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E&O Insurance protects your agency while safeguarding your clients. PIA of Kentucky has chosen to represent Utica National as our E&O carrier. And all PIA of Kentucky members receive a 10% discount! These articles provide expert tips and advice from the E&O professionals at Utica to help you save money and avoid problems. For an overview of all PIAK posts, visit our "Blog Post Library List" at "All Blogs"


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Top tags: E&O  Utica  Accounts  agency  audit  coverage  Flood Liability  gap  insurance agency 

Are You a Good Agency or a Great One?

Posted By Curtis M. Pearsall, CPCU, CPIA , Tuesday, May 1, 2018

from Utica National 

Obviously this is a matter of opinion. In fact, it’s worth asking—whose opinion really counts? Is it you and your staff’s opinion that counts, or is your customer’s opinion really the key? Personally, I think it is the customer’s opinion that matters most. That aside, there are some agency basics that you need to address before you can even consider the question of “good” or “great.”

In the national best-selling book, Good to Great, Jim Collins states that to go from a good organization to a great one, one of the first strategies they implemented “was they first got the right people on the bus, took the wrong people off the bus, and put the right people in the right seats—and then figured out where to drive it." Anything short of this and you will not be able to achieve the status you desire. Since the biggest part of an agency is the people, to be a great agency, you need to have the right people.

We all know that although the insurance industry is a great industry to work in, most people don’t grow up saying that they want a career in it. In fact, within Utica Mutual, I know of only a handful of employees that actually went to school for insurance. Personally, I started out as a weekend radio disc jockey and since that was not enough to pay the bills, I needed to find work during the week. I sold door-to-door for Combined Life, then I went to Metropolitan, then to the agency side of the business and so on.

All that being said, it stands to reason that there is a good chance that when you hire staff, they are in need of various degrees of training. Putting them at a desk and assuming that they have all of the talents and skills necessary can be a big mistake. The old days of “here is your desk, here is your phone, here are the files, any questions?” didn’t work then and it sure doesn’t work now.

A good starting point for new employees is a solid orientation program. Most agencies have their new staff start off by sitting with staff from various aspects of the agency (accounting, receptionist, commercial lines, personal lines, claims, producers, etc.) to get a handle on the culture of the agency, the file structure, the various responsibilities, etc. In many agencies, it is at least a month before new staff goes live taking calls and handling files. Obviously, experience needs to be factored but even when you hire an experienced insurance person, no two agencies handle business the same way and a brief orientation program would be of benefit even to a veteran. So whether your new employee is new to the business, or joins you as a seasoned veteran, a solid orientation program is a great place to start.

We all know that this business is changing at a rapid pace—new products, new forms, new companies, etc. Keeping up requires a commitment to training on an ongoing basis. These changes present perfect opportunities at your staff meetings to review the latest industry and company news. An individual development plan with a strong focus on training should be a part of every staff’s annual goals and objectives. When was the last time you asked your staff if they needed/desired any training? Try it; you may be very surprised at their response.

Monitoring the quality of the work product is very important and some type of quality control/checkup needs to be done. It is good to trust your staff but to trust without verification can be a formula for disaster. Someone in the agency must have some responsibilities for verifying that the staff is handling files and customers in accordance with the agency plan and goals. You need to know if the staff is doing what is expected. You also need to know if you have a weak link.

Now to the weak link—if you have an employee who is struggling, and you can honestly say that you have done everything possible to help the employee, you need to make that unpleasant decision. Not only could the employee be holding you back from getting to the next level, but they could be an E&O nightmare waiting to happen.

Make the commitment to being a great agency—it all starts with the right people in the right positions heading in the right direction.

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

Tags:  E&O  insurance agency 

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Are You Guilty of Presumptions?

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Tuesday, April 3, 2018

Very honestly, I believe that more insurance agency folks are than they realize.

What is the “presumption” that I am referring to? This is where you (the agency staff) believe that you know what coverages the client needs or what limits are appropriate. For example, let’s presume that your client (personal or commercial) has a $5mil umbrella. At renewal time, are you providing them with options for higher limits or does your proposal state “higher limits may be available”? Or are you presuming that $5mil is more than sufficient for this client?

Over the years, I have had agency staff make comments such as the following:

  • “I didn’t offer them an umbrella – I didn’t think they could afford it”.
    “the client asked me if $5mil was enough and I advised them that $5mil was more than most clients carry”.
  • “the client told me that they were told they should have higher limits. I advised them that they were good with what they had”.
  • All the above deal with umbrella but the same could be said for virtually any line of business, personal or commercial.

Are you guilty of presuming? When you presume, you are essentially telling the client that you know them as well as they know themselves. When a loss occurs and the loss is not fully or even partially covered, the client is going to be coming after you for “poor advice”. The truth is that they will probably have a case against you based on your verbal or written comments.

It is important to remember that agents can be held accountable for what they say and what they put in writing. So, if you (for example) don’t provide contents coverage for a client’s vacation home (this is a true story) because you don’t think they would buy it and they have a loss and there is no contents coverage, your agency may not have much of a defense.

The appropriate “best practices approach” is to offer the coverage / higher limit options and let the client decide. I call this “customer accountability” and this should be an objective of every agency.

Everyone knows what happens when you “assume”. Well, I can tell you that “presuming” is not much better.

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Avoid Gaps When Moving an Account

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Saturday, March 3, 2018


Ask agency staff members when the last time was that they moved an account to a new carrier. They would likely say that it happens multiple times a week, possibly every day. When this happens, an alarm should go off to remind them of the many issues that could occur. The most critical issue surfaces if the client suffers a loss that would have been covered by the expiring policy but is not covered by the replacement coverage. 

The following errors and omissions (E&O) claim highlights this issue. 

The agency’s client was a landscaping and snowplowing operation. The underlying loss was from a slip and fall in a commercial parking lot. It is undisputed that the agency’s client had snow removal coverage on the prior policy, but when a new carrier has the policy, the snow removal coverage is missing. While the producer was aware of the exclusion, there is no documentation to support a discussion on this matter with the agency’s client. The damages
were more than $1 million.

This issue is one of the more significant trends today in E&O claims. It is critical that when an agency’s staff moves accounts to a new carrier, it must have very detailed procedures that address this matter head-on. 

Those procedures should include the following: 

  A process should be in place to verify that the application used to market the account accurately describes the risk as it exists. Oftentimes, the previous year’s application is used to market the account today. The downside is that the client may have different or new exposures that need to be identified and discussed. 

  When the agency receives the proposals from the various markets, there should be a process to verify that the coverages requested are the same as the coverages proposed. Agencies should never assume that what the agent asked for, from the carriers, is quoted. A more significant concern, with the excess and surplus market, is because carriers may exclude specific exposures. If necessary exposures are missing, such as the snowplowing exposure in the above claim, an effort should be made to secure the coverage. 

›  If the replacement coverage is not comparable to the expiring coverage, it is vital to bring the reductions to the client’s attention. This notification should be in writing and the client, if he or she is agreeable to the reductions, should be required to acknowledge the reductions in writing. Also, if the agency cannot provide the same depth of coverage through the carriers it works with, notify the client as soon as this fact is determined. Based on the coverage that is missing, the client may need to find another agency. 

  If the agency does not complete the steps above, there is still another opportunity to identify any shortcomings in the coverage. It is at the time of a policy review. If the agency assumed that the coverage was the same, a thorough policy review would have caught the lack of coverage for snowplowing. The review should involve a comparison of the expiring policy versus the replacement coverage. Multiple sets of eyes can help to identify errors more comprehensively. Requesting the client to review the coverage is also suggested. Statements such as, “This coverage is as good as what you had before” (or something to that effect) should definitely be avoided. 

Moving coverage is more than just trying to save the client premium dollars. Problems may develop if the replacement policy contains less coverage than the previous policy, and the client is unaware. If the agency really wants to minimize its potential for an E&O claim to develop, it should have a detailed procedure to address this.

Tags:  Accounts  coverage  E&O  gap 

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5 Ways to Reduce Your E&O Exposure from Flood Liability

Posted By Melane Humphreys, MS, CPHRM, Thursday, February 1, 2018
Although errors and omissions (E&O) claims resulting from floods typically rise and fall with weather-related disasters, risk mitigation needs to be at the top of one’s mind when offering new or renewal property coverage to reduce exposure. Use these five approaches to help reduce E&O exposure from Flood Liability.
1. Understand. The agent’s understanding of flood insurance and the representations made to the client need to be explained clearly and accurately to avoid an E&O claim.

2. Explain. A flood policy through the National Flood Insurance Program (NFIP) requires a separate application and premium for each location. 

3. Options. Since there is an exclusion for floods under a basic property policy, the agent should always provide clients with the possibility of purchasing flood coverage. 

4. Document. The proposal formats used by the agency should be consistent and should provide an explanation to assist the prospective client in understanding flood exclusions and available coverages through programs such as the NFIP. 

5. Signature. If the client declines coverage(s), sign-off on the proposal should be secured. 

Understanding flood coverage and exclusions and effectively communicating and documenting with clients are crucial.

 The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.


Tags:  E&O  Flood Liability  Utica 

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The Agency Proposal: A Potentially Key Piece of Evidence

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Friday, December 29, 2017

The agency proposal has played a key role in many errors and omissions (E&O) claims. If the proposal is clear about the proposed coverage and includes definitions and claim examples, it can be valuable for educating the client. If it also includes the necessary disclaimers, the proposal could tip the scales heavily in the agency’s favor in an E&O claim.
However, without this information, the proposal can hurt, if not destroy, the agent’s chance of prevailing in an E&O matter. The following is an actual E&O claim.
This E&O claim was asserted against the agency for providing inaccurate information about coverage when a dwelling fire policy was procured for the client’s rental property. The producer detailed policy coverages for a Dwelling Property 3 – Special Form (DP-3) in the agency proposal. Unfortunately, the agent only requested a proposal for a Dwelling Property 1 – Basic Form (DP-1) from the carrier. The client purchased the coverage, believing that he was securing broader coverage. As is the typical scenario, the client retained all documentation provided from the producer. The underlying claim involved an upstairs toilet waterline leak, which caused water damage to the dwelling’s second and first floors. The misstatement on the proposal of the coverages clearly put liability on the agency. The E&O carrier paid the claim, with offsets taken for the underlying deductible and premium difference.

How could this issue have been avoided? 

There are several ways this could have been avoided. One way is to make sure the proposal matches what the carrier proposed. In the scenario above, it is possible that the agency asked the carrier for a quote for a DP-3 but the carrier only provided the DP-1 coverage. Carriers make mistakes, too. Agencies should have a process to compare the carrier quote against the application. There might have been something in the risk that precluded the carrier from offering a DP-3, or maybe the application only asked for a DP-1 quote when the intention was to secure broader coverage.

Another method is to have the agency proposal reviewed by at least another set of eyes, with one set of eyes belonging to the producer. In the claim above, there is a good chance that further review would have identified the error. 

Another way is to use the carrier proposal. The advantage of this approach is that if there is a misstatement of coverages or a mistake on the carrier proposal, the carrier would probably bear liability for the error. If the agency is going to use the carrier proposal, it is suggested that a wrap-around document or disclaimer be included. Typically, carrier proposals do not contain the key disclaimers. A disclaimer similar to the following should be added.

Information contained in this proposal is intended to provide you with a brief overview of the coverages provided for reference purposes only. It is not intended to provide you with all policy exclusions, limitations and conditions. The precise coverage afforded is subject to the terms, conditions, and exclusions, of the policies issued.


Based on your agency’s current procedures, could this type of incident happen to you?  

In the event of an E&O matter, the agency proposal is an admissible document that both lawyers can access. Since the legal standard in virtually all states will hold the agent responsible for what he or she says and what is put in writing, it is vital that the proposal be accurate.

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

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Do You Know What’s Really Happening in Your Agency?

Posted By by Curt Pearsall, CPCU, AIAF, CPIA , Monday, November 27, 2017

Today, probably more than ever, insurance agencies are conducting some degree of auditing. Agency management is keenly aware of the need to verify that the firm’s procedures are being followed consistently. In the errors and omissions (E&O) world, “consistency” is a fundamental word.

However, there are still many agencies that don’t believe they have the resources to dedicate to this important process. The best suggestion to those agencies is to at least start the process. You do not want to find out at the time of an E&O claim that your staff was “doing their own thing.”

Key steps to begin auditing

» Have established procedures for processing new and renewal business. If this is not something that your agency currently has in place, work with your staff to identify at least five key processes. This will provide the foundation to build on.

» Determine who will conduct the auditing. The options are many, ranging from outsourcing, to a dedicated staff member, to a “peer-to-peer” approach. The latter might be the best approach to start with, where employees audit the work of their fellow  employees.

» Identify a realistic number of files to audit.  For many agencies, the goal is 10% of the policy count. If this is not doable, pick a number, such as 10 files per quarter, per employee. Auditing at least quarterly is suggested.

» Determine the exact audit questions with the potential responses being “yes,” “no,” or “n/a.” Consider the following:

- A new business exposure analysis checklist was  completed.
- The accepted proposal template was  used.
- There was confirmation to the client of coverages they rejected.
- A binder was issued within 24 hours of the binding of coverage.
- Upon receipt of the policy, it was reviewed and errors were identified.
- The policy was delivered in accordance with the agency’s expectations.

» As the auditing process is ready to be introduced and implemented, meet with the staff to advise them of the purpose. The goal is to get their buy-in. Through a “softer” approach, the staff will realize that auditing is not only good, but also necessary. By identifying the issues in the files that did not get a passing grade, the agency will be able to develop the appropriate solutions. This could involve the need for further training on the expected way to handle a task. It could also involve tasks being performed. For example, the documentation for a task, such as an exposure analysis checklist, is not being placed in the proper spot in the agency system or in the document management system. It may also identify an employee who does not agree with the specific agency procedure.

» As the audit results are tabulated, hold a meeting involving the employee, the staff member who did the audits, and management.  If appropriate, an action plan should be developed to address areas in need of correction. Through this approach, the agency will be able to determine progress as future quarterly audits are completed.

» Celebrate successes. The goal of auditing is not to be punitive although, unfortunately that may occur at some point. The goal is to improve toward a greater degree of consistency.

Tremendous benefits

Strive to create good auditing habits. These habits will eventually become the norm in your agency. Don’t fear auditing. Some agencies become overwhelmed in the development of auditing and try to do it perfectly from the beginning. Even if your agency starts slowly, at least it has started. The benefits will be tremendous and the process can be refined over time.

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

Tags:  agency  audit  E&O  Utica 

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