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Who Can Sue Insurance Agents and Claims Adjusters for Professional Liability?

Litigation against insurance professionals is a very real concern in the insurance industry these days, thanks to America's lawsuit-happy culture and the increasing number of people able to sue their insurance carriers. Insurance agents can become the target of a professional liability lawsuit when they least expect it — even when they've done nothing wrong. It's a frustrating reality for a lot of insurance agents and claims adjusters, though adequate Errors and Omissions Insurance certainly helps bring some peace of mind.

So who's doing all the suing?

For a number of reasons, the majority of E&O claims come from agents' clients. (Related reading: "Why Insurance Agents & Claims Adjusters Face Errors and Omissions Claims.") They're the most likely to sue for professional liability because they're paying directly for their agent's professional services. They might also involve claims adjusters and agents if their lawsuit primarily targets the insurance provider.

But it isn't just clients who are able to sue insurance agents. Regulators, providers, or nearly anyone who has a financial stake in the agent's work can bring a lawsuit against them. Let's take a look at why these major parties file lawsuits so you're better prepared to mitigate issues from the outset.

Professional Liability Claims Brought by Clients

Professional Liability Claims Brought by Clients

Clients make up the largest share of those filing lawsuits against insurance professionals. Their claims frequently allege that the agent…

  • Failed to procure coverage they requested.
  • Failed to recommend appropriate coverage.
  • Misled them or didn't disclose important information about policies.

Though the claims above are the most common, it's not an exhaustive list of reasons a client might sue. They could claim that you didn't identify exposures, failed to provide a timely notice to the carrier, or misrepresented yourself and your services.

For the most part, you can keep yourself protected from these types of lawsuits by having good, communicative relationships with your clients, following best business practices, and educating yourself about the policies you sell. Clients usually sue as a last resort, so being able to communicate and resolve issues before they escalate is essential. For more information, read our article, "Things that Enable E&O Lawsuits against Insurance Agents."

Professional Liability Claims Brought by Regulators

Professional Liability Claims Brought by Regulators

Clients aren't the only players in the lawsuit game. If a complaint is made with state insurance regulators, you could find yourself facing a serious case with the government. It often gets involved if it suspects shady business practices or unethical policies. Though the target is often the carrier, you may be dragged into the lawsuit so regulators can gather information.

The best way to keep from getting involved in these suits is to know what you're selling and comply with the laws surrounding your industry. Educate yourself and get the training you need so you feel comfortable explaining policies. And document, document, document. Having good records can be the difference between a losing case and winning case.

Professional Liability Claims Brought by Providers

Professional Liability Claims Brought by Providers

It's not common, but an insurance agent or claims adjuster could be sued by the provider they are associated with. Say an agent fails to properly explain a policy, which causes a client to the provider. The provider might sue the agent for getting it involved. Or, if an agent misrepresents themselves and falsely claims to work with a provider, the provider could sue.

To learn more about how to reduce your risk exposures, read, "Avoiding Common Errors & Omissions Claims against Insurance Agents."

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