Agents selling homeowners insurance must exercise careful risk management and pay close attention to detail to avoid acts that result in errors and omissions allegations against them.

Making agency personnel aware of proper procedures in a number of areas is essential to the successful operation of an agency. The following is a collection of suggestions to avoid E&O claims across various facets of agency operations.

Communications with Insureds

In General:

Use care when explaining or delivering "all risks," comprehensive, and specific coverages. All policies have exclusions. Explain them to the insured.
Confirm in writing the insured’s declination to purchase important coverages or limits.
Explore every market—standard and excess and surplus—before advising an insured coverage is not available.
Advise insureds in writing if needed coverage, previously unavailable, can now be written.
Do not indicate to an insured you can place a policy until you know for certain it can be placed.
Do not place property coverages until you have physically visited the premises to be insured.
Stay within your own field. Don’t try to be an attorney, accountant, engineer, etc.
If you don’t know, say so. Find out and report back in writing.
Never reveal you are insured for errors and omissions.

Binders and Orders:

Prepare all binders immediately.
Indicate the time and date that the binder is effective.
Indicate the company, the type of coverage, property to be insured, limits, address to be insured and the correct name and mailing address of the insured.
Pick up the binder when you deliver the policy.
An oral request for a binder should be followed up immediately with a written binder, and the insured should be sent a copy.
All agency personnel should be informed of agency's binder procedures.
When possible, use standardized binder forms.
Use agency binders to effect new coverages on existing policies.
Do not exceed your binding authority for either limits or coverages.
Inform agency personnel of binding authority, and the prohibited and restricted lists of each company.
Binders should be executed in triplicate: the original sent to the insured, a copy to the company, and an office copy.
Never use a binder to provide free insurance. Advise the insured that coverage is in force and will have to be paid for.

Endorsements:

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

Expirations and Renewals:

A renewal policy should be issued and delivered prior to expiration of existing policy.
Advise insured in writing if the renewal differs from the expiring policy. If necessary, request that the insurer issue a corrected policy.
Cross-check renewal lists with office expiration records and company expiration lists.
The renewal list should be reviewed 60 to 90 days prior to expiration, and the insured contacted so any changes can be made.
Advise insureds in writing of non-renewal of policies in sufficient time. Obtain replacement coverage when possible. If unable, advise the insured in time for the insured to obtain coverage elsewhere. Many state insurance regulations on cancellations and non-renewals require at least 30 days prior notice of non-renewal for policies covering family automobiles, dwellings, or governmental properties.
Unless proper notice of non-renewal has been given, a renewal must be issued.

Cancellations:

Valid cancellation can only be obtained by strict adherence to cancellation provisions of the policy and insurance regulations on cancellations and non-renewals.
Policies cancelled by the insured should be picked up at once.
If it is not possible to obtain physical possession of the policy, obtain a lost policy receipt signed by the insured.
Be certain that additional insureds, mortgagees, loss payees, governmental agencies, etc., are all included in the notice of cancellation.
Check office copy of policy changes in address, assignment, etc., when a notice of cancellation is received.
Do not divulge reasons for cancellation unless requested to by law and with immunity from suit.
If a policy is reinstated, make sure that the insured is aware if there is a gap in coverage.
Never send an invoice on a policy that has been cancelled and the earned premium paid thereon. Be certain accounts receivable records indicate clearly that the policy has been cancelled. Indicate on invoice that balances due on cancelled policies are for the earned premium.

Claims:

All reported claims must be in writing and on claim report forms. Often, insurers prefer ACORD forms. Use or devise a telephone report form and/or log.
Never indicate there is or is not coverage unless you are absolutely certain.
Get the company’s answer in writing when requesting coverage information before relaying it to the insured or claimant.
Take the report and advise that you or the adjuster will be in touch with the insured or claimant.
Obtain the telephone number where the insured or claimant can be reached.
Advise the company in writing of the reported claim as soon as possible.
Advise the company at once of all reported claims. Use the phone in an emergency and follow up in writing.
Advise the insured of her or his responsibilities to protect property and to do nothing that will increase the loss. Lack of cooperation on the part of the insured could result in the claim being denied.

Communications with Insurers

Binders

Company must be sent copies of all binders.
Binders must be cancelled in the same manner as policies are cancelled.
If the company requests cancellation of the binder, comply with that request immediately and replace binder with another company.
Never bind a company for coverage or limits beyond your binding authority or for which there is no authority.

Renewals:

Check renewals issued by the company with the renewal list sent to the company.
If you don’t receive a policy renewal by the expiration date, issue a binder or advise the company that the policy has been renewed with another company.
Check renewal policy for correctness. Do not assume it has been prepared correctly.
Do not endorse an incorrectly prepared renewal. Request that the insurer issue a corrected renewal before delivery to the insured.
Check renewals as to form. Form changes should be brought to the attention of the insured.

Requests for New Policies:

Do not misrepresent the risk or withhold any underwriting information on new risk submissions.
Applications should be completed thoroughly. Applications may become part of the policy or else statements made therein may modify or void the coverage.
Check the policy against the application for correctness.
Notify the insured immediately if the company declines coverage or modifies the coverage it is willing to write.
Company requests to alter or modify the coverage requested in the application should be in writing.

Endorsements:

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

Office Procedures

Instruct office personnel that they must use your standard procedures to handle claims, cancellations, endorsements, renewals, and orders for new policies.
All personnel must record in-person or telephone conversations. Use a telephone memo or a call sheet.
Handwritten records of communications are invaluable when an agency is questioned on performance or the lack thereof.
Check and re-check office personnel on compliance with standard procedures.
Order, prepare and deliver policies, renewals, binders and endorsements as soon as possible. Insureds and agents often forget what was ordered.
Review files on a scheduled basis with other members of the agency and, when requested, company representatives.
Establish a system to advise insureds of new policies and coverages and changes in company underwriting attitudes.
Upgrade your personnel by their attendance at conferences, seminars and schools relating to their functions and responsibilities in the agency.
Know your companies. Placing coverage in an unsound company may result in a claim against you as well as damage to your agency’s reputation.

Special Reports /

72 Essential Tips Agents Need to Know to Avoid E&O Claims

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