Insurance Agents E&O Claims Examples
An insurance broker placed professional liability for a marketing consultant. The policy excluded coverage for claims arising from any contest or sweepstakes.
The insured marketing consultant introduced a client to a promotional event company, and the client worked with the promotional event company to establish a promotional contest. As part of these services, the promotional event company was expected to purchase prize indemnification insurance. When a contestant won the $1.0 million jackpot and tried to claim the prize, the client turned to the promotional event company for payment from the prize indemnification insurance policy. Since the promotional event company never purchased the insurance, it refused to pay. The contestant brought an action against all involved, including the marketing consultant, for failure to pay the prize.
While the marketing consultant had no direct involvement in the contest, they are a party to the action and require defense and coverage from their insurance. However, their insurer has denied the claim due to the exclusion for claims arising from contests or sweepstakes. The marketing consultant has brought an action against their insurance broker for failure to place proper coverage, and the insurance broker’s professional liability insurer is providing coverage and a defense.
The insured marketing consultant claims that they were never told and were not aware of the contest exclusion. Additionally, it appears that the policy was not produced in a timely manner. The claim is currently being litigated.
Second Claim Example:
A recent claim situation demonstrates how complicated our business can become. While the names have been changed, the situation is real.
An insurance agent, whom we will call ABC Insurance Agency, placed a range of coverages for one of their clients, Widget Manufacturing. The coverages included an employment practices liability policy placed with an insurer, whom we will call EPL Insurance Company, as well as a general liability policy placed with another carrier, whom we will call GL Insurer.
Widget terminated one of its employees, John Doe, and brought an action against him to collect certain payments he had received during his employment. Doe then commenced an action against Widget alleging wrongful termination, sexual harassment, malicious prosecution, abuse of process, defamation, etc., etc., etc. The claim was passed to ABC Insurance Agency who, in turn, notified EPL, Widget’s employment practices insurer.
EPL Insurance Company assigned defense counsel and paid for the defense of the claim without incident or reservation. At a mediation of the claim against Widget, approximately one year later, EPL Insurer’s counsel inquired of ABC if there were any other policies applicable to the claim. ABC then forwarded the general liability policy to EPL Insurer’s counsel, who recommended to ABC to tender the claim to GL Insurer.
Despite late notice, GL Insurer agreed to contribute to the defense of Widget with respect to those allegations that were covered under the Personal Injury Coverage Section of the GL policy (defamation, malicious prosecution and abuse of process). Subsequently, the Court granted a motion of summary judgment filed by Widget dismissing the non-employment claims (defamation, malicious prosecution and abuse of process). Thereafter GL Insurer refused to cover any future defense costs or contribute towards any settlement. The Doe case settled a few months later for approximately $175,000.
However, the case was not over. EPL Insurer then made a claim against ABC Insurance Agency asserting that ABC was negligent in not tendering the claim to all of Widget’s insurers. EPL Insurer claims that if ABC had tendered the claim to the general liability insurer EPL would not have had to pay for the defense of the claim and Widget would not have had to pay the large deductible on the employment practices policy. Widget has not brought any action against ABC Agency. The claim between EPL Insurer and ABC Agent is currently being litigated.
On the surface it seems that EPL insurer is going way overboard in bringing an action against ABC. Yet the case is open and its resolution will hinge on a number of narrow issues, including the following:
Third Claim Example:
A simple lack of attention to detail in the normal processing of daily business can have severe consequences. An insurance agent received a notice of claim and copies of a lawsuit filed against an insured client. The agent prepared a fax to the insurer and left it for an assistant to send out. The fax was put in the fax machine but did not actually go through, and the documents were put in a claim file and filed. The fax confirmation was never checked to ensure that the fax had gone through to the correct number.
Approximately 30 days later the insured called requesting the status of the claim. The agent discovered that the claim had never been received by the insurer and faxed the original claim notice and lawsuit. However, the plaintiff had filed a motion for default in the meantime, and the default had been granted in the amount of $ 1,250,000.
The insurer immediately assigned counsel and filed a motion to overturn the default judgment. The motion was denied and the insurer and client have each brought an E&O claim against the agent.
This claim could have been prevented if the assistant had checked the fax confirmation thoroughly prior to filing the documents.
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