Calling non-pay clients... a good idea or an E&O exposure?

[tinkerbell]

I agree with the responder who advised you to keep your E & O paid up. You will eventually have an issue because you say the following:

'Me, I'm still going to be selective about who gets calls from my agency. Retention is very important to my personal lines and small commercial base, but when the workday is finished, I'm not 'mommy' to my late paying clients, and if they don't care, then why should I?'

The issue---being 'selective' (picking & choosing) about who will be called by your agency. Logic dictates that you will call the larger accounts in order to retain them, and the let the smaller clients fall away b/c theyre not big enough to matter. This will eventually hang you. E& O seminars have always stressed equal treatment for all regardless of account size. Basically, when you 'select' who will & will not get the call, you are discriminating against those whom you are not calling & its a discrimination suit waiting to happen. If you choose to call one, you must call them all. Put yourself in the little guy's shoes. Would you be upset if your agent decided not to call you but did call your neighbor when both of you were in non-pay status?

[INTLXS]

The issue---being 'selective' (picking & choosing) about who will be called by your agency. Logic dictates that you will call the larger accounts in order to retain them, and the let the smaller clients fall away b/c theyre not big enough to matter. This will eventually hang you. E& O seminars have always stressed equal treatment for all regardless of account size. Basically, when you 'select' who will & will not get the call, you are discriminating against those whom you are not calling & its a discrimination suit waiting to happen. If you choose to call one, you must call them all. Put yourself in the little guy's shoes. Would you be upset if your agent decided not to call you but did call your neighbor when both of you were in non-pay status?

This all goes back to the original post. Has there been a loss that was decided against the agency on this matter. I disagree with you comments that being "selective" will lead to a discrimination suit waiting to happen. By definition underwriting is discrimination. You are pricing based on specific criterea. I think it goes back to what you promise your clients. If part of your service pledge is to call them if their policy is going to cancel for non-payment, then you better follow through. If you start with calling any specific client to prompt them on a late payment, then you better continue to call that specific client. Key is that we gave the collection responsibilities to the carriers when we went to direct bill.

[inscopywriter]

I have to bet that no one has ever successfully sued for this specific reason. They may have recovered damages for something similar, but I bet it would be a case where the agency really did create a "reasonable expectation" that this was part of their service. I would imagine that if you added language to your contract stating something to the effect that "your agency, at its sole discretion, may decide to call, or not to call, if you notice a client is late on a payment, and that this action does not create an obligation or promise, and may or may not be repeated in the future," and made your clients sign it, it would be hard to make a case that they were expecting it or had a right to expect it.

I would also imagine that if you make it standard practice and do it for everyone all the time, that would actually be worse for you, because then if you forgot or stopped calling, you would have created a reasonable expectation and then would be liable. If you go with the idea that you can choose to do it or not based on whatever criteria you want, and make the client sign that they agree to and understand that this is not a contractual obligation or service on your part, you can point to that if anyone has any problems. You might also want to say, when calling, that you just happened to be reviewing your files and saw that they were late on their payment, and were wondering if something was up, and that although you called this time, you won't necessarily be calling again. Whether or not you think the practice is a good idea, if you're going to do it, shouldn't you at least protect yourself contractually? However, am I a lawyer? No. This is just my personal feeling about the topic.

[mhutch69]

Well, all you amateur legal minds, I finally found a case that supports my position that calling or writing a letter to inform the customer regarding cancellation of the policy does NOT obligate such action on every customer EVERY month and/or expose the agency to ANY error or omission due to such action of failure of such action.

Please see American Agent & Broker-November 2008 "AGENTS ONLY OWE DUTIES ACTUALLY ASSUMED" with the actual case being [i]Boyer v. Wells[/i].

The summary of this case was the insured missed a payment on his homeowners and the agent historically HAD called him on a late payment during a preceding policy period AND had sent a written notice in addition to the company's legal notice of cancellation historically as well.

NEITHER of these actions REQUIRED such agent to perform these duties and were NOT the proximate cause of the failure of the customer to pay for his insurance.

[u][b]I have called and written postcards to our customers for over 30 years without incident and will continue to do so in an effort to improve our retention.[/b][/u]
With such a precedent, it should allow for summary judgment dismissal should an action arise.

MHutch

[jackweho]

Mhutch69-Read the same issue. The majority opinion held that there was one previous instance, several years in the past, which the court stated did not constitute a repetitive action or business model. The narrow scope of the majority opinion seems to imply that anything more than a one-time or isolated incident could indicate a liability issue if the insured could prove reliance on such notices as a reminder to pay the premium(s) to keep policy(ies) in force.
Best idea I read so far was to set up a disclaimer which you could shorten to the Acord language "endeavor to" but assume no legal responsibility for failure to do so.