Case Studies-Policy Changes

Policy Changes Case Study #1

The Scenario

An agent deleted theft coverage for a client claiming the insured advised he no longer needed it. A loss occurred for which there was no coverage under the insured’s property policy.

The Issues

  • Failure to act on the instruction of the insured
  • Failure to confirm a policy change with the insured

The Outcome

The insured stated that he was sure his agent understood his continuing need for theft coverage.
$35,000 paid to the insured in excess of the agency’s retention
$28,883.72 in defense costs

Prevention Tips

The agency file did not contain sufficient documentation to support the agent’s claim that the insured had indicated he no longer needed theft coverage.

  • Document all conversations with an insured in the file
  • Confirm in writing all requests to delete coverage
  • Have the insured sign and acknowledge any coverage deletions

Policy Changes Case Study #2

The Scenario

An agent was asked to add a new vehicle to the insured’s policy, but failed to do so. Meanwhile, in an attempt to save the insured money, the agent replaced the auto coverage with another carrier, but failed to include the additional vehicle on the new policy. The agent believed she had binding authority with the new carrier, but did not. A loss occurred involving the new vehicle and the carrier denied coverage.

The Issues

  • Failure to procure coverage as requested by the insured
  • Failure to transfer all coverage to a new carrier

The Outcome

The agent clearly erred by not adding coverage for the new vehicle to the existing policy, and then further erred when replacing the coverage with a new company.
$23,506.74 paid to insured in excess of agent’s retention
$ 2,732.89 in defense costs

Prevention Tips

This was a clear case of agency error, leaving the E&O carrier with little choice but to settle prior to litigation.

  • Request policy changes the day they are received
  • Issue binders when adding coverage and promptly transmit to insured and insurer.
  • Be certain all agency personnel are familiar with the company’s grant of binding authority

 

Policy Changes Case Study #3

The Scenario

The insured requested the addition of $500,000 for property of others located in a new building. Although the limit was included in the policy, the actual location was not shown and when a loss occurred, the carrier denied the claim.

The Issues

  • Failure to make necessary changes to the insured’s policy
  • Failure to review policy endorsements for accuracy

The Outcome

Since the agency’s file was not well documented, the E&O carrier settled the claim. The insurance company also contributed to the settlement because they were partially responsible for not including the location.
$75,000 paid to the insured in excess of the agency’s retention
$33,882.61 in defense costs

Prevention Tips

If the agent’s file had been properly documented, there was a possibility that no damages would have been paid.

  • Document all conversations with the insured regarding policy changes
  • Verify all endorsements and policy changes against the request

 

Policy Changes Case Study #4

The Scenario

The insured alleged that the agent failed to add a mortgagee to a policy, despite being asked. There was a building fire resulting in a loss of $600,000 and the bank was not included in the payment. The agent claimed that she was never contacted by the insured and requested to add a mortgagee.

The Issues

  • Failure to properly endorse a policy when requested by an insured
  • Lack of documentation of a request from the mortgagee

The Outcome

Due to the insured’s records of all contacts with the client, the trial court was able to deduce that no conversation ever took place in which the agent was asked to add the mortgagee.
Summary judgment in favor of the agent
$112,832.90 in defense costs

Defense verdict.

Prevention Tips

The agency’s record keeping was excellent and allowed the E&O carrier to successfully defend the agent in this case.

  • Document all conversations and other contacts with a policyholder in the client file
  • Confirm all requests for policy changes with the insured in writing