Nightmare on E&O Street

By | February 23, 2004

It’s a policyholder’s worst nightmare to find out the insurance she’s been dutifully paying for is not there when she needs it. This is why every responsible agent tries to do business with reputable, financially healthy insurers. Not only does it make your life easier, but it is the ultimate selling point. You are dedicated to looking out for the consumer’s needs and foremost among these is the need for the assurance that comes with being insured by a company that won’t cheat and that won’t go broke over night.

When the consumer is the agent himself, especially in the case of errors and omissions (E&O) coverage, the whole equation is multiplied ten-fold. You want that essential coverage with a company like Warren, N.J.-based Chubb & Son, which has been around since 1882 and is a leading provider of professional liability insurance, including E&O. So when Sioux City, S.D., agent Mark Kontz bought his Chubb E&O coverage through Torrance, Calif.-based Manning Ridell Insurance Services Inc., he thought he was in good hands. He paid his premiums for seven years without a problem, as he told Insurance Journal West Managing Editor Cynthia Beisiegel, but when he was sued in June 2003 and tried to make a claim, he discovered the policy was nonexistent.

When Kontz called Chubb directly, he was told it had ended its relationship with Manning Ridell a year before. Manning Ridell is alleged to have issued more than 1,000 phony E&O policies to life insurance agents in more than 30 states, Beisiegel reports in her blockbuster story (see page 8, “Chicago MGU Sues Manning Ridell for Bogus E&O Coverage”). She was besieged with calls from dozens of agents who bought their E&O cover from Manning Ridell, which is now under investigation by the California Department of Insurance.

The alleged fraud has grown like moss on a stone. The agents, primarily selling life insurance, bought their E&O to satisfy carrier requirements, and so unknowingly passed on bogus certificates to their carriers. Chicago-based managing general underwriter Five Star Managers, meanwhile, says in its federal lawsuit against Manning Ridell that it began receiving calls from agents looking to confirm coverage for applications that were never submitted and premiums it never received.

The irony here is that agents, who to thrive must learn to sniff out shady consumers as well as carriers, appear to have been defrauded by one of their own. One chracter you should have no trouble sniffing out, however, is yours truly. Please e-mail me or call me anytime at my Chicago office, (773) 381-1572. Tell me what you think of the magazine, share a story, or tell us how we can do better.

Thanks for reading!

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Insurance Journal West February 23, 2004
February 23, 2004
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