Q: If a client sues me, will my Professional Liability Insurance cover the costs?
A: Error and Omissions Insurance can cover client lawsuits about your performance as an insurance agent, but it won't cover claims unrelated to your work.
Let's say a client sues you for selling them insurance that didn't actually cover their risk. Your insurance agent E&O would cover this claim because the lawsuit concerns your performance.
But not all client disputes have to do with your work. For instance, a client could sue over an injury. Say a client was walking into your office, but tripped over some loose carpeting and broke their hip. This lawsuit has nothing to do with your performance as an insurance agent, and it wouldn't be covered by E&O. It would be covered by General Liability Insurance, which pays for third- party lawsuits involving personal injury, reputational damage, and property damage lawsuits.
If a client sues me over an E&O Issue, will my insurance always cover it?
While E&O will cover many of your professional liabilities, no policy offers 100 percent coverage. Every policy has certain exclusions. But don't worry. Most common insurance agent risks (misrepresenting policies, failing to renew policies, etc.) should be covered by a standard E&O Insurance policy.
Keys to Maximizing the Likelihood Your Claim Will Be Covered
In order to get the most from your agent insurance, make sure you do the following:
- Read through your policy. Make sure you thoroughly understand your policy. If you don't feel like reading 50 pages of an insurance policy (who could blame you), feel free to talk with an insureon agent. They'll walk you through your coverage options.
- Report incidents immediately. If you fail to report an issue that leads to a claim, some providers will deny your claim. Reporting incidents immediately also helps resolve issues before they become expensive lawsuits.
- Maintain a single E&O policy throughout your business's life. It's best to find a good E&O carrier and stick with them. Errors & Omissions is a claims-made coverage, so it works best if there are no gaps in coverage. When you have a gap in coverage or switch providers, you'll lose coverage for claims arising from work you did before the gap.
- Get adequate tail coverage. A "tail" can be added to your E&O policy, which will allow you to file a claim after your coverage is cancelled or expired. Say you decide to take a job working for a big insurance carrier. You've worked as an independent agent for a few years, but now that you're joining another company, you're going to cancel your business insurance. However, you still have E&O risk from coverage you sold in the past. One of your old clients could still sue you. Having tail coverage will allow you to file claims even after you've switched carriers, cancelled a policy, or shutdown the business.