Common Lawsuits & Claims Against Insurance Agents

Scott Jones
Scott Jones
Claims against insurance agents

Insurance agents can be proactive in protecting themselves from expensive lawsuits that come from errors and omissions claims. There are certain risks that insurance agents cannot avoid, and errors and omissions claims commonly come from a small slipup. Not only do you have to offer adequate coverage for your clients, but it’s also equally important that you protect yourself and your business with an E&O insurance policy. Take precautionary measures to protect your business from the common causes of insurance agent errors and omissions claims before it is too late. Identifying issues and effectively acting on them will make all the difference for your business. When a client lets you know that a loss occurs, you must immediately advise the client to contact a claims manager or forward the claim information yourself. Always closely follow a claim to ensure it is taken care of appropriately and quickly. By staying up on these issues, you can keep customer service a priority while mitigating your risk of experiencing claims against insurance agents.

Failure to Maintain and Explain Appropriate Coverage

To build and maintain strong relationships with your clients, they must be able to trust that you will monitor insurance coverage and advise them in their financial well-being. However, instances will arise when you may not have offered the right coverage. If your client faces loss due to the lack of coverage they needed from you, you would be held liable for the financial damages. When they feel you are at fault for this, they can take legal action, which is the reason for many E&O claims against insurance agents. It is helpful to vet every client thoroughly to determine their specific coverage needs to offer proper advice. Be sure to promptly notify clients if the coverage they ask for is not available, and offer to go over alternatives with them.

Even if you do all the steps to offer the right coverage to your clients, it is still crucial to fully understand the terms and coverage limits before purchasing a policy. Review the details of the policy with your clients, frequently pausing to see if they have any questions. When it is time for a policy renewal, communicate any changes in policy terms. Be sure that your marketing materials are up to date to reflect the current insurance policies you offer.

Administrative Errors

When using a variety of software programs for new policies, maintenance, and renewals, it is easy to make a mistake. You can lower your risks by reducing the number of individuals working with a client throughout the process. When information gets passed through multiple ears, it is bound to be slightly different from one person to the next. Distorted messages within client management should be avoided at all costs. To help prevent communication errors, There should be one agent assigned to a specific client to take care of all consulting and ongoing maintenance. It’s important for agents to stay up to date on the policies they sell. It is recommended that they stay informed and educated about existing and new insurance products through continuing education classes. When they thoroughly understand product details, they can communicate client needs much better.

Be sure to document all communications with your clients. If a client refuses a policy, it is in your best interest to record that. It is also helpful to send a follow-up email after interactions of review, so it is clear on what is agreed to or declined. Keep all documents of communication even after a relationship is no longer intact. Plus, note that it is your responsibility to monitor carrier solvency. 

Failure to Identify Exposures and Policy Changes 

E&O lawsuits against agents are often due to poor risk analysis, which highlights the importance of education. Protect your agency by evaluating new hires’ level of risk analysis skills, requesting that employees take risk analysis courses, and using resources to assist in client risk evaluation

Clients must immediately be notified of policy changes such as a change in the insurer’s financial situation that would directly impact their ability to cover a claim or maintain the policy. Even just the simplest unidentified change can cause a great deal of disruption. You can protect your professional stance and have peace of mind with all that CA E&O insurance has to offer. 

About iPro-Agency

iPro-Agency is a specialty insurance brokerage with the expertise to protect your firm, assets and to help you retain clients.  Our services offer all types of professionals the protection they need so they can stay committed to their work with ease.  We are connected with leading insurers to bring you the best coverage for your unique needs and areas of risk. Get in touch with us at 888- 673-8039 so we can begin to safeguard your success.