CalSurance Associates Blog

CalSurance Associates Blog

Monday, May 1, 2017

Your Files Can Help - or Hurt

Will your files help you or hurt you when it comes to E&O? Take a look at the below claim scenario and risk management tip to learn how you may protect yourself with regards to your files.

Claim Scenario: An agency's customer claimed the agency had committed an error in handling his insurance and retained an attorney who subpoenaed "any and all" of the agency's customer files for review. The attorney's goal was to determine whether there were discrepancies in the manner in which the agency handled their client's insurance needs. The agency had no written procedures regarding file handling or business processing, and no formal internal quality control or auditing program to monitor adherence to such procedures. Without formal procedures in place the agency was unable to effectively object to the breadth of the subpoena, resulting in over 1000 customer files being turned over to the claimant's attorney. After reviewing and comparing those files to the claimant's, the attorney discovered multiple inconsistencies in file documentation including the manner in which coverages were offered, written, and documented. As a result he was able to present a compelling case that the agency had discriminated against and breached its duty to the client at trial, resulting in a large adverse verdict against the agent.

Risk Management Tip: Your agency's file documentation is often its first and best line of defense in the event of a claim. This loss could have been avoided had the agency developed, implemented and monitored an internal quality control (QC) program including office procedures regarding documentation of the processing of business. QC Procedures should cover subjects including binders and certificates of insurance, records management and disposal, telephone, claims handling, mail and e-mail, and cash management to name a few. Your quality control program should also include standardized form letters  and in-house forms regularly used by the agency. Even with such procedures in place, the agency must be able to prove that they are followed consistently by all employees and that compliance is monitored on a regular basis.

A formal quality control program including a written office procedure manual should be one of the cornerstones of your agency's risk management program.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.


Monday, April 3, 2017

Premium Financing Woes

Claim Scenario:

John and Jane Doe, an extremely wealthy couple, met with their insurance agent who advised that $10 million in life insurance coverage would be appropriate given their financial status and estate planning needs. He recommended a whole life policy that earned dividends and accumulated cash value. Given the couple's age and health concerns, annual premiums for the policy were determined to be approximately $275,000.When the Does advised the agent that they were unable to pay the premiums out of pocket and unwilling to liquidate substantial portions of their investment portfolio to do so he recommended premium financing. Under the plan he outlined for the Does, premiums for the first few years could be borrowed, with future premiums paid by accumulated cash values of the policy. The agent backed up his recommendation with a professional presentation provided by the premium financing company, and the Does agreed to finance the premiums for the first five years of the policy.

Five years later the Does, having incurred loans of over $1.6 million plus interest, discovered that the policy's earned dividends were insufficient to pay the premiums on an ongoing basis, and filed claims against the agent, the carrier, and the financing company. Although the agent responded that he had not guaranteed any level of accumulated cash value or that it would be sufficient to pay premiums after five years he was able to produce no written documentation other than e-mails characterizing the financing scheme as "solid" and "extremely reliable".
Risk Management Tips:

Claims related to premium financing generally involve relatively large amounts as the involved policies have high limits and premiums to match. In many cases collateral is aggressively sought by the financing company and often ultimately lost. Given the foregoing, full disclosure of the risks and mechanics of the transaction must be made to the client and comprehensive documentation provided and maintained by the agent. Agents should consider requesting involvement of the client's own legal counsel to ensure that the financing structure is proper and understood by the clients. Doing so will provide additional protection to the agent in the event of a claim. Bear in mind that in many jurisdictions promoting premium financing may be considered as creating a special or fiduciary relationship with the client which may in turn serve to elevate the agent’s professional standard of care and disclosure.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.


Thursday, March 2, 2017

Beware Ransomware

Ransomware is malware that denies users access to their own device. It is increasingly showing up on mobile devices. Mobile ransomware infects the victim's phone by blocking access to apps while displaying a message explaining how to pay the demanded ransom. Various forms can lock the keys and replace the home screen with fraudulent official warnings which state that the ransomware recipient broke the law by visiting illegal websites. The ransomware shows screenshots from the illegal website and the user's browser history, and demands a $500 fine. Attackers are indiscriminate in selecting victims, who simply need to click on the wrong link on a smartphone to be infected.

To defend your agency's devices from ransomware and other malware:

  • Password protect devices.
  • Update software regularly. Malware is constantly being modified and improved. Outdated software simply won't stand up to more advanced malware.
  • Avoid questionable downloads. If you don't trust the source of a download, don't download it. Otherwise, you're inviting an attack. Beware of app reviews; many fake ones seek to give you confidence in malicious apps.
  • Employ mobile security. You may have the latest spyware and virus blockers on your agency desktops, but do employees have the same on their tablets, phones, and other portable electronics? If not, once connected to your network, these devices may leave it vulnerable to breaches. Establish mobile and employee owned device policies to make certain employees don't create unguarded network access points.
  • Don't allow employees to access sensitive data through unsecured connections, such as a local fast-food franchise's or coffee shop's free Wi-Fi. Public Wi-Fi hotspots are especially prone to malware.
  • Use encryption software. Unencrypted company devices can be "mined" for company data and information for sale to competitors and provide easy access into company files and email. Enforce encryption policies to mitigate this risk.


All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.


Wednesday, February 1, 2017

Responding to a Carrier Rating Drop

You may have followed all best practices of the industry in placing business for your clients in markets approved by your agency's selection protocol in order to protect the agency from potential claims and the client from loss. You followed up by monitoring the ratings and activities of the carriers involved according to agency guidelines. In short, you've done everything right. But what do you do when one of those carriers suffers a rating downgrade? The following tips may help you to provide further service to your clients while minimizing potential liability exposure to your agency:
1.     Immediately notify clients of the downgrade and answer any questions they may have to the best of your ability.

2.     Continue to keep your clients apprised of developments - use carrier      approved notices/forms when available.

3.     If a potential solvency issue exists make your clients aware of available guarantee fund protection.

4.     Discuss with your clients their options including implications of a coverage move either at mid-term or expiration and potential impacts on premium involved. Allow the client to make client to make the decision as to which options to exercise and confirm in writing.

5.     Be consistent - treat all clients in the same manner and document all client communications and agency actions taken in writing.

6.     Consult with legal counsel regarding agency actions and content of client communications.

7.     Maintain a positive relationship with the carrier. Avoid negative references and review your contract with the carrier to determine any duties or restrictions you may be subject to in regard to the downgrade. 


All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.

Sunday, January 1, 2017

You Say Tomato, I Say Tomato

Agents selling life insurance coverage must always focus on risk management and pay attention to details to avoid simple errors which could have catastrophic results. One of the most common errors involves client communication, or the lack thereof. Unrealistic and unrealized client expectations are contributing factors in the majority of professional liability claims in any discipline, and particularly so in those involving insurance agents and brokers. Unrealistic expectations are most often caused by simple communication failures between the agent and his client. Those failures need not happen, and can be avoided by consistently employing a few basic strategies.

Never overestimate the client's knowledge of the services you intend to provide, regardless of the client's level of sophistication. It is your responsibility from the outset of the client relationship to clearly explain exactly what services you will perform and - equally important - those you won't. Carefully explain all coverages to your clients as well as any exclusions to those coverages. Never indicate to a client that you will place a policy until you have confirmed that it can be placed - if you don't know, say so. In advising clients always remain within your own area of expertise - do not attempt to render legal, accounting or any other type of advice. Make sure that communication is two way - have your client clearly explain has or her desires, needs and expectations Never volunteer information regarding your errors and omissions coverage. Clear communication can help ensure that you clients have the information and expectations they need to understand your responsibilities and liabilities regarding your scope of services.

Even when verbal communication is frequent, memory failure and misunderstandings often can result in disputes and litigation. For most of us, memory does not improve with the passage of time, and memory lapse tends to be aggravated when large sums of money may be at stake. Few of us remember all the details of telephone calls, group teleconferences, or face to face conversations shortly after they take place. Accordingly, agents should confirm verbal communications in writing, especially if they involve an agreement or commitment, notification, or a request for action or follow-up. Remember that voicemails pose a great risk for miscommunication and should be followed up in writing as to any points of significance (i.e. agreements, notification, request for action), correction or clarification.

Agents should also be aware that e-mail in the context of client communication is never actually casual of informal. From a legal standpoint e-mails are given the same standing as any other formal written document, are never totally deleted, and always form a key component of the client record for litigation purposes. For these reasons every agency should have a formal, mandatory e-mail communication policy in place requiring appropriate content, transmittal to all interested parties, and filing of hard copies of e-mails in client files. Use the "return receipt' e-mail function to confirm that your message has been received and opened. Follow up promptly if it appears that your message has been ignored, misdirected or lost. Texts to clients should be only used for the limited purpose of scheduling and requests for communication, and never for the purpose of transmitting substantive content.

Clear communication is a vital key to a successful and profitable client relationship void of disputes and claims. Effective communication should be a core competency of any agency that strives to understand and meet the needs of its clients. With expectations properly communicated, documented and verified any issues can be addressed quickly, calmly and effectively with minimal negative impact on time, costs and relationships.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.

Thursday, December 1, 2016

Avoid Simple Mistakes That Can Lead to Liability

Insurance industry studies indicate that approximately 5% of E&O claims involve the sales or administration of life insurance. While they are relatively rare, when those claims occur they can be significant. The majority of claims filed involve common errors that are easy to avoid with proper attention to detail and documentation.
The most common mistake made by financial representatives is the failure to administer the application process diligently. They often fail to exercise due care in assisting their clients to answer the questions on the application - i.e. they fail to make sure that each question is answered correctly and accurately. Failure to do so may result in an E&O claim by the intended beneficiary if payment is denied by the carrier.

Financial representatives also often fail to recognize answers that do not correctly represent a client's health status. Questions such as "Have you ever been diagnosed with an eye, ear, nose or throat disorder?" are often answered in the negative by "ordinarily healthy" applicants. A long list of "no" answers should raise an alarm if the financial representative is paying attention. Often both the representative and the client fail to consider that simple issues such as a prescription for glasses or allergy treatment are relevant from the carrier’s perspective.

Another common mistake is the failure to maintain documentation of all communication with the client. For every meeting with a client a record should be made of who said what and what they the parties agreed to do. Financial representatives are often targeted for lawsuits by beneficiaries whose claims are denied, and must be prepared to defend themselves with proper documentation.

While you can be sued by anyone, you can make it harder for them to make a case against you by attention to detail and proper documentation.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.


Tuesday, November 1, 2016

E&O Prevention for Insurance Agents & Agencies

Many people today are glad to bring a lawsuit against a company for the smallest reason or for what they think is a legitimate reason. If you or your agency provides them with a reason, even casually, you may find yourself in court. Errors and Omissions, or E&O prevention is not an option for insurance agents and agencies; it is an essential for solid risk management. Here are some steps to take to reduce E&O causing problems.

Inform Each Staff Member
Effective prevention starts when insurance agents become especially aware of what can lead to an E&O. Being educated about what might trigger an E&O lawsuit is the first step in being able to avoid them. Not only should the agents be informed about possible trigger events, but also the secretaries and anyone else in the office that deals with the public or with clients.

Develop Policy Procedure Manuals
Make sure everyone in the office is on the same page for preventing E&O by putting all procedures in writing. Then, ensure that each staff member and all agents are familiar with those practices, and notified immediately when updates or new practices are to be implemented.

Evaluating the Needs of Clients
Agents need to ensure that they take time to learn about all of the client's assets so that the right amount of risk management can be determined. More than half of the E&O cases stem from a failure to provide the right amount of coverage. This problem can be eliminated if agents would take more time to understand the client’s needs and write them down.

Document Everything
Another effective way to help reduce claims of E&O is to be sure to document everything that takes place between clients, agents, and staff. Information needs to include time and date of the call, the names of client and agent, overall nature of the conversation, action needed, and a note of completion when the desired actions are taken. If a lawsuit should arise, the lawyer will ask for a copy of all documentation about the client.

If a particular coverage is suggested and then declined, get the client to sign a statement to that effect. Have the spouse verify it, as well.

Add electronic documentation to the office, too. Put everything on the computer so that it can be easily found again when needed.

E&O Seminars
Attend E&O risk management seminars. This is not only for agents but also for staff members. Seminars are a good way to keep everyone informed and reminded of the potential problems that can lead to an E&O lawsuit. Instructors can provide reinforcement to the agency's need to stay alert to potential problems.

Encourage Clients to Verify Policy Contents
Once a policy is delivered to a client, have them review it and confirm in writing that it is what they wanted. If there are any questions, have them contact the agent immediately for clarification.

Detail Property Carefully When Involved
When property is involved, be sure to physically drive by and look at it. Do not take a client's word for its condition. This is especially true when dealing with another insurance company and they want an evaluation. Agents need to cover themselves by carefully describing the property and making sure that they add in any problems seen. A claim later may be paid by an insurer, but they may turn around and sue the agent if the information given is in any way misleading.

Be Careful about Binding
If you do not have the authority to bind, make this clear to the client. Do not let them think they are covered if they are not. This has led to many lawsuits in the past.

Problems with E&O can often be prevented by being careful and following established rules in the office and in the field. It is true that having better information is safer. Proper training and keeping up with new recommendations given in seminars is a great way to stay ahead of potential legal problems.


All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.

Saturday, October 1, 2016

Advantages to Working with a Broker that Specializes in Professional Liability Insurance

Advantages to Working with a Broker that Specializes in Professional Liability Insurance

As an insurance agent, you spend your day helping others gain the necessary coverage to protect them in their daily business. However, how often do you think about the insurance you need for yourself? Professional liability insurance should be a key component of your own insurance coverage mix.

In the event that a former client should sue you, it is important that you are fully protected to save your livelihood and potentially that of your company. More commonly known as error and omissions insurance (E&O), professional liability insurance fills in the gaps not covered by other insurance policies you may have. In choosing who to purchase your E&O insurance from, you'll have a number of factors to consider. An insurance broker who specializes in professional liability insurance will likely be your best source of information on the topic, and here's why:

Customized Group Programs

If you work for a larger insurance company, it is likely that a professional liability insurance broker can develop a unique plan that is tailored to your company's needs. Rather than opting for a one-size-fits-all approach, the insurance broker can evaluate the unique requirements of your organization so that you and your fellow employees can get the coverage they need without paying extra for coverage that they don't.

This will save both you and your company time and money in choosing which insurance coverage you need, simplifying the process for future employees wishing to obtain adequate E&O coverage. Another added benefit of group purchasing is that your company can often save money by bundling multiple policies together for a discounted rate. This helps everyone in your organization to cut down on the costs for professional liability insurance coverage.

Competitive Advantages

In dealing with a broker who specializes in professional liability insurance, it is likely that the broker has cultivated successful working relationships with a variety of carriers, giving you the option to choose which carrier offers the best policy to meet your needs. In building those relationships, your broker can often negotiate lower rates, thanks to his ongoing work with those companies.

It is a mutually beneficial relationship for both the broker and the insurance company, so it is in the insurance company's best interest to keep the broker satisfied. That way, he will be more likely to send them new clients in the future. This benefits you because you can take advantage of that relationship to keep your cost down as well. If you were to contact the insurance company directly, you would not have as much bargaining power in negotiating better rates for yourself. Your broker can also guide you in evaluating the various insurance organizations to ensure that you are getting the best policy to meet your needs.

Additional Services

Through working with a specialty broker rather than going it alone, you may be able to gain access to additional services that the broker offers. This can include things like administration, claims handling and other services related to your policy. Because the broker specializes in the professional liability insurance area, she will have a better handle on dealing with the insurance company than you will. After all, it is the core of her business and something that she deals with on a daily basis. This can save you a lot of time and hassle in the event that you ever do need to file a claim. The broker can streamline the process for you, freeing you up to continue handling your day-to-day business duties, rather than having to focus on dealing with the insurance company yourself.

These are just a few of the key benefits to working with an experienced professional liability insurance broker. Before purchasing any new insurance policy, it is always best to conduct your own independent research to ensure that you understand the process and know exactly what you are getting. The more you know, the better your broker will be able to assist you in obtaining the best policy for your needs.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.

Thursday, September 1, 2016

Understanding the Difference Between a Broker, Third-Party Administrator (TPA) and Managing General Agency (MGA)

In the professional liability insurance realm, there are a lot of nuances in terminology that you need to be aware of. Understanding the difference between the various parties that work in insurance can help you in choosing who to work with and what is best for you. Here, we'll explain the difference between brokers, TPAs and MGAs, and what each can do for your insurance business.

Insurance Brokers

An insurance broker acts as an intermediary between the client and the insurance company. In this role, the broker serves as an advocate for the client in contracting with a particular professional liability insurance company. A broker may maintain relationships with a variety of insurance companies but is not employed by any of them. In dealing with insurance companies, the broker keeps the client's interests top of mind, making the process as streamlined as possible for the client. The broker advocates on behalf of the client to help them achieve the appropriate coverage for their needs and within their budget. Some brokers assist clients with filing claims as well.

Third-Party Administrators (TPAs)

A TPA is employed by an insurance company, typically to assist with risk management and the handling of claims. In the wake of the recession, many insurance companies were forced to cut back on their staff levels, and claims and risk management were some of the hardest hit. Rather than employing more staffers, many insurance companies turned to TPAs to help expedite their claims processing efforts. TPAs usually have expertise in one or more areas, like professional liability insurance, enabling them to process claims in an efficient and expedient manner, freeing up the insurance company to focus its efforts in other areas, rather than on claims.

Managing General Agencies (MGAs)

An MGA is similar to an insurance broker but is a bit more specialized. The MGA is granted underwriting power by an insurance company, whereas regular brokers do not have this privilege. Thus, an MGA has more power than a broker and can even assign new agents or brokers in retail insurance offices.
MGAs typically specialize in particular areas of insurance, like professional liability insurance. This takes the pressure off the insurance company to need to have on staff an expert in each type of insurance they offer or to have to spend time and money to train someone new. Instead, they contract with an MGA to handle more obscure areas of insurance.

Benefits of These Roles

Some companies are able to act in all of these roles in different scenarios. For your insurance business, it can be a great help to employ these services. Insurance is a somewhat complex topic with a lot of nuance and detail, so it helps to have people who understand these nuances and specialize in certain areas. Rather than having to learn every little detail yourself, you can free yourself up to focus on other areas of running your business, leaving it to the experts to handle more detailed tasks.

It is important to understand exactly what each of these entities offers before getting into a contract with one or all of them. Ask plenty of questions to get a better understanding of what they can and cannot offer you and your business. Make sure that you fully understand what the scope and limits of their responsibilities will be, as this can vary from case to case. It is important to do ample research in advance to ensure that you have the full picture. This will better enable you to make an educated decision about what is right for your business and your needs.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.

Monday, August 1, 2016

Minimizing E&O Risk for Insurance Agents

As an insurance agent, you spend much of your work day putting together insurance plans for your clients to make sure that they have the proper coverage to protect them in the event of any incidents. However, you need to ensure that you have ample coverage for yourself as well to protect you and your company from any errors and omissions claims, which can result in debilitating costs for your company if not covered under your regular insurance policy.
Having professional liability insurance to cover E&O claims provides an extra layer of protection for you and your organization. In addition to having this additional coverage, there are a number of practices you should employ to help minimize the risk of incurring such claims in the first place:

Follow Correct Procedures

First of all, make sure that you fully understand the intricate details of all of the insurance options your company offers and the extents and limitations of each policy. You need to know exactly what you are providing to your clients so that you can make the best possible recommendations for their individual needs.
Be sure to follow all applicable regulations, and always employ ethical business practices. If you are unsure whether a particular action is ethical, it is usually best to err on the side of caution until you can be completely sure. When completing application forms for your clients, always make sure that each question is answered fully and accurately to prevent future complications due to misrepresented information.

Communicate with Your Clients

Throughout the entire process of developing an insurance coverage plan for a client, take the time to explain everything to the client in detail. You want to ensure that your client fully understands the products that they are getting and the scope of coverage. If a client chooses to decline a particular aspect of coverage, impress upon them the potential risks of not obtaining that coverage and what it could mean for them in the future. The last thing you want is for a client to file an E&O claim against you simply because you did not make them aware of potential complications with their policies. In the event that you must switch your client over to a different insurance carrier for a particular policy, be sure to alert him or her to any changes in levels of coverage, deductibles, or other pertinent information.

Document Everything

As you work with your clients, both during the application process and in subsequent conversations regarding policy changes or claims, keep a record of everything that was discussed and the results of those conversations. Any time a client elects to make a change to a policy or remove certain coverage options, get it in writing with the client's signature. Having this paper trail can greatly reduce your liability in E&O claims because you will be able to prove that you provided the client with all of the information needed for them to make an educated decision and that the changes you made to the policy were at the client's direction. While it is unlikely that you will ever need most of this documentation in the future, it is best to keep track of everything just in case there is ever an issue.
By following these tips, you can greatly reduce your risk of E&O claims in your insurance practice. However, it is important to remember that we are all human, and even with the most careful application of these practices, mistakes can still happen. Any time there is a discrepancy, report it to your E&O insurance provider immediately. The faster you take action, the better your insurance company will be able to help you weather the storm.

All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.