Case Studies-New Business

New Business Case Study #1

The Scenario

The client requested a workers compensation policy. The agent applied for coverage and the insurance company acknowledged coverage was bound, but indicated that continuance was dependent on receipt of a completed form required by the state. The agent waited two weeks following receipt of the letter from the carrier to request the completed form from the client, and did not indicate that the form was required to keep coverage in force. Meanwhile, an employee of the client was injured and the claim denied by the carrier since coverage had terminated due to non-receipt of the required form. The client filed suit against the agent for payment of the workers compensation claim.

The Issues

  • Failure to promptly request additional information from client.
  • Failure to notify client that information was required to continue coverage in force.
  • Lack of appropriate suspense and communication handling procedures that may have prevented the loss.

The Outcome

The E&O carrier settled the case prior to litigation. The amounts paid in excess of the insured’s retention were:
$99,303.37 paid by E&O carrier to injured worker for underlying uninsured workers compensation claim.
$49,113.22 defense costs.

Prevention Tips

The agent’s error in failing to promptly process the request for additional information and to follow up resulted in the agent being liable for this claim.

  • Promptly follow up on all carrier requests for further information
  • Notify the insured in writing if coverage cannot be continued without requested information
  • Maintain adequate suspense and mail-handling procedures

 

New Business Case Study #2

The Scenario

The client applied for workers compensation coverage through the agency. The agency completed an application and collected the deposit premium. The application was not sent to the carrier until after the agency was notified that there had been a serious accident that resulted in injury to an employee of the client. The client filed suit against the agency when it was discovered that they had no workers compensation coverage in force for the accident.

The Issues

  • Failure to forward application and/or premium to carrier.
  • Lack of written procedures dealing with forwarding applications to company.

The Outcome

Since there was clear liability on the part of the agency for failing to mail the application prior to the injury, the E&O carrier settled the claim prior to litigation. The amounts paid in excess of the agency’s retention were:
$720,000 paid on behalf of agency for worker’s injuries (the worker was deemed eligible for Medicare benefits, or total claim cost would have been even higher)
$21,551.97 in defense costs

Prevention Tips

The absence of workers compensation coverage was due to the agency’s failure to mail the application prior to the date of the injury.

  • Submit all applications for coverage to the insurance company the same day
  • Transmit premiums collected in accordance with the agency agreement, brokerage contract, or other obligation
  • Maintain adequate suspense procedures

 

New Business Case Study #3

The Scenario

The client applied for workers compensation coverage. The agency accepted the application, but filed the paperwork in the insured’s file and did not forward it to the insurance company. A loss occurred for which there was no coverage and the client sued the agency.

The Issues

  • Failure to follow up with placement of insurance.
  • Lack of suspense system or improper use of suspense system to track placement of requested insurance.

The Outcome

The case was settled by the E&O carrier prior to litigation. Two workers were seriously injured in the accident. The amounts paid in excess of the agent’s retention were:
$196,794.87 in payment to the injured workers
$4,093.34 in defense costs

Prevention Tips

The insured failed to follow up on requested coverage.

  • Transmit applications for coverage the day they are received
  • Maintain an adequate suspense system
  • Conduct random audits of files to determine if procedures are being followed

 

New Business Case Study #4

The Scenario

The client faxed a request for commercial fire insurance to the agency. The client suffered fire damage to the property and the insurance company denied the claim stating that no coverage was in force on the date of the loss. The client alleged that the agency had failed to place requested coverage on a commercial structure.

The Issues

  • Placing coverage as directed by the client.
  • Documenting the date, time, and method requests for coverage are received by the agency.
  • A policy regarding maintenance of records and proper fax handling procedures.

The Outcome

Proper documentation in the agency’s files proved that the client had not requested coverage until after the date of the loss. A fax request from the client, showing the date and time, and a log of incoming fax transmissions, was introduced into evidence during trial, proving conclusively that the coverage was requested after the date of the fire.

Defense verdict.

Prevention Tips

Proper documentation in the agent’s file provided evidence that coverage had not been requested until after the loss.

  • Retain all faxed documents showing date and time of receipt
  • Confirm that faxes sent by the agency have been received
  • Retain logs of fax transmissions
  • Maintain a procedure for distribution of incoming and outgoing faxes