Disclaimer: This Article is Intended to Provide Agents with Information on Disclaimers and How to Use Them

We use a lot of disclaimers in the insurance industry. A disclaimer is a formal statement saying that the disclaiming party is not legally responsible for something, such as the information given in a book or on the internet, or that the disclaiming party has no direct involvement in it. In insurance, disclaimers reduce the risk of liability when an issue occurs and establish realistic expectations with your customers.

Agents must be clear and careful when servicing clients. The goal is to provide great, efficient service while also ensuring the agency is protected. Consistently using disclaimers can provide increased protection. Sometimes, just one simple sentence can make all the difference in keeping your agency protected.

Disclaimers should not be narrowly focused.

It’s important to keep in mind that you want disclaimers to be very broad in nature. If you use a narrow disclaimer that is focused solely on one hazard, you could worsen the agency’s E&O exposure. Focusing on one potential exposure while not addressing or effectively ignoring all other exposures places the agent in a dangerous position. For instance, disclaimers focused solely on COVID, or any other “hazard of the day,” open up major opportunities for the plaintiff attorney if an uncovered loss occurs or an improperly managed exposure results in a loss.

Agents generally do not list every possible exclusion or limitation in a proposal or renewal, but a few are highlighted – generally those added by endorsement. But as every agent knows, or should know, the unendorsed policy language already contains exclusions and limitations. Short of listing every exclusion, gap or limitation (which would require pages and pages of explanation), the only way the agent can adequately warn the insured about exclusions and limitations is by use of a well-worded disclaimer.

When a package of coverages is written (CGL, BAP, Umbrella/Excess, Crime, etc.), the exclusion and limitation explanation pages would fill an encyclopedia. Disclaimers are necessary to remove the need to be this precise in every proposal. And from a sales and marketing perspective, presenting the client with a 60-plus-page proposal, most of which is explanations of the lack of coverage, lowers the chances of closing most clients.

Best Practices: Writing a Disclaimer

• Disclaimers should not address one or a few specific exposures.
• Disclaimers should be broad enough to warn the prospect and client that there are exclusions and limitations that may not be addressed in the proposal.
• Disclaimers should point the insured to the specific policy language, warning the insured to not depend on the proposal for any interpretation of coverage.
• Disclaimers should clearly state that coverage determinations are often fact-based and are determined by the carrier.
• Disclaimers should address the agent’s market access. This means that the agent makes known to the insured that they have not researched the entire marketplace to see if a specific coverage is available; but they have researched their available markets.