E&O Insurance for P&C Agents
What is the best E&O insurance policy for P&C agents? The answer depends on . . .
- the precise nature of your P&C business,
- whether you’re a solopreneur or owner of an agency with multiple agents and customer service representatives, and
- the risk profile of your customer base.
But at the most fundamental level, the best E&O insurance policy for P&C agents hinges on what’s best for your particular needs.
That may sound overly simple. But we can’t tell you the number of times we’ve heard of P&C agents buying E&O insurance that omitted coverage for an activity that was central to their business. When this happens, it’s clear the agents either hadn’t thought about the risks they faced while doing business or didn’t do their due diligence before buying E&O insurance. By failing to do their homework, they ended up buying coverage that could leave them unprotected in the event of a client dispute.
Don’t let this happen to you. Instead, adhere to the E&O insurance buying process recommended by EOforLess.com, an online E&O provider sponsored by the National Ethics Association. This process involves three steps:
- Know the basics of E&O insurance protection.
- Know the fundamentals of buying E&O insurance.
- Know the subtle features that distinguish one E&O insurance policy from another.
Let’s take a closer look at each step.
The Basics of E&O Insurance—At its core, E&O insurance prevents P&C agents and brokers from being saddled with all of the costs and damages resulting from making a mistake or failing to perform a key activity on behalf of a client. E&O insurance policies provide money to pay for the financial implications of a customer claim, which may result in a lawsuit. In such situations, E&O insurance provides cash . . .
- to pay for an attorney to defend you,
- to pay for legal judgments should you lose in court, and
- to handle any court costs levied as a result.
When you have E&O insurance, you transfer the above financial exposures to an insurance company, which frees you from financial ruin, stress, worry, and potentially the loss of your business. You also get the services of an E&O claims adjuster, who will assist in the resolution of the claim.
Knowing these basics, it’s also important for you to review two key elements of a proposed insurance policy: the insuring clause and the list of exclusions. The insuring clause is the heart of the policy, defining the scope of protection offered. For example, here is a typical insuring clause for an E&O insurance policy:
“The Insurer shall pay on behalf of the Insureds, excess of the applicable Retention and within the Limits of Liability as stated in the applicable Certificate of Insurance that Loss which the Insureds become legally obligated to pay resulting from a Claim for a Wrongful Act solely in rending or failing to render Professional Services.”
Before purchasing any policy, make sure to study this clause carefully and to ask the insurer or entity from which you are purchasing the policy to clarify any confusing points.
If the insuring clause defines the benefits of the policy, the exclusion list defines situations in which those same benefits will not be available to the insured. Most policies exclude losses under many scenarios that might not initially be obvious. For example, did you know that E&O policies typically do not cover financial penalties imposed by regulatory agencies such as FINRA, the SEC, or state insurance departments? Or that they often don’t cover class-action lawsuits?
Key takeaways regarding both the insuring clause and exclusions: Don’t buy an E&O insurance policy without first reading the policy language. And if you don’t understand something you read, ask your E&O provider—the agent, broker, membership organization (for group coverage), and the insurance company—to provide details. The crucial time to fill your knowledge gaps is before you buy a policy, not after you need to make a claim.
The Fundamentals of Buying E&O Insurance—Once you understand the basics of E&O insurance, the next step is to search for quality coverage at an affordable price. The way to do this is to establish the criteria that will guide your search. Here are the major ones:
- Do you want an individual policy or group coverage? The former may be required if you have a large agency with unique risks. But the latter may be more suitable for solopreneurs and small agencies with standard operating risks.
- Do you prefer a full or streamlined underwriting process? The former may be necessary for large agencies, but the latter may be available for independent agents with less complicated businesses.
- Do you wish to deal with an E&O agent/broker or with an E&O insurance program/carrier? The advantage of dealing with an agent is that you’ll have assistance selecting the right coverage for your specific situation. This is helpful when your business risk is large or complex in nature. The disadvantage is that agents will need you to complete a detailed application before shopping it around to several insurance companies, a process that may take several days or weeks. They will then provide a proposal summarizing the coverage available from the carriers, from which you can select the most appropriate. The advantage of dealing with an E&O program/carrier directly is that the purchase process is much quicker. The disadvantages are that the services of an agent to complete a detailed analysis will be unavailable, plus the policy may not be appropriate for unique or complex business risks.
Finally, would you prefer to buy your E&O insurance online, using a purchasing platform such as EOforLess.com or buy it in person or over the phone from another entity? The big advantage of the online option is that you can select, apply for, pay for, and print out your coverage within minutes of accessing the site.
For P&C agents who operate as solopreneurs or who own smaller, less complex agencies, buying E&O insurance online from an entity such as EOforLess.com often provides the ideal compromise between comprehensive coverage, affordability, and shopping speed and convenience.
Facts about E&O for Property & Casualty
Once agents understand the basics of E&O insurance and how to shop for it, it’s time to learn about the subtle differences between policies. Here are several key facts about E&O for Property & Casualty.
- Watch for how coverage triggers are defined. Most E&O policies are issued on a claims made basis. This means coverage is available from the point at which the agent files a claim, not the time at which the loss originally occurred. However, some policies are issued on a claims made and reported basis. This means the agent must file a claim within a certain time period in order to qualify for protection. Make sure to nail this down before purchasing any E&O insurance policy.
- Consider retroactive dates as opposed to full prior acts. In other words, as long as you maintain continuous coverage (i.e., with no lapses), insurers will consider claims that are made against you during the coverage period, even if the original event happened when you were insured by another insurer. But if you lapse your coverage, then no insurer will be responsible for claims that arose before and during the lapse. Result: you will be completely uninsured for past acts, which can destroy your business should you get sued in the future. However, if you purchase a policy with full prior acts coverage (available at a higher cost), then you will be covered for all prior acts.
- For agents who might employ leased or temp employees or independent contractors, make sure your policy protects you against errors these individuals make while working for you.
- Does the policy cover things like subpoena expenses or loss of earnings incurred because you’re focusing on the claim and not on your normal business duties?
In short, if you’re looking for the best E&O insurance for P&C agents, don’t take shortcuts. Spend enough time to fully understand:
- The basics of E&O insurance.
- The fundamentals of buying it.
- The features that distinguish one policy from another.
If you do all of the above, you will be more likely to purchase the E&O insurance you truly need at a price you can afford. If you ever get sued, your family, business, and career will thank you for it.