Agents E&O Loss Prevention

Quality file documentation

A must if you are serious about errors & omissions prevention

By Curtis M. Pearsall, CPCU, CPIA

Over the years, I have reviewed my fair share of errors & omissions claims. While agents can do many things to enhance the culture and commitment of their office, probably the most important is documentation. This is most likely why virtually every E&O class ever taught has heavily stressed that subject because nothing will determine the direction an E&O claim takes more than documentation.

In reality, the issue isn't just: "Is there documentation in the file?" It heavily depends on the documentation's quality and timeliness. While it is difficult to identify every area where good documentation is critical, let's take a look at some areas to focus on.

Phone calls coming into the agency. Most members of an agency staff have been trained to ensure that phone messages are documented in the paper file or in the agency management system. While it is probably safe to presume that this activity is being performed, the key question is, "Is the documentation of sufficient depth and handled in a prompt time frame?" Documentation stating, "Spoke with Curt regarding his auto insurance" is clearly far short of where it needs to be.

In theory, the documentation should be to the level that anyone can look at it and clearly know what was discussed, what was resolved and whether or not there are open issues. If it does not meet this level, it is probably inadequate.

Why is this level of documentation so important? When looking at some claim files, is it evident there was a misunderstanding between what the customer told you and what you heard? What if a claim develops and the misunderstanding now surfaces? The goal must be to try to resolve any misunderstandings before the claim occurs. What is the best way to do this?

The most effective means is to document back to the customer your understanding of the conversation. This should be in writing and, for many agencies that have adopted this approach, a quick e-mail or letter does the job. For instance, "Mrs. Smith: Per your request, we have deleted all coverages on 410 Main St. If this is contrary to your understanding, please contact the agency as soon as possible."

What does this accomplish? It puts the responsibility on Mrs. Smith to speak up and advise you that you misunderstood her and restate what she actually wanted. While this may take some time, the benefit is clear: A possible misunderstanding has been identified, and any issue has been corrected before a claim occurs.

Requiring customers to come into the office when they are making policy changes is ideal and preferred. Unfortunately, it may not be possible in all situations.

Various "What if?" questions. Your internal staff routinely interacts with your customers on important insurance issues. Whether dealing with available limits, dog breeds, the definition of co-insurance or a host of other possible scenarios, these discussions must be thoroughly and promptly documented—not only in the agency file, but with a letter to the customer. Once again, without this level of documentation, the conversation will be "he said/she said," and it is questionable whether your agency will win that one.

Communication outside of the office. This may be via a cell phone or a face-to-face meeting between the producer and the client. These types of interactions can involve many scenarios. Once again, the important issue is that the documentation is handled thoroughly and promptly, as there is a good chance the agency's client is documenting the essence of the conversation for their records. You must do the same. Provide written documentation back to the customer detailing the conversation and what was resolved. If there was discussion on coverage questions or they indicated they did not want certain coverage, make sure your file clearly reflects these discussions and decisions.

For agency staff engaging with the customer outside of the office via cell phone, be certain the file reflects the discussion and the understanding. In addition, whoever was involved in the discussion should be the person who documents it. The quality of the documentation is extremely important and requiring the person who spoke with the customer to perform it adds to the quality and validity.

Become a fanatic. It is critical for the staff not only to be aware of the importance of documentation, but also to know that management is extremely serious about it. Staff meetings are a great forum. As agency management performs quality control, the quality and timeliness of the documentation in the file should be factored in.

Unfortunately, quality and timely documentation may not prevent you from being hit with an errors & omissions claim. You don't have to do anything wrong to get sued. To repeat: In the resolution of those claims, nothing will determine the direction the claim goes more than documentation. Solid and timely documentation—become a fanatic about it—you'll be glad you did.

The author

Curtis M. Pearsall, CPCU, CPIA, is president of Pearsall Associates, Inc., and a special consultant to the Utica National E&O Program.