Risky Business

At face value, purchasing agency E&O coverage directly from one of your appointed carriers seems like a good deal. But serving your customers and defending your agency from E&O claims are two very separate things. With E&O claims, what is best for the agency isn’t necessarily what is best for the customer or carrier, with potential conflicts of interest lurking around every corner:

Agent vs. direct: Just because you know the coverage needs of your customers doesn’t mean you know the marketplace for agency E&O.

Burning bridges: The intrinsic value of agencies is their book of business and carrier appointments. Don’t let a disagreement about an E&O claim strain the relationship with an important carrier.

Data breach: E&O applications contain sensitive agency information. Will the E&O department of your appointed carrier keep this confidential, or share it with other retail lines of business?

Playing defense: Over the past ten years, carriers have increasingly begun suing agents for mistakes that result in damages to the carrier.

Conflict of interest: Once the carrier believes the agent is responsible for the E&O claim, the carrier’s main goal is retrieving damages from the agent—presenting an immediate conflict of interest if your E&O policy is with that same carrier.

Claims history: When an E&O incident occurs, the appointed E&O carrier must make the decision to defend the agent or pay the retail customer’s underlying claim. If the carrier decides to pay the loss as an E&O claim under your account because it is less expensive than defending it, taking advantage of your deductible and justifying an increase in your premiums, is this really in your best interest?

David Hulcher is assistant vice president of agency professional liability risk management at Big I Advantage®.