Lawyer Warns Producers Of Cloudy Legal Demands

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By Mark E. Ruquet

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NU Online News Service, Jan. 24, 11:50 a.m.EST?An attorney lecturing independent agents and brokerson the dangers of errors and omissions lawsuits advised that whilethe law remains murky, there are steps they should take to protectthemselves.[@@]

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David H. Paige, an attorney in the New York law firm Sullivan,Manarel & Paige and chief operating officer of DeWitt SternGroup Inc., in New York, an insurance brokerage firm, offered thisassessment during an education class held last Thursday during theProfessional Insurance Agents of New York Metropolitan RegionalProgram in Brooklyn, N.Y.

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Mr. Paige said lately the cost of insurance protection forE&O coverage has risen dramatically, with both deductibles andpremiums seeing increases. He added that agents are finding itdifficult to find E&O plans as more carriers exit the market orconsider leaving.

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However, the bigger problem with E&O issues, he said, is notin finding the coverage but suffering through a claim that causesdifficulties for the agency or brokerage firm, taking up time thatcould be spent selling and tarnishing the firm's reputation, whichcan eventually cost it accounts.

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However, an E&O claim, Mr. Paige noted, has nothing to dowith making a mistake, because mistakes happen all the time. Theissue arises, he said, when a claim is not paid and the clientfeels he or she has not gotten the coverage they should have.

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He said there are three things producers should do to avoid anE&O claim: understand what your obligations are, plan toprevent E&O losses, and keep detailed records oftransactions.

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Mr. Paige advised that in some of these areas, such asunderstanding the obligation requirement, the responsibility canremain muddled because the law is not clear on the subject. Ascourts and juries make determinations on specific cases,agent/broker obligations are constantly changing and regulationsdiffer from state to state, he said.

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"The truth is that the courts and the public are confused overwhat the insurance broker is suppose to do," he observed.

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Among the issues that lack clarity, he said, are, "What shouldyou do if a company is downgraded, and when should you tell theclient?"

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"I wish I could get up here today and tell you ?These are therules,' where I could draw a box and it all fits in. But it's notlike that," he remarked.

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Problems do arise for those agents who begin to give adviceoutside of the purview of what is considered the traditionalboundary of insurance. However, he noted, as professionals,advising clients on subjects related to their coverage isessential.

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He advised that when giving advice, "you have the responsibilityto make sure you are right."

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