Although I'm a loyal Denver Broncos fan, the early season play of the Dallas Cowboys inspired this month's Avoiding E&O topic. Dallas has been playing exceptionally well in the first games of the football season and the pundits have been trying to explain the team's success. The Cowboys aren't a bad team, but each time they seem ready to break into the elite ranks, they make a major mistake. In other words, they're pretty good, just not good enough.

Unfortunately, that's also a recipe for insurance professionals to get themselves into legal difficulties.

A case I'm involved with is a perfect example of litigation arising from an agent doing a “pretty good” job. The litigation is between an insured plaintiff and his insurance representative, the defendant. The relationship existed for more than two decades and it is undisputed that the producer was intimately aware of the nature of the insured's business operations. It is also undisputed that this particular client was one of the agent's largest and best clients. Recognizing this, the agent was regularly in touch with the insured and conducted an annual review of the client's insurance portfolio. The annual renewal meeting was not just a social visit—the purpose of the frequent contacts between the two parties was to make sure that the insurance program prepared by the agent met all the needs of his valuable client.

Over the course of the 20-plus years of their relationship, the insured came to rely on the agent's advice and counsel. At first glance, it would appear that the agent was properly servicing his client; however, the actual events of this litigation make the point that the producer missed a few key opportunities.

The insured was and is a manufacturer and distributor of measuring devices installed in factories, apartment complexes and manufacturing facilities. The devices determine whether various energy sources used by the insured's customers were expended in the most effective and efficient manner. Approximately four years ago, the plaintiff became involved in two different litigations. The first involved a violation of state regulations, while the second was for providing a negligent computation formula.

The insured notified the agent and the carrier of the pending litigation. Unfortunately, both claims were rejected on the basis that an “occurrence,” as defined by the comprehensive general liability policy, had not taken place. The answer to the problem was Professional Liability insurance, which provides indemnity and defense for errors and omissions made by the insured. It is important to note that Professional Liability insurance was both available and affordable.

Even though the agent knew the business operations of his client, he did not provide or even recommend Professional Liability insurance.

The complaint alleges that because of their long-term partnership and annual insurance reviews, a “special relationship” existed between the parties. The agent had a duty to exercise reasonable care and skill on behalf of the client and recommend insurance coverage that insures the customer against all risks and claims of liability. If you make the assumption that the allegations made in the complaint are accurate, then the agent failed in his duty to meet the generally accepted standards of care, resulting in a failure to meet his professional obligations.

There's no question that the agent did a pretty good job of making it appear that he was acting as a valuable counselor to his client. In reality, he was either just making face time for approval signatures or simply did not understand the exposure implications of the client's business operations. It is hard to imagine that after 20 years of annual reviews, meetings and telephone conversations, the agent did not understand his client's business operations.

Simply going through the motions means that the agent failed to meet the generally accepted standard of care expected of insurance professionals. The definition states that the insurance producer has the obligation to use reasonable care and diligence in the course of completing his or her duties to the client. As it relates to this litigation, the keyword is “diligence,” and doing a light job of monitoring the client's coverage hardly meets the standard of diligence. This litigation is particularly significant to an agency that deals with complex business risks and seeks to build long-term relationships with its clients.

It is reasonable to posit that a “special relationship” existed between the client and its insurance representative. But with the privilege of having a special relationship comes the responsibility of heightened duty to advise and counsel. In addition, this particular client was a dream client who is said to have paid his bills on time and never shopped the account around.

Ask yourself the question: “If I consider myself a true professional, how far am I willing to go to make sure that my clients are properly protected?” The answer should be that you're willing to do what is necessary to ensure that your client's insurance program is complete. The alternative could be litigation, losing the commission dollars on a five-figure premium insurance policy and the loss of a valuable, longtime account.

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&lsquo;Pretty Good&rsquo; is Not Good Enough

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‘Pretty Good’ is Not Good Enough