avoid-lawsuits-with-this-checklist

Would you prefer to spend time and money on growing your business or on protecting it? We thought so. And that’s because it’s human nature to focus on positive things and to avoid dealing with problems.

Yet preventing bad outcomes from harming your business can have as large a beneficial impact as launching a shiny new marketing program or buying new computer equipment or furniture.

In fact, spending money on E&O insurance may spell the difference between your company surviving a nasty client lawsuit or succumbing to it. But if you fail to buy E&O insurance and get sued, you’ll have the aggravation of hiring and paying for your own attorney and then paying for any settlements or judgments out of pocket.

So how to best avoid E&O lawsuits? By scrubbing your sales process of high-risk behaviors. This checklist shows you where to focus your mitigation efforts.

  • Only purchase sales leads from marketing firms that use compliant practices.
  • Properly identify yourself and your products in all pre-approach solicitations.
  • Conduct comprehensive fact-finding with all prospects.
  • Use a valid profiling instrument to understand your clients’ appetite for risk.
  • Only recommend suitable insurance and investment products to clients.
  • Never misrepresent the features, benefits, fees, or penalties of a recommended product.
  • Make sure clients understand what they’re buying, both at the time of sale and at policy delivery.
  • Review every client’s changing personal circumstances on an annual basis.
  • Execute all client service requests as quickly as possible.
  • Don’t disappear during times of market volatility; make yourself available to reassure nervous clients.
  • Establish reasonable expectations regarding the benefits of owning an insurance or investment product.
  • Document in writing when a client decides not to follow one of your recommendations.
  • Build a relationship with your clients’ children so they understand the nature of the work you do with their parents.
  • Memorialize in the client file all key plans and implementation steps.
  • Stay within your area of expertise; refer “outside” product sales to highly skilled third parties.
  • Do your own due diligence on product or insurance/investment firms before recommending them to clients.
  • Standardize your office policies and procedures, train your staff on them, and have printed copies on file.
  • Have a process for documenting and responding to client complaints.
  • Stay on top of regulatory and rule changes affecting your business.
  • Adopt a defense posture in every facet of your business; try to anticipate problems and eliminate risks whenever possible.