Written by: Blair E. Boyd 

As a result of Hurricane Ida and the ongoing pandemic, insurance agents and brokers should anticipate an increase in errors and omission (“E&O”) claims in 2022.[1] Lawsuits against insurance agents often occur where recoveries fall short of policyholders’ expectations. To put it bluntly, policyholders are looking for another pocket to recover from. Although it is impossible to eliminate E&O claims all together, there are a few easy steps that can reduce an agent’s exposure and improve the likelihood of a successful defense.

While under Louisiana law, an insured/policyhowilder is generally deemed to know the contents and coverages contained in their insurance policy, assuming that the insured has received a copy of the full policy,[2] a common type of lawsuit against insurance agents is the allegation that the agent failed to obtain a requested type of coverage.  In such cases, the insured alleges that the missing coverage was not purchased when the policy was first obtained, but was later requested or discussed with the agent. Because the request is made mid-policy year, there is often no written record of such a request being made, if such a request was made. It is this very same lack of documentation that may subject the agent to liability and/or costly litigation. 

For example, take a situation where an insured contacted their agent to get a homeowner policy coverage. The agent gets the requested policy. Three months later, the insured builds an outdoor kitchen on the property.  One month thereafter, a storm damages the property.  The insured makes a claim to his insurer, who denies coverage for the outdoor kitchen because the homeowner’s policy did not have other structures coverage. Another example could be a situation in which the insured declined to add business interruption or contents coverage.

While it is hard to prove a negative, an insurance agent’s best defense is to have all communications with their clients well documented. For example, agents should write confirmatory emails or letters to their clients verifying the types and amount of coverage requested. Agents should supply their clients with descriptions of all applicable coverage types and corresponding quotes for potential coverage. If a client declines a specific type of coverage, this declination should be in writing, signed by the client. If a client calls during a policy year to change or add coverage, all of this should be documented as well. Agents should keep logs of all communications with their clients, whether that communication be via email, telephone, or in person. Agents should regularly save all text communications with their clients, especially if a client requests information regarding coverage or declines coverage via text message. This is because written documentation is key to minimizing exposure.

Deutsch Kerrigan defends insurance agents, brokers, and adjusters against claims of errors and omissions. Deutsch Kerrigan is a leader in professional liability defense successfully defending accountants, attorneys, insurance agents and brokers, and other types of professionals.  If you are a professional or insurer of professionals in Louisiana or Mississippi, let us partner with you today.