An agent complies with an auto leasing company's request to change an insured's policy. Are they setting themselves up for an E&O disaster?
An agency provides a policy for an insured who leases several vehicles. The insured puts the agency in touch with the leasing company to get the vehicle information necessary to place the coverage.
The leasing company then sends written requests explaining that the insured is swapping vehicles and needs to change their current policy. The agent complies with the request to remove one vehicle from the policy and add another, then sends proof of coverage to the leasing company so the leasing company can supply it to the insured for placement in the vehicle. The insurance company then sends the changes directly to the insured.
About two months later, the agent receives a call from the carrier. An accident has occurred, but the vehicle involved is not on the policy. In fact, the vehicle in question is the one the agent removed per the leasing company’s request. Now, the leasing company argues that the swap should have only lasted 20 days while one of the vehicles was undergoing repairs.
Q: "No one informed us this was a temporary swap. What issues do we face as an agency? What could we have done differently to prevent this?"
A: “As we understand the situation, your agency has been making changes to the insured's auto policy based on instructions from the auto leasing company—not the insured themselves.
Read the policy for specification of who is authorized to make changes. In most cases, only the named insured—or, when it’s a commercial lines policy, the first named insured—has the authority to make changes on a policy.
Accepting changes from third parties can get your agency into errors & omissions trouble. Check out this article from the Big ‘I’ Virtual University, ‘Policy Changes Requested by Third Parties,’ for more information.
Since the insured now seems to have an uncovered claim, you should probably notify your E&O carrier.”
Bill Wilson is director of the Big “I” Virtual University.
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
