Why is the Need for E&O Insurance?

[FL_PC]

I will give you a simple case that went bad when I started. I wrote a policy on a guy with a children term rider. About a year after issue when the kid was 17 he was playing chicken with cars by standing in the middle of the road, got hit and killed. The company contested the claim and did not pay because one of the questions was have you every been arrested and he was. About 4 months later the dad called and said it was illegal in my state for a company to ask a minor that question. I called the company and they finally paid the money 6 months after his death. When they agreed to pay, some smart a$$ attorney wrote a letter with the check telling him he to get on with his life. He sued and won over $600,000 for the company using unfair claim practices. It cost my E&O $25,000 plus legal fees. I dropped the company and the guy has been a great client the last 22 years.

I wasn't trying to be a smart alec ( well, maybe a little).. The reason you need E&O is that unless you are perfect, you might make a mistake one day. People sue when mistakes are made. But even if you are perfect, people sure over "perceived" mistakes and some times juries feel sorry for that poor little policy holder and grant a judgment against that big ol' insurance company and its representative.

True story. I was a GA for a company that sold Major Medical insurance in the 1980s. The policy and all the literature stated that maternity was not covered.. no way, no fashion. A girl in Alabama had a baby. The company did not pay. The girl sued. She was granted a judgment against the company for $3,000,000.00. The judgement was upheld on appeal. As a result, the company withdrew from the MM business sand cancelled the entire block in all states.(killed my renewal base).. In those days it wasn't like it is now. The attorneys went after the companies deep pockets.. Now, they sure everybody involved... including the lowly agent.

I was dead serious when I said , "If you don't mind putting everything you own or will own at risk" because if you go without E&O that is what you are doing.. You are in the business of protecting people against possible loss.. Isn't it worth $10.00 per week to protect yourself against the loss of not only everything you have now but possibly everything you hope to have in the future?

Wish you great success in the business.

Even if you had the Pope notarize your proposal, some ahole will still attempt to sue you. Lots of clients develop selective deafness and blindness when it suits them. Nature of the business.

And the Pope!

I think I get it now. "Sometimes life is not fair". Thank you all.

 

[Norwayguy]

Or a simpler answer its required by the carriers you want.

 

[tlmarketing]

E&O claims don't happen when you write the case, they happen 5 years later when everyone has forgotten the details.....except for your client now suffering from dementia. You need E&O to CYA.

 

[Crabcake Johnny]

E&O claims happen the second your client hires an attorney who figures out that you have E&O.

 

[arnguy]

The simple and direct answer is it's to CYA!

 

[reductable]

E&O=defense costs
even if you didn't do anything wrong it still costs $ to defend you

 

[FL_PC]

E&O=defense costs
even if you didn't do anything wrong it still costs $ to defend you

I think this is the answer I needed. Thank you.

 

[Guest]

You know, there are probaly 100's of reasons you need this,

another one, say you have 1 client fail to make a payment, you notify that person, but you dont notify another client, you just set a precident of notifying clients, you now HAVE to notify every client, the one that you don't, You just got put on the hook for a claim.

E&O is really a very broad coverage. There are probaly literally 100's of reasons why you need it and the carriers understand this and REQUIRE you to have at least $1 million, and most will ask you to priove it every year when that policiy renews.

This isnt an area to be cheap at