Editor’s Note: This “claim story” actually is about an E&O claim that was averted. The point of putting it in this space is to have it serve as a cautionary tale.

The PAR insured took over a non-profit client by agent-of-record letter and was supposedly given copies of all the client’s then-existing insurance policies.

At the first renewal after the agent-of-record had been signed, the producer sat down with the client to fill in an exposure checklist. Through the checklist, the producer determined that the non-profit offered an array of employee benefit plans which were subject to ERISA. Despite this exposure, the agency had not been given evidence of a fiduciary liability policy when it took over the account.

Questioned about this apparent lack of coverage, the client provided a copy of a fiduciary liability policy. The policy had different effective and expiration dates than the non-profit’s other policies -- and it had already expired.

Since there were no known losses, the prior fiduciary liability carrier agreed to renew the coverage on the terms applying at the time it had expired. Fortunately, any potential problem was resolved before it could turn into an errors and omissions claim. However, had the PAR firm utilized the exposure checklist when it first became the agent-of-record, the threat of this E&O would have been removed from the beginning of the agency/ client relationship.

In a book entitled Dare to Prepare, written by attorney Ronald Shapiro, he quotes a famous neurosurgeon at Johns Hopkins named Ben Carson. Dr. Carson said:

“I take great pleasure in preparation; it gives me serenity. In my line of work, I have a real responsibility to avail myself of as much information as I can from the things other physicians have done. I need checklists and structure to step from one patient to the other. If you are prepared, the likelihood of success is that much greater.”

Insurance agents and brokers are not neurosurgeons, but they can learn from Dr. Carson, as well as from the “might have been” exemplified in this story. It is essential that an exposure checklist be completed at the time an account is taken over by agent-of-record letter (just as would be accomplished for any new client). Then, a checklist should be redone every year thereafter. An agent or broker can’t expect to be as lucky as the PAR insured was in this instance.