the unauthorized practice of law.

Mr. Cesario explained that customers will often go to their producers with contracts and leases in hand, asking the producers to review those documents and tell them what kind of coverage they need. “Dont bite to that,” he warned. “Advise them to contact their attorney to make a legal determination of the coverage they need.” Then they can come back with a specific coverage request, he said.

Document all conversations where you discuss with the customer what their duties are and what your duties are.

Memorialize in writing any conversations with the customer regarding coverage options and coverage decisions.

Upon delivering the policy, attach a reminder to the customer to: read the entire policy; ask any questions if anything is unclear; advise if any provisions are incorrect or dont meet the expectations of what they thought they were getting; inform you of any changes in coverage needs.

Emphasizing and elaborating on the final three practice tips, Mr. Cesario and Andrew Forstenzer, senior litigation counsel for Marsh & McLennan in New York, repeatedly told agents and brokers to “document, document, document.”

Mr. Forstenzer, for example, spoke about the need for producers to take contemporaneous telephone notes during the quotation process, rather than having to rely on their memories three-to-five years after a transaction when an E&O claim comes to trial.

But documentation can also lead to trouble, Mr. Forstenzer said. “Youve got to pay attention to what you write,” he said, referring to the recent news of the risk manager for the World Trade Centers leaseholder “jotting down some words that may cost $3.5 billion.” (See NU, Feb. 6, page 19).

“Take the notes, but keep the good notes in the file,” he said.

Clarifying his remark for National Underwriter, Mr. Forstenzer explained that he wasnt suggesting that producers “twist the truth,” but rather they “get down the truth of a situation as it happens.” For example, the agent might write, “These are the five exclusions we talked about on this date. The customer indicated he understood the exclusions” and agreed to them.

He also suggested that many producers are not careful about the inadvertent documentation trails they leave through e-mail communications, often blindly clicking reply all” without noticing who has been on the chain of e-mails that ended up in the producers inbox.

And sometimes, theyre simply not sensible about what theyre writing, he suggested, presenting several examples of dangerous sentences actually included in agency e-mails.

“I think we have an E&O claim, theyll write to their boss. We seem to have made a mistake, theyll tell their colleague.” Another wrote, “I think the clients correct,” he said. “Put that up on the board in front of a jury,” he remarked with respect to the last example. “You can have the best lawyer in the country. Thats going to be hard to beat.”

“If you want to say something” about a potential E&O situation, “dont put it in writing [to a colleague]. Put it in writing to your lawyer, marked privileged and confidential,” he advised.

Mr. Forstenzer also advised getting rid of all e-mails and back-ups after a specified number of months. If producers just print out the information they need from their e-mails and put that in their hard copy files, then they avoid the headache of trying to recover all e-mails and back-ups if lawyers request them years down the road.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 27, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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When Is A Customer Not A Client?

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