E&O Considerations for the Automated Agent
Technology is providing agents and brokers (“agents”) today with several tools to increase sales and profitabil- ity, as well as to provide better customer service. Automation is also helping many agencies manage their E&O risks more effectively, because of its capabilities to retain accurate data, foster consistent processes, document transactions and con- versations and generate reports to monitor adherence to agency procedures. However, if the agency does not implement its tech- nology in a disciplined way, this same tech- nology can be used against the agency in connection with an E&O claim or lawsuit.
ACT requested the law firm, Keidel, Weldon & Cunningham, to provide this overview of E&O considerations agents should keep in mind when using technolo- gy, given the firm’s expertise in defending agents in E&O lawsuits.
Electronic Delivery of Insur- ance Policies
It is crucial in defending many E&O claims and lawsuits that the agency be able to demonstrate that it delivered the insur- ance policy to the customer. Without this evidence, we are unable to raise one of our most valuable defenses – the “Duty to Read” defense. However, many agencies are now delivering insurance policies and other insurance documents to customers in elec- tronic form rather than in paper form. Providing insurance documents to cus- tomers in this way can help save both time and money and also allows the agency to provide a higher level of customer service.
Any agency that is contemplating the delivery of electronic copies of insurance documents to customers should follow a few simple steps in order to better serve the customer and help protect against an E&O claim or lawsuit. First, the agency should make certain that the customer consents to electronic delivery and understands that going forward, until such time as he or she indicates otherwise, he or she will only receive electronic copies of insurance doc- uments and will not receive paper copies. The best practice for the agency to follow is to have the customer sign a letter acknowledging his or her acceptance of this practice.
If policies are being emailed to cus- tomers, the agency should not rely upon automatic receipts, since sometimes they can be falsely generated by the recipient’s antivirus software. Instead, the agency should request that a customer who is sent a policy by email affirmatively respond that he or she has, in fact, received the email and attachment. If the customer does not affir- matively respond, the agency should be sure to call the customer to confirm receipt, and then be sure to make a note of that conver- sation in the agency management system.
If a customer is being provided with an electronic copy of his or her insurance pol- icy that is contained on a CD, the agency should be sure to send or hand deliver that CD along with a letter stating that the elec- tronic document is the policy and that the customer should be sure to review the pol- icy carefully and advise the agency of any questions he or she may have or changes that need to be made. In addition to email or delivering a copy of the insurance policy on a CD, there is also an electronic system whereby an agency sends an email to the insured with a link to a standalone secure server where the client can obtain a copy of his or her policy. If the insured retrieves an electronic copy of his or her policy, the agency management system is documented to show that it was retrieved, by whom it was retrieved and when it was retrieved. However, if the insured does not retrieve the electronic copy of his or her policy, an email is sent to the agent to advise that the policy has not been retrieved. The agency can then either send the customer another email reminding him or her to access the policy through the secure portal or print the policy out and send it the old-fashioned way, via mail.
Notes of Discussions with Insureds and Insurers
The rule within every agency should be that all employees must consistently make notes within the agency management sys- tem of any discussions with insureds, insur- ers or anyone else that concern in any way issues related to coverage or claims. The agency management system notes the date and time for any such notes which are entered. These notes can be very powerful proof if needed to defend the agency against an E&O claim or lawsuit. There are five important aspects to documenting any communications, and they are as follows: • Note the date, time and duration of the conversation; • Note the name and title of the indi- vidual with whom your agency is communicating; • Note how the conference took place, such as office conference, telephone conference and/or cell phone confer- ence; • Note the salient points of the conver- sation; and, • If possible, follow-up with the insured in writing to confirm the conversation.
While this seems extremely basic, you would be amazed by how many times we open an agency’s file and the notes are miss- ing such details as with whom they spoke, or where the conversation took place, or even the issues that were discussed. Without some, or all, of this basic information, it may be more difficult or even impossible to properly defend an agent in an E&O claim.
Activities Noted in the Agency Management System
Activities that are created within the agency management system are a great way for employees to diary matters for follow- up. No matter what agency management system you are utilizing, the first and most important thing to confirm is that any activ- ity performed is reflected by an activity within your system. For example, if your agency creates a certificate of insurance for a customer, your agency management sys- tem should create an activity in the activity log that corresponds to the creation of the certificate of insurance. This would likewise apply to any other type of task, such as the completion of applications, change endorse- ments, performing a function on the carrier website, etc.
The second most important thing to keep in mind is that the activities that are created should always be closed when the activity has been completed. A very pow- erful piece of evidence in defending E&O claims and lawsuits is to demonstrate that an activity was opened, handled and then closed when completed. Conversely, it can be very damaging for an agency to have activities within its agency management sys- tem that have never been followed up on; or if they have been followed up on, they have not been closed. Accordingly, every agency should make certain that all employ- ees are creating, following up and then clos- ing all activities within the agency manage- ment system.
Voice Mail Messages and Disclaimers
Voice mail messages are regularly left by customers on the voice mail system of agencies, asking questions on coverage, reporting claims, and requesting changes in coverage. For this reason, it is recommend- ed that a voice mail disclaimer be used on both the message for every employee and also on the main message for the agency. This disclaimer should state that coverage cannot be bound or modified, nor can a claim be reported, by use of the voice mail system.
In addition, it is a good practice for an agency to consider adopting a procedure whereby voice mail messages are retained either in the original recorded form or in written form. Some agency management systems are compatible with phone systems to allow a copy of voice mail messages to be attached to an insured’s electronic file. There are also programs that exist where you can have a written version of your voice mail messages sent to you by email and then retain that written version of the message.
Disclaimers for Email, Websites and Social Media Sites
In addition to a disclaimer on voice mail, it is also important for every agency to have similar disclaimers on their email transmissions, websites and social media sites. Some agencies advise us that they like to use email for their customers to report claims. For those agencies, the disclaimer might state as follows:
“Please note that an email will not be effective to report a claim or request a coverage change until such time as you receive a confirmation from us that the claim submitted or change requested has been processed.”
Additionally, some agencies have inter- active websites that allow customers to report claims or request policy changes. A similar type of disclaimer should be used for those interactive websites as well.
Where an agency or brokerage is utiliz- ing a social media site like Facebook or Twitter, the agency should use a disclaimer similar to that mentioned above with the addition of advising that these vehicles should not be used to communicate client specific information to the agency, any con- tent the customer provides becomes the property of the agency and the agency is at liberty to add, modify or delete any content that is not acceptable.
Certificates of Insurance
Certificates of insurance are still one of the largest sources of E&O claims and law- suits. As such, it is important for every agency to have good documentation con- cerning how certificates were issued in the event an issue arises related to a certificate. The agency should be sure to retain, either in paper form or electronically, a copy of every certificate of insurance issued.
While agency management systems will automatically save a copy of the certificates on the system, one problem we have encountered is that many of those systems will only print out the current date (not the date that the actual certificate was issued). Because of the importance of having an exact copy of the actual certificate that is issued (including the exact date it was issued), agents should make certain that if they are saving the copies of certificates electronically, and not in a paper form, their agency management system will either: • print out the date that the certificate was actually issued if the certificate is printed at a later date; or • scan a copy of the certificate that is actually issued by the system and maintain an electronic copy of it with- in the respective insured’s file.
ACORD Forms
It is equally important that every agency use the most current and up-to-date ACORD forms in connection with its daily operations. Doing so will help protect the agency from potential E&O claims and law- suits and will often also help better serve your customers.
For example, the ACORD 80 Home- owners Application was revised in October 2009, but some agencies appear to still be using the earlier versions of the application. The new ACORD Homeowners Applica- tion now contains five pages and it is akin to a checklist of coverages and exposures which is one of the best means to dispute a claim by a customer that coverages were never reviewed. Reviewing the completed application with customers will help protect the agency from claims that the agency did not review a particular type of coverage with the customer or ask about a certain ex- posure that may exist.
Another form that is often not used by agencies in its most current version is the ACORD 25 Certificate of Insurance. The most recent version of the ACORD 25 is the May 2010 edition. As mentioned above, because certificates of insurance are involved in a great many E&O claims and lawsuits, it is of the utmost importance that agencies use the most recent version of the ACORD 25 Certificate of Insurance.
Downloads and Uploads
Another area we would like to address is the agency’s uploading and downloading of documents and information from the insurers with whom they do business. While we understand that uploading and downloading has become a major tool to increase agency efficiency, there are several points to keep in mind: 1. Confirm that your agency manage- ment system is not allowing your agency’s downloads to change the applications from insureds unless it creates a new version. 2. Downloads can greatly enhance the accuracy of the agency’s data which is essential when counseling insureds, but it is important to audit these downloads regularly to make sure they are accurate and that the agency’s database contains good data overall.
Critical to all of these recommenda- tions is that the agency incorporate them into its written procedures, train its employees on them and require that they be followed, as well as audit the agency’s systems regularly to make sure the proce- dures are being followed.
This overview is not meant to be an exhaustive list of potential E&O issues that you may face when you examine the elec- tronic side of your business. Agencies should always keep in mind all of the other E&O risk management principles that they have learned and how the technology they are using might impact them.
