It's often said that every cloud has a silver lining. In the case of the admittedly very dark cloud that was COVID-19, one such positive in the insurance world was the initial drop in auto insurance claims and premiums.

From an errors & omissions standpoint, Swiss Re saw the number of auto E&O claims drop from around 190 annually between 2017 and 2019 to just 118 in 2020. This was no surprise. Drivers with no place to go translated neatly into less driving, fewer auto accidents, fewer claims and, therefore, fewer agent mistakes being brought to light.

However, times have changed again. In 2021, the Great Reopening brought with it a return of the auto E&O claim. Swiss Re received 183 of them and 2022 is on track to surpass last year.

Business is back. Your customers have left their garages and are asking you to renew existing policies, replace old vehicles or add new ones. Many agents are taking on new personal and business auto clients. As a result, we're seeing the same old claims.

Here are three common scenarios that are contributing to the reemergence of auto-related E&O claims:

1) Incorrect values listed after a vehicle change. Your customer wants to replace the tired, old vehicle that is currently on their auto policy with a new purchase. You fill out a change request in the system of a national insurance carrier specifying “vehicle change only," so that the coverages remain the same. The form goes directly to the carrier rep who processes your request and forwards the new declarations page to the customer and your office. You receive and file and document it. You handled the change personally, so you know it was done correctly.

A month later, the customer totals his new ride. Curiously, the new declarations page shows “Stated Value," which you had not noticed before, most likely because you didn't review it properly. In fact, you never look. That's why you weren't aware that this national carrier had a system glitch where it does not always recognize new vehicle identification numbers (VIN) and converts the policy to stated value. When you review other files, you find out that it is a recurring problem and has implications for vehicles that may appreciate in value, such as luxury cars and high-end electric vehicles.

2) Commercial vehicle listed on a personal policy. The customer asks to add a vehicle to the policy. You enter the make, model and VIN information into the carrier's system. The system flashes green and accepts the information. Had there been a potential problem, the system would have flashed red, and your request would instead go to underwriting for approval. The carrier does not require you to view the vehicle, so you do not ask about modifications or changes to the vehicle. Instead, you bind the coverage and move on.

A month later, your customer's vehicle is totaled. The carrier denies coverage, claiming the vehicle is a commercial-grade truck on a personal auto policy. You see pictures of the wrecked vehicle and see that significant modifications were made. It now appears to be a commercial truck used in construction and snow removal.

Looking up from the photo to your customer, you complain that the insured didn't tell you the vehicle had been modified. His plaintive response: “You didn't ask."

3) Policy canceled for last-minute payments. An insured makes a late premium payment through the agent's office to avoid a cancellation, which is not the first time this has happened with this customer. Two days later, you see a notice of cancellation come through on the customer's account. You know the payment was made at the office and swept from the agency system by the carrier, so you assume the cancellation will be reversed. No action is needed and none is taken.

Three months later the customer has an accident, but the carrier denies coverage because the policy was canceled for non-payment. You received the notice of cancellation but did not check the system to verify the payment had been collected by the carrier. Further, no one set a reminder to follow up to check that the payment was credited and the policy status was still active.

In some cases, the lion's share of the blame for these three scenarios belongs to your customer for failing to read any instructions or information sent to them. Sadly, getting a jury to believe it is much more difficult. You always have the option of going to trial, taking the stand and testifying under oath: “Yes, as a licensed professional, I may have made a small mistake—but my customer should have caught it!"

That's the worst defense ever. Honestly, if you sat on a jury of the plaintiff's peers, would you buy that argument?

Our advice: Skip the trial. Better yet, skip the E&O claim altogether. To avoid angering your customer, getting sued and facing the financial ramifications of an E&O claim, take a few minutes to ask the right questions; review the returned quote, change form or revised declarations; and if you've inserted yourself in the payment process, which is not recommended, confirm that payments made through your office are received and credited to an active policy.

We get it. Time is money. But any judge will tell you: Even an order taker needs to take enough time to get the order right.

Madlyn Tombs is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the office in Kansas City, Missouri. Insurance products underwritten by Swiss Re Corporate Solutions America Insurance Corporation, Kansas City, Missouri, a member of Swiss Re Corporate Solutions. 

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re") and/or its subsidiaries and/or management and/or shareholders.