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E&O Corner


E&O Corner

Every Agency or Brokerage Should Think About Natural Disasters Events Before They Occur

October 2017 - Harvey, Irma, Jose and Maria. This year’s Atlantic hurricane season has been extremely active, and there are still two more months to go. Over the years, we see insurance agents and brokers react to these types of storms and change certain aspects of how they conduct their business to better protect their customers and prevent a potential errors and omissions claim or lawsuit. In this issue of The E&O Report, we will discuss a few tasks every insurance agency or brokerage should complete in preparation for another natural disaster. No matter where your agency or brokerage is located, it is important you think about the following issues..

According to estimates, less than a quarter of the properties damaged by flooding in Texas and Florida as a result of hurricanes Harvey and Irma were covered by flood insurance. After Irene and Sandy, many of the storm-related E&O claims and lawsuits we saw were brought by customers who suffered a flood loss but did not have flood insurance in effect at the time of the storm. As a result of such claims, many insurance agencies and brokerages adopted a procedure where they offer every customer the option of purchasing flood insurance, regardless of where the insured is located. Since most customers will usually opt not to purchase flood coverage, unless they are located near a body of water, it is a good practice for the agency or brokerage to document the customer’s rejection of that coverage.

One of the best ways to document the acceptance or, more likely, the rejection of coverage is to use the ACORD 60 Flood Acceptance/Rejection form. The ACORD 60 form should be completed by the customer indicating that the coverage is either accepted or rejected. Then, it should be signed and dated by the customer. Once this form is signed, it should be retained in the customer file. An added benefit of using the ACORD 60 Flood form is that it specifically states that once it is signed it applies to all future policy renewals. By adopting an agency-wide practice where the option of purchasing flood coverage is offered to each customer and the ACORD 60 is completed by every customer, agencies and brokerages will help protect themselves from potential E&O claims or lawsuits if a customer sustains a loss due to an uncovered flood claim.

Another lesson many insurance agencies and brokerages learned from the storms of the past few years is that it was only as a result of the storm that customers often discovered they lacked:

  • sufficient coverage;
  • adequate limits of coverage; or
  • a full understanding of how their coverages or deductibles applied.

As a result, many insurance agencies and brokerages now use major storms as learning tools for their customers to think about coverage. When discussing coverage, for instance, a good practice is to walk the customer through their limits of coverage and applicable deductibles in the event a disaster occurs, such as a hurricane, ice storm, blizzard or fire. Agents and brokers that follow this practice tell us that it is a good way to help customers identify changes in coverage so they are adequately insured.

An additional lesson storms, such as Irene and Sandy, teach us is that every insurance agency or brokerage, no matter how large or small, should have a disaster plan in effect. It should be known by and understood by all employees and include the responsibilities of each employee should a natural disaster occurs. Additionally, any disaster plan should include how the agency or brokerage accesses its data remotely in the event its offices are not accessible or fully functioning. The agency or brokerage should also have the ability to forward phone calls and access email so communications with customers continue despite the disaster. An agency or brokerage that plans ahead in this way will be able to continue to operate and assist customers in that crucial period immediately following a natural disaster.

The prudent insurance agency or brokerage is the one that thinks well in advance of a natural disaster and has its customers do likewise, so both are prepared when a disaster occurs. By doing so, the agency or brokerage will not only help protect itself from a potential E&O claim or lawsuit, but it will also provide better customer service and in the process often sell more insurance.

Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP

Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida. 

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