Agents' Errors & Omissions Review is excerpted from The Professional Edge newsletter which is published by SAFECO Insurance companies in conjunction with the marketing administrators for SAFECO's agents E&O program.
Did I say that?
At issue: Joe Handshake with the Promise & Handshake Insurance Agency had been handling the insurance needs for his good friend Frank Fairweather for many years. Frank called Joe one morning to advise the agent that he had decided to go into business for himself and had just purchased a small restaurant. The change in ownership was to take place at the end of the month and Frank wanted the agent to obtain quotes for commercial property and liability coverage. Joe was able to obtain quotes from several different carriers and set an appointment to meet with his client.
When Joe and Frank met and reviewed the insurance proposals, Joe advised his client that, in addition to the coverage requested, he would recommend a crime endorsement be added to the policy. However, Frank didn't feel that he would need this coverage since his restaurant was located in such a nice neighborhood. Coverage was written without the endorsement and the policy was issued.
Later in the year, Joe received a frantic call from his client who advised that there had been a break-in at his restaurant and over $4,000 in cash had been stolen as well as many pieces of equipment. There was also severe damage to the interior. The claim was submitted to the insurance company which denied coverage because crime coverage had not been endorsed onto the policy.
The client retained an attorney who wrote a letter to Joe Handshake, claiming that the agent was responsible for the loss, because he hadn't recommended crime coverage to his client. Although the agent had recommended this coverage to the client, he had neglected to make any notation of their conversation in the file and had not confirmed his client's refusal of this coverage. The agent didn't think that it was necessary to document the conversation; after all, the client was a good friend. In addition, he really didn't have the time.
SAFECO's commentary: Taking just a couple of minutes to make a note in the file or type a quick confirming letter would have documented the agent's claim that the coverage had been offered and declined.
In today's fast-paced business environment, where everyone is trying to do more with less time, some key loss prevention measures are being discarded. One such measure is file documentation. In speaking with agents, many have said that there just isn't time to make a note in a file every time something happens. However, we would urge you to find the time for the simple task of documentation as this could prevent a claim in the future that could cost thousands of dollars.
This is just one example of a situation where documentation in the file could have helped prevent a claim or at least made the client's claim against the agent much weaker. With time, memories fade and our recollection of conversations tend to become more self-serving. Don't rely on verbal communication only; make a note, type a letter, send a facsimile. While time is money, taking the time to document your file will be worth the investment in the long run. *
©COPYRIGHT: The Rough Notes Magazine, 2000