Agent no legal duty to inform on cancellations?

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Re: Agent no legal duty to inform on cancellations?

Post by surestart12345 »

From original poster:
Thank you for all the comments, court citations (especially useful) and suggestions!
We have very clearly produced a document which the customer signs/initials and we copy the signed doc for our files, and they get this with a verbal summary along with other policy application, etc. paperwork. Also, we put a statement to the effect of non-reminders on a sticker label that is affixed to a large envelope that ultimately contains all the copies of stuff we give them.

More specifically about the 'court case at hand', after we both went to court mandated mediation, we haven't heard from the other party (plaintiff-insured). There has been no move to get a court date set. The court doesn't automatically assign one. After 120 days the case becomes inactive. Though locally the court clerks are behind in work and haven't made the inactive status official as yet. We think that the 'attorney' by her side in the mediation (probably either a friend or assigned through a prepaid legal plan) told her that she really has no case. As we pointed out during the mediation, the party she should be suing is her mortgage bank! They were the ones who didn't pay her insurance bill. Though...they would say easily that she also got notices to pay and ultimately the cancellation notice...and summarily threw both in the garbage!
Further to her ridiculous arguments, on an aside, she blamed us for 'telling her mortgage company to pay another policy on an altogether different landlord policy' for a totally different property. ...which by the way occurred 3 months after the first policy cancelled due to nonpay. Which we again summarily refuted as the paperwork from that other insurance company showed that the endorsement was not made by us, but by the insurer after the mortgage company made the they thought that now there is a mortgage and that the insured wants them to pay....and then they refunded her the money she paid them herself just a week before. It's a case of mistaken insured who complicated issues and policies that were first set up totally correct....just thought you'd like to know that little funny tidbit of info..

Thank you all again, and any further court citations or links to professional papers, attorney opinions, etc. could make for a good gathering place of information for all to utilize. Gary
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Re: Agent no legal duty to inform on cancellations?

Post by justthere »

15 Years ago, we were sued by an ex-client who said that we had not told her she was out of force and got into an accident 6 months later. After a year of wrangling, we settled with them paying us $500 for our troubles with the caveat that the Judge threatened the other attorney with sanctions if they ever brought a case like that back to his court. We were contacting every client who was late and we still continue to do so. If somebody is continually late, we push as hard as we can to get them on EFT and that solves the problem.
After analysing costs, we figured out that it costs us about $10K a year to have this policy and saves over $100K a year in revenue. This is a no-brainer. In case you have forgotten, we are in a SERVICE business. So, for all of you who are afraid to keep your business - please keep it up. It enhances my reputation for service and more business for me.
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Re: Agent no legal duty to inform on cancellations?

Post by sdlewis16 »

I am wondering about how to notify the cert holders that the policy is canceled. I have been reading a lot that we shouldn't amend the actual certificate and am curious how others have gone about this.
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Re: Agent no legal duty to inform on cancellations?

Post by Godfather »


Here's what I do. I print out a copy of the COI, mark it CANCELLED with a big red Sharpie, put it in a window envelope, and mail it to the Cert Holder. If the USPS doesn't return the envelope, the Cert Holder got it.

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Re: Agent no legal duty to inform on cancellations?

Post by longhaul »

A couple of questions related to this topic, especially for those of you whose agencies do not call:

1. Do you find that even though you do not call, there is still significant activity in this area when you need to coordinate no loss letters? Or worse, that you need to rewrite because they didn't address it til 30 days later?

2. Legally, and ethically, can an agent refuse to rewrite a policy, if they have a market (even though it may be E&S), on the basis of prior payment history? Does the legal climate involved in this particular question change if it's auto and you could send them to CAIP/PAIP?
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Re: Agent no legal duty to inform on cancellations?

Post by d's insurance store »

pbuffo wrote:I have actually told a client who was perpetually late, in cancellation status, we had rewritten the policy several times, was always making changes...the last time I told him I was no longer interested in rewriting his business. His premium had been decent initially but as his finances started to be iffy, the policy size dwindled and he kept reducing coverages...yes I believe it is justified to tell someone you can no longer help them. I have done this in the past as well, but this is my most recent incident...sometimes it just is too much work and the earnings don't justify all the work you have to do. and yes I would call him/email him at every cancellation notice...
Congratulations and welcome to the Best Business Practices Club.

There's nothing in the rules that say you have to do business with everyone who contacts you, and clearly, if the servicing time and effort begin to outweigh the revenue, then you have an obligation to jettison that kind of client to preserve your business model for those who do contribute to the business success.

After decades in the business, many years of which were spent calling and enabling the late pay people, usually the same folks over and over again,I have finally settled on just a quick email and no more and sometimes even less when the late notices are habitual. At this stage of my career, I just don't want nor need the responsibility or hassle.
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Re: Agent no legal duty to inform on cancellations?

Post by LisaTurcotte »

I would like to mention that wherever you fall in the opinions going back and forth on whether or not to make contact with delinquent insureds and/or cancelled policies, the reality is that that the insured may sue either way and defense costs can mount quickly. Putting yourself in the best possible defensible position is important, but in 18 years of writing E&O, I have seen some cases that we all thought were extremely cut and dry and that the agent/broker would prevail, but to our astonishment, the plaintiff won the day. Each side of this debate has excellent points, so imagine how easy it is for a jury to have the same kind of debate and draw their own conclusion and consider whether the E&O carrier would want to appeal that decision (if they didn't settle before taking it to court in the first place to keep defense costs low).

What I can tell you from experience is that anytime you have a claim, E&O underwriters always want to know what you would change to prevent similar claims from happening again, especially if the agency is marketing the E&O to other carriers at renewal, or is in a more difficult position of being non-renewed. Each E&O carrier may have a different stance on how they would want it handled and one "change" response may be met with an indication from one underwriter, but a decline from another. If that happens, we will ask the declining underwriter what their recommendation would be, and if the insured can live with it, request that they reconsider their declination if the insured will agree to adhere to their recommendation.

This is one of those tricky situations where there may not be any one "right" answer that works in practice as it should on paper. All we can ever do is act in good faith, adhere to our ethics, and--I think--provide the same standard of care to each of our clients that we would expect if we were the consumer.

To the original poster, best of luck on a speedy and positive resolution for your agency.
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Re: Agent no legal duty to inform on cancellations?

Post by phillers3 »

Great point, LisaTurcotte.

The reality is, anybody can sue you at any time for practically any reason. That's why there's no clear answer to this question. You can get sued if you do and you can get sued if you don't.

I have to ask.. how hard is it to notify a client when a payment is late? If you have time to log into these forums and chat about stuff like this, you should have time to contact your clients. Just sayin.
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