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Utica, Liberty Mutual and CITA - E&O Policies through the PIA

Posted By Staff writer, Tuesday, April 23, 2019

Aren't you at least a little bit curious as to how

much PIA can save you on an E&O policy?

 

E&O insurance PIA West insurance PIA insurance E&O policy

 

E&O insurance with PIA Western Alliance - Utica, Liberty Mutual, CITA

 

Before you start shopping for an E&O policy,

talk to us about our E&O policies.

 

Tags:  CITA  E&O  Liberty Mutual  PIA Insurance  Utica 

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Utica’s E&O Tips — Premium Audit

Posted By Staff writer, Tuesday, April 16, 2019

Errors & Omissions (E&O)Loss Prevention Tips

Your insureds don’t like surprises, especially when it comes to the topic of audits. Without proper explanation and timely, adequate handling procedures, policies subject to audit can lead to surprises and E&O claims against your agency.Your agency works long and hard to establish a relationship with a prospect. You learn about his or her business, analyze loss exposures, develop and present a comprehensive risk management plan, including insurance coverage, and win the case.

Now it’s time to think about audits, as a number of policies are subject to audit.

The following are some suggestions for your agency to ensure that your customer understands what it means to be audited and what he or she can expect.

Know

  Identify which policies are subject to audit.

  Determine why the policy is subject to audit, whereas some other policies are not.

  Improper Workers Compensation class codes and territory issues are often discovered during an audit, and can result in premium changes.

  Check with the carrier prior to choosing classifications and developing premium.

  Document your conversation.

Inform

  Notify your client in writing, on the proposal, that his or her exposure will be audited.

  Explain the audit process and timing.

  Clarify the difference between a physical audit, phone audit, and self-reporting audit.

  Explain why the client’s premium can change from the initial proposal or policy premium. Talk to him or her about how growth, previously unknown exposures, changes in operations, new products and/or operations, acquisitions, etc., can result in premium changes.

  Reinforce his or her responsibility to maintain adequate records. Advise what specific information will be needed to complete the audit. 

Use

  Utilize proper premium calculation forms. If the carrier has its own form for calculating premiums for policies subject to audit, use that form. 

Plan

  Strategize how to respond to an audit. 

  Discuss with agency management, or the producer, the best approach to promptly disclose premium increases to the client.

  In the event of a mistake, advise your client that you are looking into the matter.

  Collect your information and contact your E&O carrier.

  Together, determine if there are any solutions to the problem.

  Discuss how best to communicate with the client.

While not all premium audit problems can be avoided, proper knowledge, explanation, and planning go a long way toward maintaining a positive relationship with your customer and minimizing the E&O exposure to your agency. 

 

Purchase a Utica policy direct from the PIA!

pia for errors and omissions insurance

 

 

Tags:  E&O  errors and ommissions  Pia western alliance  Utica 

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Lately, PIA has been saving agents 15-20% on their E&O premium! See what you can save, now!

Posted By staff reporter, Tuesday, February 12, 2019

Save 15-20% on your E&O premium

 

 

 

Call Kim Cottrell today!

You do not have to be a PIA Western Alliance Member to take advantage of our E&O premium savings!

Contact Kim Cottrell today!

 

 

CARRIER COVERAGE

Utica, Liberty Mutual, CITA

 

PIA Western Alliance sells Utica National

 

Easy Estimate Form

Click here

Available in all states

 

Q: How can I earn 10% off my agents' E&O premium?

A:  There are 3 ways you can save...

1.  Conduct an annual exposure analysis program reviewed by Utica (5% credit)

2.  Professional training & development of your staff

3.  Attendance at an approved E&O seminar (5% credit)

 

Utica E&O Insurance PIA Western Alliance

 

Q:  Is this program available in my state?

A: This program is available in Arizona, Idaho, Montana, Nevada, New Mexico, Oregon and Washington.

 

 

 

Q:  Why Utica?

A:  Utica is the only company that separates property and casualty E&O from life and health E&O. Both Utica Mutual and Utica Life & Health are specifically geared toward that type of agency.

Utica has been providing agent E&O coverage for more than 40 years and has nearly $2-billion dollars in assets. They continue to be one of the standard bearers in the industry, offering a superior product at a competitive price.


 

Q:  What do the Utica policies include?

  • DIRECT access to the underwriter
  • Dedicated claims specialist
  • Full prior acts
  • Defense costs in addition to limits of liability
  • First-dollar defense coverage
  • Optional loss and litigation deductible and an aggregate deductible that caps your annual deductible exposure
  • Advertising and personal injury coverage
  • 5% loss control credit. Attend a Utica approved 3 hour E&O course for credit
  • 5% credit for Professional Training & Development. 60% or more agency staff achieve recognized designations including CPSR, CISR, ACSR, CPCU, CIC, and CPIA
  • Flexible payment plans and an A+ claims department
  • Optional Coverage's include-Financial products coverage, real-estate coverage, mutual funds and variable annuities, and employment practices liability
  • Optional extended reporting periods that reinstate the aggregate and offer options of as long as 10 years

 

GET STARTED!

 

 Easy Estimate Form

Click here

 


  

Liberty Mutual E&O Insurance

 

Liberty Mutual logo

 

Easy Estimate Form

Click here

  

 Available in Idaho, Montana, Oregon and Washington

 

 

 Q:  What does Liberty Mutual policies include?

A:  You’ll find broad definitions of the professional services covered by your policy as well as a supplemental payments section. Policy limits up to $10 million and deductibles as low as $2,500 provide affordable, comprehensive coverage, including:

  • Consent-to-settle
  • Contractual and vicarious liability
  • Data compromise (at no additional cost)
  • First dollar defense
  • Full prior acts
  • Innocent insured (for fraudulent or dishonest acts)
  • Insurance carrier insolvency
  • Insured vs. insured (for personal lines placements)
  • Personal and advertising injury for professional services
  • Punitive damages (where allowed by law)
  • Vicarious fiduciary liability

Also available:

  • Employment practices liability coverage, available by endorsement with separate limits and deductible
  • Professional services extra expense coverage

 

Download Liberty Mutual EO information

 

 Q:  What do I need to be eligible for this coverage?

Property and casualty should represent (75%) percent of your business, and your annual premium volume should be $1 million at minimum. Businesses also should have a good loss history.

 

GET STARTED!

Easy Estimate Form

Click here

 

 


 

PIA Western Alliance sells CITA E&O policies

 

 cita lOGO

 

Easy Estimate Form

Click here

 

 Available in all states

 

Q:  What does CITA Insurance Services policies include?

CITA Insurance Services professionals have been in business for over 30 years and specialize in smaller Independent P&C agencies with $5 million or less in annual revenue and 30 or fewer staff members.

  • Low Capped Deductible (2x Aggregate):
    Reduces exposures to aggregate claims in an E&O policy period
  • Specified Provider Deductible Option:
    Lower deductible option for E&O Claims arising from business through an agency’s top carrier
  • 80/20 Consent to Settle Option:
    Minimizes the risk of out of pocket expenses
  • Diminishing Deductible:
    Deductible reduction applies when you are claim free and renew your policy
  • Individual policy:
    Ensures that you don’t share your policy with anyone else!
  • Defense Costs Outside the Limits of Liability:
    Defense Costs will not reduce your policy limits of liability
  • First Dollar Defense:
    Your deductible does not apply to defense costs
  • Excellent Claims Adjudication
  • Association membership is considered for discounted or preferred rates.

 

CITA E&O Insurance PIA Western Alliance

 

CITA’s Errors and Omissions Insurance for Insurance Agents is

written on an admitted basis with an A+ XV rating by A.M. Best Company in all state. 

 

 

GET STARTED!

 

 Easy Estimate Form

  Click here

 

 

Tags:  E&O  PIA Western Alliance E&O policy 

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Would you mind if I took a look at your E&O?

Posted By Staff Reporter, Tuesday, December 11, 2018

PIA Members & Non Members alike can take advantage of Utica's E&O policy discounts!

 

Q: How can I earn 10% off my agents' E&O premium?

A:  There are 3 ways you can save...

1.  Conduct an annual exposure analysis program reviewed by Utica (5% credit)

2.  Professional training & development of your staff

3.  Attendance at an approved E&O seminar (5% credit)

 

Q:  Is this program available in my state?

A: This program is available in Arizona, Idaho, Montana, Nevada, New Mexico, Oregon and Washington.

 

 

Q:  Why Utica?

A:  Utica is the only company that separates property and casualty E&O from life and health E&O. Both Utica Mutual and Utica Life & Health are specifically geared toward that type of agency. Utica has been providing agent E&O coverage for more than 40 years and has nearly $2-billion dollars in assets. They continue to be one of the standard bearers in the industry, offering a superior product at a competitive price.

 

Q:  What do the Utica policies include?

  • DIRECT access to the underwriter
  • Dedicated claims specialist
  • Full prior acts
  • Defense costs in addition to limits of liability (Wow!)
  • First-dollar defense coverage
  • Optional loss and litigation deductible and an aggregate deductible that caps your annual deductible exposure
  • Advertising and personal injury coverage
  • 5% loss control credit. Attend a Utica approved 3 hour E&O course for credit
  • 5% credit for Professional Training & Development. 60% or more agency staff achieve recognized designations including CPSR, CISR, ACSR, CPCU, CIC, and CPIA
  • Flexible payment plans and an A+ claims department
  • Optional Coverage's include-Financial products coverage, real-estate coverage, mutual funds and variable annuities, and employment practices liability
  • Optional extended reporting periods that reinstate the aggregate and offer options of as long as 10 years
  •  

Specialty Markets

"Call me...I am able to quote from several markets for hard-to-place or start-up programs."

 

Tags:  e&o  insurance content  insurance industry  pia western alliance 

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Carrier Ratings: Do You Have the Necessary Process in Place?

Posted By Administration, Tuesday, May 30, 2017

by Curtis M. Pearsall, CPCU, AIAF, CPIA, President. Pearsall Associates Inc. and Special Consultant to the Utica National E&O Program

Over the next few months, rating agencies such as A.M. Best, Demotech, S&P, etc., will be carefully dissecting the financials for nearly every insurance carrier in the marketplace. Based on these reviews, there is the potential that some carriers’ ratings could change. Does your agency have a process in place to manage this key issue?

Managing Carrier Ratings
Every agency should have an established minimum financial rating for the carriers they do business with. While a minimum rating of “A-,” using the A.M Best rating approach, is common among agencies, how your E&O carrier addresses insolvency in the policy form should be a consideration.

As rating agencies begin to publish their findings, it is vital for your agency to have a process to secure the most up-to-date information. There are many approaches. Based on the number of carriers your agency does business with, including carriers used by the wholesalers you do business with, identifying carriers’ ratings can be a time-consuming process. It is suggested that agencies look for an automated approach to secure this key information.

A.M. Best has a tool that is part of its Key Rating Guide that provides email alerts on important information pertaining to various carriers. There is a fee for this service, but the information is timely. Visit www.ambest.com/sales/krg to learn more. The website includes a video demonstrating the guide’s capabilities and functionality to help determine if this approach is right for your agency.

Get It in Writing
Not many carriers are downgraded each year. For example, an agency could have a carrier going from “A+” to “A.” While agency management may want to examine the situation more closely, there will probably not be any further action needed. But what would your agency process be if one of your carriers was downgraded from “A-” to “B”?

If this happens, identify the clients with those carriers. If the carrier is used by a wholesaler, the wholesaler should be able to provide this information unless that information was captured in your agency system.

It is then suggested to give those clients a written notice. The document should explain the situation advising the client that the coverage was placed with an insurance carrier that was recently downgraded. The explanation of the rating as provided by the rating agency should be included. For example, in the A.M. Best methodology, a “B” rating is defined as “Fair,” a “B+” is “Good,” etc.

Inform your client that you are not in a position to attest to the carrier’s future status and that there is the potential for the carrier to be unable to satisfy its obligation to pay claims. A primary goal of this written document is to educate the client to enable

them to make an informed decision on whether they want to continue or discontinue coverage with the current carrier. Include language advising the client that the agency would be willing to remarket the account to a carrier with a higher rating. In addition, tell the client that there is no guarantee that the premium will be equal to or less than what the client is currently paying or that the coverage will be identical.

The client must make a decision and communicate that decision in writing to the agency. In essence, what direction does the client want the agency to take? Some agencies have the choices noted on a document and require the client to check the box that indicates their decision.

Be Ready
There may not be many carriers whose rating changes in 2017, but what if one of those carriers is one you do business with? Make sure you have the necessary process in place.

Tags:  Carrier Ratings: Do You Have the Necessary Process  Curtis M Pearsall  E&O  Errors and Ommissions  Insurance Content  Insurance Industry  Insurance News  Weekly Industry News 

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What is Your Memory Worth in the Courtroom?

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Wednesday, May 10, 2017

The answer to the question posed in the headline is “not much." When errors and omissions (E&O) claims occur, the discovery process involves sworn statements provided in depositions or in the actual courtroom in the vast majority of the cases. When these statements are provided, the best scenario is that there is documentation, such as agency system notes, letters, emails, etc., to support them. However, all too often, statements are based on the memory of the people providing them.

Using the scenario in which the producer alleges that the client declined a specific coverage from the proposal, which of  the following has more credibility: the producer relies on his or her memory or a document that memorialized the decision  to decline a specific coverage?

Document, document, document

A common phrase often used in litigation matters is  “if it is not in the file, it didn’t happen.” It would be challenging to find a more accurate phrase when it comes to E&O loss prevention. When an E&O matter develops, both of the attorneys have a right to all of the various pieces of a file. This includes agency notes, e-mails, letters, the proposal, and more. The goal  is that the documentation will tell a story that aids in the agency’s defense. Therefore, a lack of documentation significantly impacts that defense.

The courts typically do not look favorably on a person’s use of their memory; it is referred to as “hearsay” and does not carry the same weight as actual written documentation. There is the definite possibility that testimony based on memory may be considered inadmissible.

What does good documentation look like? Consider these key elements:

  • Be mindful about what you’re documenting as your email or agency notation handled today could be read by someone who is suing you tomorrow.
  • The documentation should be handled promptly and accurately
  • The documentation should be detailed and contain the necessary “who,” “what,” “why,” “when,” and “where.”
  • The person doing the documenting should be the same person who had the conversation with the client.
  • Discussions with carriers and intermediaries should be documented. While you believe that the underwriter will work with your agency in the event of a problem, what if that underwriter is no longer with the company when you need them?
  • Declinations or rejections of coverage must be documented. To ensure that there is no misunderstanding about what the client said and what your agency heard, it is strongly suggested that there be written communication back to the client memorializing the discussion. You will be surprised about what the client will say after a loss when they are told there is no coverage!
  • The agency should have written standards and procedures established that clearly delineate where documentation of various types should be stored in the agency system.

Done Right

For insurance producers, there should be concise documentation of producer–client meetings. This can be at the initial stage of the relationship or at the numerous times when the interaction occurs. Notes should be taken detailing the discussion and then memorialized not only in the agency system but also, as noted above, through some form of written communication back to the customer or prospect. The documentation should include who was present for the meetings, what was discussed, and what was agreed upon.

Quality and effective documentation may not be easy and will be time consuming, especially if it is done right. However,  it really is that important.

Tags:  Court Room  Courtroom Cases  E&O  Errors & Omissions  Insurance cases  Insurance News  Insurance Talk  Loss Prevention  Memory in the Courtroom  Risk Management 

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How Involved is Your Human Resources Department in Your E&O Culture?

Posted By Administration, Tuesday, November 1, 2016

Curtis M. Pearsall

 

by Curtis M. Pearsall, CPCU, AIAF, CPIA President – Pearsall Associates, Inc.

 

When many individuals in agency management think of errors-and-omissions (E&O) loss prevention, the main thoughts probably center around documentation, exposure analysis, proposals and policy checking, to name a few. These issues, after all, play a critical role – good or bad – if the agency becomes involved in E&O litigation.

 

Ironically, an area that does not receive the proper level of attention is human resources (HR), which should have a much greater role than just the completion of paperwork when someone is hired or terminated, the tracking of vacation days, and the handling of the agency’s benefits program. Because, as the saying goes, insurance agencies don’t make mistakes, people do,” wouldn’t it make sense to include the area that’s heavily involved in the selection and training of people?

 

Important areas

HR plays a key role in recruiting the right people and fostering a culture based on integrity, client service and quality management. Areas where your HR department should have its hand in the development of a strong E&O culture and commitment include:

 

Job descriptions. Without these, there may be a disconnect on the responsibilities and expectations of each staff member, with some doing what they believe their job is as opposed to what the actual expectations are. Most management will state, I just need the staff to do their jobs.” For this to have a greater chance of being a reality, it would make sense to have a document that advises employees on what their jobs are.

 

While most job descriptions will include job duties and responsibilities, qualifications, etc., consider adding a statement such as, the employee is responsible for adherence to the stated expectations and procedures of the agency in the area of E&O loss prevention.”

 

Ensuring the firm is properly staffed with qualified individuals. Having the right people greatly determines an agency’s success. Recruiting and the identification of tomorrow’s employees” are vital.

 

Staff training. This is essential and should be an ongoing objective, not just when a new employee starts. There are many training opportunities including courses (electronic and classroom) on topics such as products, technology, sales, customer service, and others. In addition, industry publications are excellent training sources. With constant changes in the industry, the agency should have programs in place to provide the staff with the necessary knowledge and skills.

 

Performance appraisals. The staff needs to grow for the agency to grow. Performance reviews should be done at least annually and contain goals for the following year that enhance the agency’s overall E&O culture.

 

Don’t underestimate the impact

Does your agency have any employees working remotely? If so, HR should ensure that policies and procedures are developed to address situations that may arise with remote workers. These employees are subject to the same standards of quality service as their onsite co-workers.

 

If the agency uses independent contractors to fill any roles, these workers should be managed in compliance with applicable laws and regulations, and there should be a written agreement that details expectations and processes.

 

Agency management should not underestimate the impact HR can have on taking the agency to the next level of E&O commitment. It is more important than many may believe.

 

 

Tags:  Curtis M. Pearsall  E&O  How Involved is Your Human Resources Department in 

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How Strong is Your Errors & Omissions Prevention Culture?

Posted By Administration, Tuesday, June 28, 2016

Curtis M. Pearsall
by Curtis M. Pearsall, CPCU, AIAF, CPIA President – Pearsall Associates, Inc., and Special Consultant to the Utica National E&O Program

 

Assessing an agency’s errors and omissions (E&O) risk management culture is easier said than done. While there is no real established formula that provides a grade, there are some valid ways to determine where the agency is on the continuum to achieving a solid E&O prevention culture.

 

Staff Assessment and Training

Agencies don’t make mistakes. People do. Start with an assessment of the agency’s staff. Does each staff member possess the necessary expertise and knowledge to professionally perform his or her duties? This evaluation should be done for each staff member. The results will help to determine if more training is needed. The insurance industry is constantly evolving with new coverages and forms, so dedicating a significant amount of energy to staff training helps ensure that they have the proper level of education on technical knowledge, systems, sales training, etc.

 

An additional evaluation, focused on E&O prevention commitment, should also be performed. Agencies with employees truly committed to E&O loss prevention have achieved a solid step in the right direction.

 

Job Descriptions

In addition to having knowledgeable and professional employees, a strong E&O prevention culture includes employees knowing what is expected of them via documented job descriptions. Without job descriptions, there is the chance that staff members will do what they think they should. This increases the risk that certain tasks and activities will not be completed because the staff may think that’s not my job.”

 

Each employee should be aware of what role he or she plays and how various functions are to be performed. It is common for an agency with a strong E&O culture to have a written procedural manual. Without it, staff will handle a task the way they want to.

 

Consistency is a key word in designing a strong E&O culture. The potential for inconsistency increases without a manual denoting how the task should be done.

 

Exposure Analysis Checklists

A major cause of E&O claims involves the failure to provide the proper coverage, so a strong E&O culture should include the use of exposure analysis checklists. These lists are often referred to as the closest thing to a silver bullet in E&O loss prevention” and will help an agency to truly know its clients. This evaluation will heavily determine the next steps in the sales cycle.

 

Job Performance

An important yet often overlooked area involves an ongoing review and evaluation of the staff’s job performance. Having the right people and a solid game plan does not guarantee success. To a large degree, the agency’s success depends heavily on whether the staff performs the necessary tasks using the expected procedures. Insurance agencies are fairly complex organizations and, for this reason, they need an internal audit process that periodically varies to what degree staff members are meeting expectations. Without this auditing process, mistakes will occur that can have a significant cost to the agency.

 

The development of a strong E&O prevention culture and commitment doesn’t just happen. It requires a concerted effort from the leadership and every member of the team.

Can we save you money?

Fill out an E&O Easy Estimate and find out! Click Here

Tags:  E&O  How Strong is Your Errors & Omissions Prevention C  Insurance Content  Insurance Industry  Weekly Industry News 

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How Your Agency Management System Can Help Minimize Your E&O Potential

Posted By Administration, Tuesday, April 19, 2016
 
Curtis Pearsall

Curtis Pearsall — Pearsall & Associates & a consultant to Utica

 

An uncovered exposure is typically the number one cause of an Agents’ Errors & Omissions (E&O) claim. Therefore, the more exposures an agency insures, the lower the E&O exposure.

 

While virtually every agency focuses on writing new business, the potential to write additional policies is likely within the agency’s current book. Recent industry surveys indicate that, on average, insurance agencies write fewer than 1.7 policies per account. The average Personal Lines account has 5-6 policy opportunities at a minimum, so there is real potential to write business from within the current book.

 

If you don’t know your agency’s specific numbers, now is a good time find out. Every agency should have account development strategies that include, among other things, a commitment to identify cross-selling and account-rounding opportunities.

 

Greater opportunities, greater defense

More effective use of your agency management system will help. For example, how can you determine which accounts your agency has with an auto policy and a homeowner’s policy, but no umbrella? Many agency management systems have the capability to identify these customers. By interacting with and marketing to them, you can write more insurance while at the same time minimizing your E&O potential.

 

A recent insurance survey indicated that over 50% of renters do not have the proper coverage because they believe their landlord’s insurance covers their personal belongings. This is clearly an opportunity to educate customers and write more business.

 

These strategies also provide a greater defense if an E&O claim develops and the customer alleges that you never discussed a specific coverage with them. While not every customer will purchase every coverage suggested, properly documenting discussions and declinations enhances the agency’s E&O protection.

 

Does your agency management system have this capability? If so, is your agency using it to identify gaps in coverage? Many agencies have established campaigns to market to customers who have gaps. This will help to grow your policy count while reducing your E&O exposure. Imagine if your agency added just one more policy per customer over the next year. Remember, too, that the more business you write for each customer, the better your retention will be.

 

A win-win 

Another approach worth considering involves looking for cross-selling opportunities every time your agency interacts with a customer. Some agencies provide customer service representatives with a new business incentive for rounding out” their customers’ insurance programs. Whichever approach your agency considers means greater growth and profitability.

 

This is a win-win for everyone.


Tags:  E&O  How Your Agency Management System Can Help Minimiz  Insurance Content  Insurance Industry  Insurance News  Weekly Industry News 

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Workers Compensation: more of an E&O risk than you might think

Posted By Administration, Wednesday, July 8, 2015

 

by Curtis M. Pearsall, CPCU, AIAF, CPIA, President, Pearsall Associates Inc.Special Consultant to the Utica National Agents E&O program

If you asked most agents about the errors-and-omissions risk involving workers compensation, it is a good bet the vast majority would say it presents minimal, if any, real E&O claims potential. In reality, with a number of E&O carriers, E&O claims arising from the sales and service of workers compensation is in the top 5, generating upwards of 10% of all E&O claims every year. This is a line of business to which agents should be sensitive.

In most states, the legal standard of an agent is to provide the coverage the client specifically requests. In the early 1980s, the Massachusetts E&O case Rae vs. Air Speed put a slightly different spin on this. The case, which was eventually appealed to the Massachusetts Supreme Judicial Court, concluded that if the coverage at issue is compulsory, an injured third party can assert a negligence claim against the tortfeasors agent. As a result, it seems incumbent for agents to know the customers they are dealing with (or looking to deal with) and whether there is a workers compensation exposure that must be addressed.

 

A potential fraud issue

There are a variety of factors that go into calculating and determining the appropriate premium with workers compensation. These include job classification codes, experience modifications, payroll, SIC codes, etc. Insurance carriers expect the application to reflect correct information. The determination of these factors (or the intentional misclassification of these factors) has been a central issue for fraud. It is generally believed that when businessowners seek a lower premium through the misrepresentation of the nature or class of the business, employees specific duties, or under-reporting payroll, they are committing premium fraud. Agents must be aware of this to avoid becoming an unknowing participant in any fraud scenarios.

 

Does the subcontractor have workers compensation? 

Most agents insure a contractor or two. This class of business poses a number of E&O issues. When an agent writes workers compensation for a contractor, the agent may believe his or her job is done. However, there is significant potential for problems to develop. While the contractor needs workers compensation, it is important the client knows whether any subcontractors he or she hires has workers compensation, too. Its probably best to verify this via a certificate. 

If an employee of the sub is injured on the job and the sub does not have workers compensation, the contractor that retained the sub could be deemed to be the employer and have to provide workers compensation benefits. This issue also presents auditing concerns because the payroll for the sub could now get factored in the development of the workers compensation audit, resulting in some significant additional premiums.

 

Clients with current/emerging multi-state exposures

It is not uncommon for a business to do business in other states. Many years ago, providing coverage for employees in these additional states was handled by the Broad Form All State Endorsement. This form no longer in exists and the industry has developed a new method for handling this exposure. 

For states in which an employer actively conducts business operations, at the effective or renewal date of the policy the state must be listed in Item 3A of the policy. The remaining states where the employer may, at some time in the future, conduct business operations must be listed in Item 3C of the policy. If an employer begins operations in a 3C-listed state, the standard policy requires the employer to notify the insurance company as soon as work begins. That state should now be listed in Item 3A.

There are a handful of states, called monopolistic fund states, that require that workers compensation coverage be purchased from the state fund. Monopolistic fund states typically do not have a provision for providing an "all states" provision.

Agents must communicate this information to their clients and have a means to identify a change in the business operation, such as an expansion of states. This information should also be included on proposals.

 

Sole proprietor/partnership issues

If you have a client acting as a sole proprietor or partnership, oftentimes there have been issues as to whether the sole proprietor or partners are actually covered by their own workers compensation coverage. As the agent, you wrote a workers compensation policy for the business, but are the individual or partners covered by that policy? Unfortunately, the discovery of this matter seems to normally surface at claims time when it is difficult to do much about it.

Agents must know how their state handles this issue. Some states exclude this class of employees and they have to opt in if they want coverage. Other states include these employees and they have to opt out. Typically, such key decisions need to be made at the inception or renewal anniversary of the coverage.  Bottom line, for those clients that you insure that operate as a sole proprietor or partnership, do the key executives know if they are covered? Documentation of discussions centering on this issue should be detailed and memorialized back to the client. 

When certificates of insurance are completed and the objective is to show evidence of workers compensation coverage, there is a question on the certificate that agents must answer: Any proprietor/partner/executive officer/member excluded? Make sure it is answered correctly because the implications are significant.

 

Is the policy subject to audit?

There have been situations where the customer buys a workers compensation policy and receives a significant additional premium upon audit. The customer brings an E&O action against the agent claiming he or she was unaware of the audit provision. Agents should ensure that proposals/offerings of coverage include statements detailing any audit provisions. All discussions regarding this issue should be well documented. 

Workers compensation presents more E&O issues than many agents think. Understand these issues and put procedures in place to avoid any part of E&O litigation.

Tags:  E&O  Insurance Content  Insurance Industry  Insurance News  Mergers and Acquisitions: Some E&O Words of Wisdom  Weekly Industry News  Workers Compensation: more of an E&O risk than you 

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