Standards of Care Heighten with Increased Professionalism
March 1, 2005
The errors and omissions claim is the insurance producer's malpractice suit. And, as experienced in other professions, insurance producers have witnessed a significant increase in errors and omissions allegations.
Several factors are responsible for this trend. Today's public is far more claims-conscious than insurance buyers of the past; they are more aggressive in pursuing liability claims of every nature, including against insurance producers. Another cause is the growing philosophy in the United States that every injured party is entitled to compensation for an injury, whether it involves physical injury or property damage. Applied to insurance, if the insured is not covered against some loss, then someone may have been negligent and is liable. Often, that person is the producer.
Related to this is the fact that courts are more often finding liability based on the defendant's negligence and juries are allowing ever larger damage awards. These lawsuits have created an expanding body of law setting forth the responsibilities of producers to their insureds, the insurers they represent, and the general public.
Additionally, in past years it was fairly rare that an insurance company would turn to its own agent for indemnification when the insurer became obligated to pay a claim as a result of a producer's negligent act. This has changed. Insurers are taking a much more aggressive stance in defending against claims. In several cases, agents were subsequently called on to repay the insurer, when, for various reasons, they did not carry out the instructions either issued by insurers or contained in the company-agency contract to act on a particular matter.
An Illinois appellate court case illustrating this point is Frangos v. U.S. Fidelity and Guarantee Company, 312 N.E.2d 688 (Ill. App. 1974). Here, an agent was held liable to an insurance company for damages paid to an insured because the producer had failed to make the pre-binding inspection required under the agency-company agreement. The insurance company had issued a fire policy on a restaurant that contained a sprinkler system. Several months later the insured moved to new premises that did not have a sprinkler system. The insured notified the agent of the move and requested an inspection, but the agent bound the company to the risk without visiting the new facility.
When a fire damaged the restaurant, the insurer denied coverage. The insured sued the insurer and agent, with the court deciding the agent's actions had bound the company, but that the producer's negligence had been the cause of the insurer's loss. The court stated that the agent had breached its fiduciary duty to the insurer by failing to inform the insurer of a material change in risk. The agent argued that the insurer failed to prove that its damages resulted from the agent's negligent act. Specifically, the agent contended that this burden included a showing that, if properly notified, the insurer would not have written the policy.
The court ruled, “. . . As defendant readily admits, the change in location . . . involved a substantial change in risk to the insurer since the building was not equipped with sprinklers. The insurance policy . . . expressly limited coverage to the 'sprinklered' building . . . Defendant breached its duty to [the insurer] by failing to notify it of the change of location and thus denied it the opportunity to decide whether it would extend coverage on the substantially altered risk. By its inaction defendant bound plaintiff to an extension of coverage which it had no opportunity to assume or reject. By so subjecting its principal to liability, defendant became liable to it for the resulting loss.”
The agent is to obey all reasonable instructions and exercise reasonable care in carrying out the orders of his principal. When an insurance company directs its agent to cancel a policy or reject a risk, it is his duty to do so; and if he negligently fails to carry out his principal's instructions he may be found liable to the insurer for the amount of any loss paid under the policy (Cameron Mutual Insurance Company v. Bouse, 635 S.W.2d 488 (Mo. App. S.D. 1982).
The same principle applies to a request by the insurer to the agent to reduce coverage. If he fails to secure the reduction in coverage, he may be held liable for the loss (Trinity Universal Insurance Company v. Fuller, 524 S.W.2d 335 (Tex. Civ. App. 1975).
Courts have generally adopted the position that a producer's negligent act must materially affect the risk faced by the insurer in order to uphold an indemnity action. A Tennessee case illustrating this is Fireman's Fund v. Jamieson and Fisher, Inc., 531 F. Supp. 423 (D.C. Tenn. 1982). The action arose out of the agent's failure to request a “vacancy endorsement” for a school building that was part of a large schedule of buildings, insured on the same policy. The building became vacant in January, 1977 and burned in May, 1997. During the trial the agent testified that the insurer had routinely issued vacancy endorsements in the past, even though they had no written policy regarding these endorsements. In fact, the agent had renewed one vacancy endorsement every ninety days for several years. In finding for the agency, the court ruled: “Jamieson & Fisher was negligent in failing to request a vacancy endorsement on item # 19, Frazier High School. The Court also finds and concludes that Fireman's Fund's injuries, namely the $ 165,000 settlement paid to the Tipton County Board of Education, was the natural result of plaintiff's insurance business.”
The court went on to find the agent's negligence was not the cause of loss in this case. “If an agent violates the proper instructions of his principal, his responsibility to the principal is for all loss or damage which naturally results from the agent's acts, and that is also the limit of his liability. An agent can escape liability if he shows that no loss or damage resulted to the principal from his disobedience to the latter's instructions or his neglect to follow them. And even where the principal has suffered a loss, the agent may exonerate himself if he establishes that his disregard of the principal's instructions had no connection with the loss and that it would certainly have occurred if the instructions had been obeyed.”
In a more recent Tennessee case (that used the Fireman's Fund decision for support), Gurkin v. Wood, 2004 WL 1737397 (Tenn. Ct. App. 2004), an appeals court declared that an agent could not be held liable, even assuming he was negligent, because he was not the proximate cause of any harm to the insurer. The agent's failure to learn of the insured's full use of his auto in this case caused no damage to the insurance company. If the negligence of the agent does not alter the risk the insurance company was willing to take, said the court, the agent's negligence is not the cause of the insurer's loss.
Producers as Professionals
Another significant reason for the increase in errors and omissions litigation is the acceptance of insurance producers as professionals on the level of attorneys and CPAs. This issue becomes particularly cloudy when “fee-for-service” arrangements are involved.
Traditionally, the general legal obligation of the insurance producer has been to exercise reasonable care in business pursuits. According to the legal text, Outlines of Agency (Mechem, 4th ed., 1952) — a work dealing with the legal topic of agency in general, and not referring specifically to insurance agency relationships — the exercise of reasonable care involves:
”By accepting an employment whose requirements he knows, without stipulating otherwise, the agent impliedly undertakes that he possesses a degree of skill reasonably or ordinarily competent for the performance of the service, and that in performing his undertaking he will exercise reasonable care, skill, and diligence. He does not agree that he will make no mistakes whatever, or that he will exercise the highest skill or diligence, but does agree that he will exercise reasonable skill, and that he will take the usual precautions.” (Section 524.)
The duty of producers to exercise only reasonable care where they do not hold themselves out as specialized experts has been upheld in the majority of cases. An example is Hill v. Grandy, 321 A.2d 28 (Vt. 1974), a Vermont supreme court decision. The case involves a person who leased a poultry operation that included an off-premises barbecue exposure. Shortly thereafter, the party contacted the original operator's insurance agent and requested the “same type” of coverage the owner had carried on the business. The agent had written the coverage on the property for at least a decade, but the policy had never insured the off-premises barbecue operation.
Two years later the insured was sued as a result of an accident in the barbecue operation. A court ruled the insurer was not obligated to pay any damages because it did not insure the off-premises risk. The insured sued the agent for negligence in failing to provide the proper coverage, contending that the agent owed to the client a duty as an insurance agent to assess the entire risk and provide adequate insurance. The insured “contends that as a result of the agent holding himself out as competent in matters of insurance, and the insured, unfamiliar with such matters, relying on his expertise, the agent was under a duty to exercise reasonable care and skill in making inquiries to ascertain the extent of the risk . . .”
The court disagreed. “An insurance contract arises out of the insured's desire to be protected in a particular manner against a specific kind of obligation. It is his responsibility to adequately convey, albeit in laymen's terms, the nature of his wishes, in order to obtain the protection requested. An insured need not insure himself against every obligation which may arise. He need not carry all his insurance with one agent . . . An agent may point out . . . the advantages of additional coverage and may ferret out additional facts . . . but he is under no obligation to do so; nor is the insured under an obligation to respond.”
In an appeals court decision from Arizona, the reasoning of the Vermont Supreme Court was not followed. The case is Southwest Auto Painting and Body Repair, Inc. v. Binsfeld, 904 P.2d 1268 (Ariz. App. Div. 1995). Here, the insured brought a malpractice lawsuit (after an employee theft loss) against its agent (Binsfeld), alleging that the agency failed to offer or recommend employee dishonesty and theft coverage. The appeals court noted that Arizona case law holds that, when a person presents himself to the public as possessing special knowledge, skill, or expertise, he must perform according to the standard of his profession. The court went on to say that in occupations involving specialties and professional status, law requires higher standard of care in the performance of duties; therefore, an insurance agent must exercise the degree of care ordinarily expected of persons in the profession.
The insured in this case presented deposition testimony from its insurance expert that the standard of care in the community for professional insurance agents required agents to advise clients about the relevant types of coverage that are available and the cost of the coverage. This testimony raised a question of fact as to whether the standard of care for a professional insurance agent was met by Binsfeld. This had to be decided by a jury as a trier of fact.
In addition to the issue of acting professionally by procuring the correct coverage, what about procuring the appropriate limits of liability? In a New York case, the insureds took their agent to court for not advising them of the availability of higher uninsured motorists limits when they increased their bodily injury liability limits. The insureds contended that the agent should have suggested the higher UM limits to them. The New York appellate court held for the agent. It concluded: “Absent a specific request for coverage not already provided in a client's policy, there is no common-law duty of an insurance company or its agency to advise a client to procure additional coverage. Moreover, while an insurance broker acting as an agent of its customer has a duty of reasonable care to the customer to obtain the requested coverage within a reasonable time after the request, or to inform the customer of the agent's inability to do so, the broker/agent owes no continuing duty to advise, guide, or direct the insured customer to obtain additional coverage.” The case is Chaim v. Benedict, 628 N.Y.S.2d 356 (N.Y.A.D.2d 1995).
However, what about when the insured requests certain limits and the agent does not follow through with the request? In a case that mentioned the Chaim ruling, the Supreme Court, Appellate Division, held that, as a general rule, insurance agents and brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time, or to inform the client of their inability to do so. Failure to do this may mean the agent is liable. The court in Reilly v. Progressive Insurance Company, 733 N.Y.S.2d 220 (N.Y.A.D.2d 2001) said that, to hold a broker liable for a negligent failure to procure insurance, an insured must show that the broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that the broker breached the agreement, or that it failed to exercise due care in the transaction. And whether this happened was a factual issue that had to be decided by the trier of fact, the jury.
However, producers are warned that reasonable care standards are relative, and increase in proportion to increases in producers' professionalism. Section 525 of Outlines of Agency states, “More than the ordinary skill may also be reasonably required where the agent, though perhaps not belonging to any of the specially skilled classes, has in the particular case specially undertaken to exercise or has held himself out as possessing extraordinary skill.”
This point is illustrated by the ruling in one of the landmark errors and omissions cases, Hardt v. Brink, 192 F. Supp. 879 (D.C. Wash. 1961). The case involves the failure of a producer to advise a client of a potential liability under a lease agreement. For a period of eight years, the agent had handled all of the client's insurance, including general liability and fire coverage on the stock of goods and equipment of the insured's corporation.
The insured entered into a lease agreement that did not contain a hold harmless clause saving the lessee from fire liability. The CGL form contained the standard care, custody, or control exclusion eliminating coverage for property damage to premises rented by the insured. The client did not provide a copy of the lease to the agent, nor did the agent request to see it. Sometime thereafter, a fire destroyed the building, leaving the insured responsible for more than $40,000 in damages. The insured sued the agent to recover that sum.
The insured argued that the producer held himself out as an insurance expert and specialist, qualified to advise on all phases of insurance problems. As such he had assumed a duty to inspect or have inspected any lease entered into by the lay client, and advise him of his insurance needs. According to the insured, had the producer done so the proper coverage would have been in effect at the time of the loss. Therefore, the breach of this duty was the cause of the insured's loss.
The producer, on the other hand, took the position that the liability of an insurance agent to a client is essentially contractual in nature and must be based upon a breach of a specific undertaking or agreement.
The court decided. “Clearly, the ordinary insurance solicitor only assumes those duties normally found in any agency relationship. In general this includes the obligation to deal with his principal in good faith and to carry out his instructions. No affirmative duty to advise is assumed by the mere creation of an agency relationship. However, this does not mean that the agent cannot assume additional duties either by express contract or a holding out [of professional status].
“Whether or not an additional duty is assumed will depend upon the particular relationship between the parties. Each case must be decided on its own peculiar facts . . . This is an age of specialists and as more occupations divide into various specialties and strive towards 'professional' status the law requires an ever higher standard of care in the performance of their duties . . .
“Whether defendant intended to act as a consultant and counselor as well as a solicitor of insurance is not clear. But it is clear that through the designations on his letterheads and the stickers he attached to policies issued by his office, defendant held himself out to be an insurance expert . . . I am convinced that by his conduct and business practices defendant permitted a reasonable inference to be drawn by his customers . . . that he was a person highly skilled as an insurance advisor and that plaintiff relied on him as such. Under these circumstances defendant assumed a duty to advise plaintiff as to his insurance needs in connection with his business . . . Thus, the defendant's negligence was the proximate cause of plaintiff's financial loss.”
In another case, the supreme court of New Jersey ruled in 1984 that agents have a fiduciary duty to the insured: “Insurance professionals, because of the increasing complexity of the insurance industry and the specialized knowledge required to understand all of its intricacies…often stand in a fiduciary capacity to their client and should be required to use their expertise with every client.” (Sobotor v. Prudential Property and Casualty Insurance Company, 491 A.2d 737 (N.J. Super. A.D. 1984). The message to the agent is to use due diligence and document that diligence. And, in Walker v. Sears, 523 A.2d 665 (N.J. Super. A.D. 1987), the court ruled that an agent has a duty to inform a client of the availability of coverage. This duty arises out of the agent's specialized professional knowledge and the client's reliance on this particular asset.
Now, a superseding statute was passed in 1993 by the state assembly; this statute allowed statutory immunity from liability for the failure to advise customers of the availability of additional insurance coverages. But even after that action, there have been cases dealing with the issue of an agent's duty to his client. For example, in Aden v. Fortsh, 776 A.2d 792 (N.J. 2001), the New Jersey Supreme Court ruled that a broker engaged to obtain insurance must exercise reasonable skill, and is expected to possess reasonable knowledge of types of policies, their different terms, and the coverages available in the area in which the principal seeks to be protected.
More and more of these cases may appear in courts as producers increasingly refer to themselves as “insurance counselors,” “insurance advisors,” or “insurance consultants.” As previously stated, this issue becomes yet more complex when the arrangement of “fee-for-service” is introduced. Judges and juries will compare the client's sophistication with the producer's. If evidence is presented, courts are likely to consider the types of advertising the producer uses, his or her experience and training, and the general level of professionalism of the agency. This will all influence how the factual issues are resolved.
Surveys of insurance producers' errors and omissions claims have identified several “areas of vulnerability” in insurance agency operations. Between 50 to 75 percent of all agents' errors and omissions actions involve either failure to obtain proper or adequate coverage or failure to maintain coverage. Other major sources of claims include cancellations (failure to advise the insured of cancellation, improper cancellation); claims against agencies by insurers for acts or omissions; claims caused by dishonesty or fraud of agency employees; and claims caused by the use of “improper insurers” (such as insolvent insurers). A “growth area” in errors and omissions claims is claims arising out of government programs; agents are seeing errors and omissions allegations arise out of situations such as failure to suggest flood insurance. Some of these areas are discussed in more detail below.
Faulty Coverage. Three sub-categories make up the area of faulty, or improper, coverage: (1) failure to obtain proper or adequate coverage; (2) failure to obtain any coverage; and (3) failure to renew (maintain) coverage.
The great bulk of improper coverage claims arise from the first category (experts estimate that as many as 50 percent of all errors and omissions claims fall into this area). Giving rise to these claims are such acts or omissions as (a) not analyzing the risk properly or not offering to obtain proper coverage; (b) not physically requesting the proper coverage from an insurer; and (c) not receiving the proper coverage from the insurance company. Both the Hill and Hardt cases discussed previously, are examples of actions of this type.
An example of not receiving the proper coverage from the insurance company is the case of Smith v. National Flood Insurance Program v. Martin, 796 F.2d 90 (5th Cir. La. 1986), decided by the United States court of appeals for the fifth circuit. Here an agent was held responsible for a loss that was uninsured because the agent used regular mail service to forward a flood insurance application. The controlling federal regulation provides that coverage is effective on the day following the application date if the national flood insurance program (the program) receives the application and premium within ten days of the application date, or if the application and premium payment are sent to the program by certified mail within four days of the application date.
On March 31 the agent received from the insured a completed application and check. The agent sent these materials by regular mail service to the underwriting office of the program the same day they were received from the insured, indicating an effective date of April 1. On Sunday, April 10, flood waters damaged the insured's home. The application and check were not received by the Program until Monday, April 11, and the Program therefore denied coverage. The court held that the agent had assumed a duty to guarantee the April 1 effective date, and that: “The use of certified mail service within four days of the application date is the only way to guarantee an effective day one day after the application date.” Therefore, the agent was liable for the insured's flood damage because his use of the regular mail service was held to be negligent.
Another case occurred in Illinois. A lady went to a broker seeking homeowners insurance. The broker was aware that she baby-sat in her home for compensation. However, the homeowners policy he obtained for her contained an exclusion of business pursuits. The appellate court ruled that the broker failed to exercise reasonable skill, care, and diligence in procuring the homeowners insurance. (Economy Fire and Casualty Company v. Bassett, 525 N.E.2d 539 (Ill. App. 5 Dist. 1988).
Insurers' Claims Against Producers. Some of the errors and omissions issues insurers and agents have already been discussed. Another area that causes a significant number of claims between insurance companies and the agents that represent them involves cancellations.
It is estimated that as high as 10 percent of all producer errors and omissions problems may stem from mistakes related to policy cancellation. Included here are incidents of improper cancellation and failure to notify the insured of cancellation (one agency errors and omissions expert states that the latter problem may arise from delaying the notice of cancellation to the insured until after new coverages can be arranged; however, a gap in continuity of coverage can develop and create problems). See earlier reference to the Bouse case.
Use of Improper Insurers. This category involves claims that may arise because of the use of an “improper insurer” in the placement of coverages. This problem involves writing policies through insolvent companies, assessable companies, and nonadmitted or unlicensed insurers. According to one legal expert, “The duty regarding solvency of insurance companies is to obtain some financial knowledge of the insurance companies by whom coverage is to be written, because there is an implied warranty that the insurance company is solvent. Generally, if the insurance company with whom a client is placed is solvent when the policy is written, the producer's legal obligation is met. However, how long before the courts will impose a further duty on the producer to monitor the solvency of insurance companies during the client's term is open to question.”
According to Sternoff Metals Corporation v. Vertecs Corporation, 693 P.2d 175 (Wash. App. 1985), courts are still hesitant to allow this type of liability action against producers. In this case, an agency placed a corporation's liability coverage with an unadmitted insurer after the admitted insurance company refused to renew the coverage. During the policy term, a products liability action arose that was covered by the contract. During the defense of the case, the insurer became insolvent and ceased contributing to the corporation's defense and refused to settle any claims. The corporation sued the agency for negligence in placing coverage with an unadmitted insurer that became insolvent.
The court held that the insurance agency had made the proper inquiries with admitted insurers and had reason to believe coverage would have been unavailable from those sources. Further, “In addition to the statutory requirements, an insurance broker has the common law duty to his insured not to negligently place insurance in a company which he knows or should have known is presently insolvent. . . . Clearly, Pitts did not violate this duty. No evidence was presented that Spence Pitts knew or should have known that . . . was insolvent at the time. In fact, . . . was solvent at the time of placement and remained so for two years, until after the . . . claim arose.” (The agency had relied on the National Association of Insurance Commissioners' Report and the Best's Insurance report for financial information on the insurance company.)
A later case in Texas dealt with the insolvency of a fully admitted company, Higginbotham v. Greer, 738 S.W.2d 45 (Tex. App., Texarkana 1987). Jack Greer owned a bowling alley and insured it with Proprietors Insurance Corporation (PIC) through independent agent Higginbotham. When the bowling alley suffered a fire loss, the claim was paid by PIC, but the check was returned to Greer as denied due to insufficient funds.
The trial court ruled that Higginbotham was negligent and owed damages to Greer. The court of appeals reversed that decision, ruling that the agent had relied on: (1) the status of PIC as a fully admitted and approved carrier in Texas; (2) the fact that at the time of placement, PIC was paying its claims promptly; and (3) the A.M. Best rating of B+ (very good).
Notice of Policy Exclusions. Hionis v. Northern Mutual Insurance Company, 327 A.2d 363 (Pa. Super. 1974) left insurers and their producers concerned about their duty to notify policyholders about exclusionary clauses in insurance contracts. Under the Hionis ruling—and cases that have followed its line of reasoning— an insurance company seeking to rely on a policy exclusion or limitation as a means to deny payment of a claim must affirmatively prove that the exclusion or limitation was explained to the insured and that the insured understood it.
In Hionis, the plaintiff was a recent emigrant to the United States who opened a restaurant. One of his customers— an insurance agent — convinced him that he was underinsured and needed more coverage for the betterments he had made in his facility. The owner entrusted the insurance situation to the producer, requesting that he be covered for his improvements on the property. An insurance company issued a policy covering improvements and betterments for $49,500.
A fire damaged the property, with the loss exceeding the amount of coverage. However, the insurer refused to pay anything in excess of $12,000, basing its denial on an exclusion that stated the company was liable for actual cash value only if the premises were repaired; if not repaired, the amount would be prorated in accordance with the unexpired term of the lease. The insured sued.
The court held the exclusion was not applicable unless the insurer could prove that it had been explained to the insured and that he could understand it. The court further held that even where an exclusion is written in completely unambiguous terms, it is the insurer's burden to prove that the insured was aware of the clause.
Subsequent cases have upheld the Hionis ruling, with the exception of cases in which the parties were of equal sophistication and bargaining power. In such cases the insured has been charged with responsibility of reading the policy.
In Standard Venetian Blind and Morris v. American Empire Insurance, 469 A.2d 563 (Pa. 1985), the Supreme Court of Pennsylvania said that Hionis “fails to accord proper significance to the written contract. . .By focusing on what was said and was not said at the time of contract formation rather than on the parties' writing, Hionis makes the question of the scope of insurance coverage. . .depend upon how a fact finder resolves questions of credibility. . .Thus, Hionis, which would permit an insured to avoid the application of a clear and unambiguous limitation clause in an insurance contract, is not to be followed. . .Where the policy limitation relied upon by the insurer to deny coverage is clearly worded and conspicuously displayed, the insured may not avoid the consequences of that limitation by proof that he failed to read the limitation or that he did not understand it.”
The court did say that the Hionis principles might still be applied “in light of the manifest inequality of bargaining power between an insurance company and a purchaser of insurance.” In such a case, a “court may on occasion be justified in deviating from the plain language of a contract of insurance.”
In Bishop v. Nationwide, 480 A.2d 1088 (Pa. Super. 1984), the court clarified the intent of the Hionis ruling, that it applies in cases where the contract wording is “unconscionable” or “an exclusion is buried in fine print deep in the insurance contract.”
However, because Hionis has not been overturned, just limited, it remains unclear what the duties of a producer are in relation to Hionis-type liability. The responsibility for explaining an exclusion and ascertaining that it is understood is plainly imposed on the insurer seeking to invoke the exclusion. As a practical matter, though, the company's only contact with the insured is through the producer that sells the coverage. A question could arise as to whether the agent is liable to the company for failing to point out the exclusion and explain it in a way that the insured can easily comprehend. Another question that arises is whether doing so could be construed as the unauthorized practice of law.
To avoid Hionis-type liability producers are advised that a checklist of topics discussed with and signed by the insured may serve as proof that an exclusion was brought to the client's attention at the time of sale. After the policy is issued, producers might send a follow-up letter that clearly sets forth the coverage extended and the policy exclusions.
Measure of Damages
Should a producer be found liable for failure in his duty to the insured, what would be the proper measure of damages? Generally, the proper measure of damages in an action for failure to procure insurance is the amount that would have been due under the policy if it had been obtained. The following cases are examples of this finding: Commercial Insurance Consultants, Inc. v. Frenz Enterprises, Inc., 696 So. 2d 871 (Fla. Dist. Ct. App. 5th Dist. 1997); American Ref Fuel Company of Hempstead v. Resource Recycling, Inc., 722 N.Y.S.2d 570 (N.Y.A.D.2d 2001); and Capital Site Management Associates v. Inland Underwriters Insurance Agency, Ltd., 806 N.E.2d 959 (Mass. App. Ct. 2004).
Risk Management
Organized knowledge of errors and omissions problems and solutions is the best defense an agency can have to avoid pitfalls of errors and omissions claims and the resulting financial loss. Planning for such incidents in advance may be the best defense when claims arise. An agency's errors and omissions program should be a contingency plan to be pulled out for use in such a situation, not developed ad hoc as the crisis develops. If an agency takes the position that errors and omissions claims are inevitable (and are therefore a cost of doing business), the problem can be handled with careful risk management.