FRIDAY, SEPTEMBER 29, 2023
Insurance agents are vital in safeguarding individuals and businesses from unforeseen risks. However, even the most diligent professionals can make mistakes or have oversights that may lead to claims of errors and omissions (E&O). To help insurance agents manage the risk of such claims and minimize potential losses, it’s essential to understand common types of E&O claims that may be filed against them. 
Inaccurate Coverage Assessments
One of the most prevalent E&O claims arises when insurance agents fail to assess a client’s coverage needs accurately. A classic example involves a commercial property owner who experienced substantial losses due to a fire, only to realize that the insurance policy they purchased didn’t adequately cover the damages. The agent had failed to account for the property’s updated value and overlooked the need for additional coverage against specific perils.
Failure to Disclose Policy Limitations
Insurance agents are responsible for providing clients with a comprehensive understanding of policy limitations and exclusions. For example, if an agent neglected to communicate that a homeowners insurance policy excluded damage caused by flooding, a homeowner may face considerable financial strain after such an incident. As such, the policyholder may now face significant out-of-pocket losses and could file an E&O claim against their insurer.
Neglecting to Update Policies
As clients’ circumstances change, their insurance needs evolve as well. Failing to update policies to reflect these changes can result in dire consequences. For instance, a family’s life insurance policy that listed only one beneficiary became a subject of contention after the policyholder’s remarriage. The agent had neglected to update the policy to include the new spouse as a beneficiary, leading to a protracted legal battle.
Misrepresentation of Terms and Benefits
Misrepresenting policy terms and benefits is another common E&O claim trigger. A real-world example of this type of incident may include a client who purchased a health insurance policy based on an agent’s assertion that a specific medical procedure was covered. However, when the need for the procedure arose, the policy was insufficient, leading to substantial out-of-pocket expenses for the client and a claim filed against the agent.
Procedural Errors and Lapses
Procedural errors can also result in E&O claims. An example involves an insurance agent who failed to submit a client’s application for long-term care insurance in a timely manner. When the client later required long-term care, their policy was denied due to the lapse in coverage. The agent’s oversight led to financial hardship for the client’s family, who then sued the insurer.
Learn More About E&O Coverage for Agents
Insurance agents hold a significant responsibility in ensuring that individuals and businesses are adequately protected from risks. However, the complexities of the industry make it susceptible to errors and omissions. By learning from real-life examples and consistently practicing clear communication, accurate assessments, and proper procedural diligence, insurance agents can mitigate the risk of E&O claims and continue to provide invaluable services to their clients.
Contact U.S. E&O Brokers in Houston, Texas, today to learn more about E&O coverage solutions.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
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