If It Ain't Brokered, Don't Risk It
Why Insurance Agents and Claims Adjusters Face Errors & Omissions Claims

You might be the most careful, dutiful, and knowledgeable insurance agent on the planet, but you still have to worry about Errors and Omissions claims. Insurance professionals find themselves facing the threat of lawsuits more frequently these days — not necessarily by any fault of their own. Claimants can drag insurance agents and claims adjusters into a legal battle for a variety of reasons.

Reasons Why Insurance Agents and Claims Adjusters Are Vulnerable

Reasons Why Insurance Agents and Claims Adjusters Are Vulnerable

Why would a plaintiff name you in a lawsuit? If you did in fact make a mistake, they could allege negligence and sue for their financial losses. When such a complaint goes to court, Errors and Omissions Insurance can cover your business's legal expenses and handle its defense. (For more information, read the article, "Avoiding Common Errors & Omissions Claims against Insurance Agents.")

But what if you've done nothing wrong? What reason might a client have for pursuing your business? Though there are many possibilities, here are some of the most common reasons:

  • You are the face of the insurance company. Insurance agents and claims adjusters usually have some sort of relationship with the insured. You are often the only contact the insured has with the insurance company. They might see you as a representative of the insurance carrier that's providing the policy, even if you're an independent agent. If the insured brings a lawsuit against the carrier, you're likely to get involved, too. Plus, one agent seems a lot more vulnerable than a monolithic company, and a plaintiff's lawyer may assume that you don't have the resources to fight the claim and will settle quickly.
  • Local cases are more favorable for plaintiffs. Cases that go before a state court, rather than a federal court, are more likely to swing in the plaintiff's favor, thanks to the local jury. If you work in the same state as the plaintiff, the case has a better chance of staying in the local court. For plaintiffs, this is a better option than trying to sue insurance companies headquartered elsewhere.
  • A plaintiff needs your help in the discovery or information-gathering process. By naming you in a lawsuit, a plaintiff can demand documents and answers to questions. You might not even be the main target in a lawsuit, but by being named, you are legally required to produce relevant documents for the case.

Even if the lawsuit is meritless, it's important to respond in a timely fashion. You don't want to risk the plaintiff being awarded all their demands in a default judgment. It's also worth noting that your E&O coverage can handle legal expenses that accompany frivolous claims.

To learn more about your exposures, check out the article, "Things that Enable E&O Lawsuits against Insurance Agents."

How Insurance Agents & Claims Adjusters Can Fend Off E&O Lawsuits

How Insurance Agents & Claims Adjusters Can Fend Off E&O Lawsuits

You might not be able to completely eliminate the risk of a frivolous lawsuit, but you can take the following steps that protect your business when it's faced with a claim:

  • Create and follow work procedures. By practicing the same steps for work tasks and having a consistent workflow, you decrease the chance of mistakes and put the burden of proving you broke procedure on the plaintiff.
  • Document everything. From emails to phone calls to in-person meetings, write down and file all pertinent information so that you're not forced into a he-said-she-said argument. Having well-documented evidence can help quickly resolve a case.
  • Don't get involved if you don't have to. If you've been named in a lawsuit for information-gathering purposes, you can talk with the plaintiff's lawyer to hand over documents outside of subpoena.

Lastly, having an Errors and Omissions Insurance policy allows you to pay for a legal team and court costs if any professional liability lawsuit threatens your agency. To learn more, read, "What Does E&O Insurance Cover for Insurance Agents?"

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