Disclosing Reductions in Insurance Coverage

Due to the economy, many insured as moving coverage from one carrier to another or settling for reductions in coverage in their coverage from their existing carriers. Although, as an insurance agent you cannot force your client to buy better coverage or enhancements that you recommend, you can make sure you are covered in the event they are not.

We receive claims all the time against insurance agents for failing to disclose a reduction in coverage. This can be as simple as a new mold exclusion on a policy or as complex as a prior work exclusion on G/L policy. Some coverages that were offered a few years ago may not be offered on renewal. It is incumbent on the insurance agent to be the professional and advise clients of their options, risks and costs.

We find many times that clients make economic decisions on buying insurance coverages under the thought that they are never going to have a claim anyway. Well, it’s been my experience, that the one thing that isn’t covered is the one thing that gives rise to a claim.

The best defense for an insurance agent or broker to avoid an E&O Insurance claim is proper documentation of offering the proper coverage and getting a client’s signoff that they understand the coverage limitations. There is no way to get a client’s concurrence with every exclusion in a policy; however, you should attempt to highlight significant limitations and especially any reductions in coverage. A simple email in your file can be a lifesaver in deposition or trial. Documentation, Documentation, Documentation

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