Thursday, May 31, 2012

Agency E&O–Steps Toward Prevention

Ram and Steps Palm Springs CA

This is an artist’s creative rendering of a ram, with a landscape mural painted on its body, located outside at the Palm Springs (CA) International Airport. I can’t recall when this was taken – several years ago – so it’s possible “Mr. Ram” is gone now. I was actually looking for a photo with “steps” in it, and while the plants are in a “stepped” wall in the background, I just had to use the photo. I like it, and at the same time I can’t help but think “E&O”. You?


I just read an Insurance Journal blog post by a consultant (Chris Burand, Burand & Associates) and thought his comments/ideas are worth repeating. The basis of his post is that agents may be opening themselves up to E&O by not getting current underwriting information on renewals. The reasons for that are many, but could include:

  • No one asks the insured for updated info! This is perhaps even more likely when the policy is an “automatic” renewal, i.e. the carrier is really not asking for much in the way of info to be able to issue a renewal policy. That’s convenient but may not be the best way to protect your agency or your client.
  • The Insured isn’t all that interested in responding to another insurance information request (“…again? we just talked about this a few months ago…”), and the agency personnel that have the relationship to get the info aren’t involved, don’t want to take the time and effort, no one lets them know, etc.
  • The renewal info comes back and while it contains information that is in fact new or different, the renewal info is not compared to what’s in file from prior years.

The point is also made that if the agency is asking for updated information and discovers new or uncovered exposures, it may mean additional opportunities to provide coverage. That’s good for possible additional revenue production, as well as E&O prevention.

It would be nice if there was one simple form to use for every renewal, and of course there isn’t, but that isn’t a good reason not to make an attempt to develop renewal checklists that are meaningful. Your agency may already have done this, which is great, but it may have been several years ago. It could be time to take a hard look at those older forms.

Monday, May 14, 2012

Current Events: Sexual Abuse/Molestation

courtroomThe Children’s Bureau, a division of the US Department of Health and Human Services, reports that for the period from October 1, 2009 through September 30, 2010, there were 436,321 substantiated cases of child abuse and/or neglect. Of that number approximately 25% were categorized as physical or sexual abuse. That’s based on reported cases and does not contemplate incidents that were unreported. While any system attempting to codify child abuse is flawed for a variety of reasons, the number of abuse cases is staggering and has not gone unnoticed by law firms and others.

Recently one of the National Underwriter sites posted a column regarding the Penn State sexual abuse scandal and which insurance coverage(s) may or may not apply.  It appears the author is starting with the GL policy and will at some point address D&O and possibly EPL issues.

I have no idea what the insurance package for PSU includes, but I would certainly hope they have separate coverage or at least an additional coverage part that specifically addresses sexual abuse/molestation. I would expect to find that in an EPL policy written for the school. I’m guessing if they didn’t have that coverage in place previously they have it now, albeit at a greatly increased premium.

This particular scenario and the fact that it’s gained national attention is probably not something your client’s think can or will happen to them, but it doesn’t have to be a national scandal to ruin your customer’s business. All you need is a little local press concerning the alleged improper/illegal conduct of a private school, daycare center, assisted living facility or any of a hundred other possible entities who have responsibility for the safe keeping of others. Add to that the cost of defending the allegations and even if they’re exonerated they may not be able to recover their lost revenue.

In this day and age, it would seem that offering your client coverage for sexual abuse and molestation would automatically be on the checklist of things “to do”, even if it’s only a sub limit if that’s all you can find. For some classes and types of risks, I’ll admit it’s not an easy write and can be expensive, but if you don’t pursue it your client may end up paying costs out of pocket, and you may be filing an E&O claim. Neither situation is desirable.

Penn State will obviously live on, and it should, as the actions or lack thereof from a few people should not destroy an institution for all time. Your customers probably don’t have the staying power and resources of a major university, so at the very least they need a fighting chance to survive what could be a very damaging series of events.