Errors and Omissions Insurance ***Actual Claims***

[Josh]

From time to time I've had discussions with agents about e&o and as of yet not one single agent has been able to point out to me an instance where they or another agent they new personally actually had a claim. I don't doubt that they happen, but at a minimum they do not seem to happen with any degree of frequency. Once upon a time a little company called "e and o coverage of america" did business providing certificates (not insurance) to agents so they could have e&o coverage, but I'm assuming they were banking on not having a claim. Coincidentally they were served a cease and desist and to my knowledge are no longer doing business ( http://www.dora.state.co.us/INSURANCE/enforcement/2009/O09182.pdf )

This all being the case, does anyone have any personal experience (you can call it a "friend") or experience with a friend (or acquaintance) where they actually had a claim?

Maybe this thread will be short because the agents I associate with are an accurate depiction of the industry as a whole and the fact is that there really and truly are not many claims, but if that's not the case then I'd like to see some real examples with as much detail regarding the situation as possible.

 

[Insurance-Guy]

Desert Boy will fill you in with tons of E and O claims that he knows about.

 

[Norwayguy]

I was at a home office meeting and met a Rep that had just gone through the process of arbitration and had a claim on his E&O. This was for securities and the only reason people brought it up was because our B/D required the use of their E&O and his claim went against the total aggregate available to the rest of us reps...He would not tell us how much the claim was for, As you can imagine he was still a little pissed about the whole process.

 

[Josh]

I can definitely see more exposure on the securities side, but even at that, do you know what he did? Was it one of those things where you're like "Gee, that's bogus, why would they harass anyone about that?" or was it more along the lines of "you moron, you thought you wouldn't get caught, what did you think would happen?"

 

[Norwayguy]

I can definitely see more exposure on the securities side, but even at that, do you know what he did? Was it one of those things where you're like "Gee, that's bogus, why would they harass anyone about that?" or was it more along the lines of "you moron, you thought you wouldn't get caught, what did you think would happen?"

One of those cases..A client puts in $x and the rep recommends abc fund...the account grows to $x+++ and the client is happy. Market turns and now the account is only worth $x+. Client meets lawyer and they file a claim saying that ABC fund was not a suitable investment and even though the client has more money than they put into the account there is less than the year before...

I guess you can understand why he was bitter about it.

 

[djs]

I've seen a few agents with claims. Only in the P&C side though.

The types of claims I've seen (I've not had one, but I'm sure it will happen someday)...

- Agent stated there was coverage for something when there wasn't. Trust me, this is an easy mistake to make in the P&C world.
- Agent bound a change verbally, did not make the appropriate change on the policy. Agent admitted this. It was a true error.
- A few others that I truly don't remember details of. None of them large claims.

In fact, I don't think I've ever seen a large e&o claim processed. I'm sure it happens, but not often.

In the life and health world, with $1M of E&O costing $500 or less a year, you can't have very many claims get filed. It's sort of like personal lines umbrellas, it takes a LOT of $500 premiums to cover a $1M payout and still make any sort of profit.

Why are you asking this question? E&O claims happen.

Dan

 

[scagnt83]

When I was new to the business I knew an agent who had a suit filed against both them and the insurance company. Its probably pertinent to note that he was a captive agent at a big mutual.

A 75 year old client slipped into a coma and power of attorney went to his daughter.
From what I heard from the agent the daughter blew through the clients liquid assets pretty quickly.
She then started trying to attack his life insurance and annuities as well.

He had put $300K into a SPWL a year and a half ago (she and her brother were both 50/50 benes).

He also had around $500K in an annuity that was still under surrender.


The kids claimed that he was conned into putting his money into the SPWL and that he did not know his money would be "locked up".
They said the same about the annuity too.
They even swore in the affidavit that he told them about the purchases and that he had told both of them that he still had "full control" of the money.
This was contrary to what they told the agent when they initially called to find out when their dad purchased them, what they were, and what they were for... they told the agent that they had "no clue" that their dad had these

The kids claimed that there was no liquid money left in the estate to maintain it..... of course this is because they had liquidated CDs, MMs, brokerage accounts, and savings...


Unfortunately the IC settled out of court just to avoid the headache.
I heard from one of the partners at the office that they received around 80% of the LI premium, and close to all of the annuity.


The agent had done due diligence and recored a good bit about the case. He had also done a presentation going over rhyme and reason; and had kept the presentation.

The agents E&O eventually paid for a lawyer to represent him.
They wanted to settle at first (the kids wanted the difference of what the IC didnt give them), but the agent was adamant about fighting the suit.

Last I heard about the case, after reviewing the evidence the agent provided, the kids lawyer dropped them as clients right before the first hearing for the case.
They were looking for a new lawyer...

 

[somarco]

Entered the business in 1975. Never had a claim. Only know one person who has and that was a securities issue. I have worked with thousands of agents (mostly life & health) over the years.

Not saying E&O carriers never have to pay out but my guess would be it is about as often as paying an AD&D claim.

 

[Josh]

Not saying E&O carriers never have to pay out but my guess would be it is about as often as paying an AD&D claim.

I think you're being too generous, I've actually met a man who lost a leg.

 

[djs]

I think you're being too generous, I've actually met a man who lost a leg.

But did he have AD&D that paid out?

I've met an agent who made an error (heck, I've made an error), but that doesn't mean E&O paid out.

Dan