Author: Mike Edwards
“I currently write a very nice tree service account, which is coming up for renewal in a couple of months. Last year, we had some stiff competition, and barely kept the renewal. I suspect that this year will be no different, so I’ve already touched base with the underwriter about renewal pricing. During the current policy, we also got very involved with helping the insured get a claim paid, and I think that will be a “plus” for us come renewal time. Along those lines, we’re also working on some ideas to present to the insured about value-added services we can offer. As appreciative as he was about our help with the claim, I think he would be interested in some of the additional benefits we offer.
“For example, one of his concerns is his liability exposure for the 3 arborists, who drive their personal cars to job sites. We could offer to review the limits of liability on their auto insurance, as well as determine if the tree service is covered under the employee’s policy, or if an endorsement is needed. In addition, we would recommend that employees carry a liability limit that we thought was adequate. We could also furnish our insured the MVRs on any employees who drive on behalf of the company, whether they use a company auto or their personal vehicle.
“Any additional ideas you can offer would be appreciated.”
You’re right. In today’s competitive marketplace, independent agents need every advantage we can find. And service (now elevated to “value-added service,” in the current vernacular) is as important today as ever. While the old Big I slogan “Your Independent Agent Serves You First" has faded into history, many of us old timers wish we could bring back Raymond Burr (“Perry Mason”), who did those great commercials back in the 1980’s.
But a word of caution. In today’s legal environment, care should be used to evaluate which value-added services are prudent, and which could possibly lead to an E&O claim.
As one example, providing the MVRs of employees to your insured – who is their employer – is almost universally discouraged by legal and E&O experts. Motor Vehicle Reports (MVRs), CLUE Reports, and credit reports/insurance scores, are an everyday part of insurance underwriting. However, all are considered “consumer reports” which are protected under the Fair Credit Reporting Act (FCRA). The FCRA prescribes very strict guidelines on who can access any defined “consumer report,” and what can be done with it, such as sharing it with third parties.
An employer probably should review the MVR of every employee who drives a vehicle on company business. Many employers also routinely require drug tests of employees and job candidates. But an insurance agency should not be the source an employer turns to for these and any other protected private information. However, there are legitimate third-party providers available for such information, which is where an employer should go, not his insurance agent.
A friend of mine, who is an E&O defense attorney, did a program several years ago for a group of independent agents, which was called, “E&O That Comes From Being Too Helpful.” He cited many E&O cases that had resulted from some well-intentioned “value-added services.”
One example dealt with MVRs. An agency CSR handled the personal insurance for a friend who was involved in a bitter child-custody case with her ex-husband. The friend knew he had a drinking problem, and was concerned about her kids being in the car with him. The CSR offered to pull his MVR, which listed two DUI citations. The CSR gave the MVR to her friend, who gave it to her attorney, to support her request for a restraining order against the husband having the kids in his car. During cross-examination, the source of the MVR came to light. The ex-husband successfully sued the agency for $250,000.
As to the agency reviewing the auto insurance of the arborists, I frankly have a concern that this, too, is unwise. Many employers do set insurance guidelines – such as minimum required limits of liability – for employees who drive, but in my view, they should obtain evidence of insurance from each employee. Also, my preference would be that the agency not recommend “a liability limit that we thought was adequate.”
Lastly, your successful efforts to help your insured with his claim are laudable, and possibly risky. In my 30+ years working with independent agents, I’ve always felt that collaborating with insureds and insurers to get legitimate claims paid fairly was one of the hallmarks of the independent agency system. At the same time, I know from an E&O standpoint that any type of “service activity” with insureds carries some risk of an adverse outcome. And the current focus by nearly every business to provide “value-added service” only magnifies the potential risk of something going wrong.
A couple weeks ago, I sat in on a very interesting webinar presented by the Independent Insurance Agents & Brokers of America (IIABA) and SwissRe, titled “Avoiding E&O Exposures When Advocating for Customer Claims.” The basis for the webinar, according to IIABA, was a 2012 survey of panel counsel attorneys for SwissRe, which revealed that improperly advocating for customer claims was one of the most common errors and most dangerous things agents could do to expose themselves to E&O claims.
Initially, the title of the webinar seemed to suggest that “advocating” for claims on the customer’s behalf was a significant source of E&O claims. But during the webinar, which included two E&O attorneys along with a coverage expert, I think the key point was that agents need to be aware of when they have taken “advocating” for claims too far, and strayed into legal difficulties.
The IIABA’s Virtual University has many informative articles on some of the “service activities” which potentially pose E&O risks. So before your agency gets too far down the road with your plan to offer some value-added services to this or any other customer, I recommend that you review these articles.
Good luck with the renewal!
Last Updated: May 7, 2015