Proper Authorization. I recently saw a situation where, in a divorce, one spouse deleted the prized vehicle of the soon to be ex-spouse to spite that person. Not knowing of the divorce, the agency complied. Of course the vehicle was damaged in an accident creating an irate policyholder and a potential E&O claim.
In personal lines, it is always important to verify the person requesting the change in coverage has the authority. This can be difficult in divorces. Some, maybe most, states have a rule that when divorcing, neither spouse can cancel or modify insurance coverage, including not paying the premium, without advance notification to the other party. This rule may offer some protection to agencies but it is better for the agency to ask the appropriate questions of who is requesting the change and why the change is being made. Then be sure to document the file thoroughly.
The same can happen in commercial insurance when business partners have a serious disagreement, as is app to happen in tougher economic times. A more likely situation in commercial is when someone is trying to do the right thing, but does not have the knowledge required, asks the agency to delete some type of coverage or advise that coverage for specific property is no longer necessary. While the same personal lines rule applies in commercial lines regarding verifying the person and documenting the file. It is even better to ask the client when writing or renewing the policy to advise in writing who the authorized people are that can make changes and put this in the client’s permanent file.
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