Do you always verify exposure changes at renewal? The genesis of a common E&O claim is when a commercial client changes their operations and the agency does not catch this at renewal. These claims can be property or casualty related claims. From a property perspective, an insured buys expensive new equipment, a new building, opens a new location, or is operating from a new location and the agency does not know this. A loss occurs and the insured learns it does not have coverage for that property or that coverage does not follow the property or that separate deductibles apply. Often these claims occur around a natural catastrophe.
Casualty claims involving exposure changes are more interesting to me. These claims involve insureds suing agents and insurance companies suing their own agents so extra precaution is required. The insureds sue because they have changed their operations in such a way that their policies do not provide coverage. A good example of this is a change in operations that require some sort of professional liability policy and all the insured has is a CGL policy that excludes professional liability. Carriers sue when a loss occurs for an exposure that is covered, but the company would not have written if they had been aware the insured’s business was now making that product or providing that service.
These claims occur with small accounts just as easily as with large accounts. This fact is why every professional agency will be well served to ask every account every year for a list of all changes in their operations, both property and casualty. If they do not respond, the agency might even consider nonrenewing the policy because again, the risk is not just from the insured suing, but the carrier suing too.