I am always surprised by the creative ways that insurance pros and insurance companies find to get themselves in trouble. After 15 years of providing litigation support to the legal industry, I thought I had seen every possible scenario for a claim to be denied or the rationale for entering litigation. But the last several months have proved me wrong. Consider the following cases that I have been involved in recently.
In my last article (appearing in the March 2014 issue of NU) I wrote about an insurance company that denied a claim based on the fact that it “believed” an application for insurance did not fully reveal all of the facts. I’ve always operated on the principle that the facts of any given matter decide how a decision is reached. Producers, take note: It is not the insurance company that is being sued, but the producer who promised certain coverage.
Here’s another situation: A construction subcontractor in a monopoly state requested a workers’ compensation certificate of insurance for an out-of-state project. The producer issued the certificate indicating the out-of-state location. Several months later, an out-of-state employee working at the out-of-state location was severely injured. The claim was presented and denied by the insurer. The issue in this litigation is that the producer holding himself out as an expert should have known that the workers’ comp insurance was precluded from doing business in another state.
And this recent situation: A court decision was just handed down indicating that a producer involved in the sale of a complex insurance product has a duty to advise and counsel a client because it is reasonable to believe that an insured would have to rely on the producer due to the technicalities involved in the sale. This decision flies in the face of the widely accepted standard regarding advice and counsel that something “special” has to exist between the client and the producer to heighten the producer’s obligation to advise and counsel. What makes the relationship between the producer and the client “special” is the complexity of the product, the length of the relationship and/or the ceding of responsibility to place insurance protection to the producer by the insured. Other than the possible complexity of the sale, none of the other elements exist in this matter.
It seems to me that today’s insurance professional faces two choices: retreat to a bomb shelter and try to wait until the current situation changes for the better, or follow the age-old axiom that the best offense is a good defense.
First and foremost, be careful what you promise. Do not exceed your authority and ensure that what you discuss with your client is committed in writing, with a copy for your files and a copy for the client’s files. If you hold yourself out as an expert in any given subcategory of the insurance business, make sure that you really are an expert. Remember that you have a heightened duty to advise and counsel your long-term customers. These are usually your best clients.
Keep in mind that many states are transitioning from the agent/broker notion to categorizing insurance intermediaries as producers. This is not just a semantic exercise; it means that in any given sales presentation, you are considered a representative of the insurance company
Finally, do not leave any of your quotes to prospective clients open for an indefinite period of time. Close out the quotes and remind your prospect that the quote is no longer valid.
During the National Football League’s draft season, football organizations spend countless hours coming up with the perfect plan that will fill the shortcomings in their team and take the team to the Super Bowl. Take a tip from the pros: Gather the best brains in your organization and create a plan that will take you over the top and fix the holes in your organization.