PROPERTY & CASUALTY AGENT E&O
Filling Out an E&O Application? Avoid Catastrophe with One Simple Tip
There are many tasks in life where thoroughness is valued. In the insurance world, it’s not only valued, it’s necessary!
Inaccurately completed Errors & Omissions (E&O) applications can jeopardize coverage in the event of a claim.
Be sure to read application questions closely, and be 100% truthful and complete when responding.
For example, while it’s common for applications to inquire about claims in the past five years, many questions regarding cancellation/non-renewal or past disciplinary action are worded to ask, “Has the applicant ever…?”
“Ever” means “EVER” – and it’s best to be truthful when answering than to risk the potential consequences of a false response.
Scarier than a Horror Film – Let’s Explore a Nightmare Scenario
Knock, knock. You’re served with suit papers from a displeased former client. Their demand is over $100,000, and you’re in shock.
You immediately turn to your E&O provider for assistance – and feel relieved when they start their investigation.
But that relief is short-lived. The claims administrator requests a copy of your E&O application, and the discovery process begins. The claims administrator searches a claim/disciplinary action database and discovers you’ve had a securities license terminated for ethical reasons seven years ago. This information wasn’t disclosed on your E&O application.
The allegations raised in the suit appear to have merit, and your liability in the matter appears unfavorable. Not wanting to become involved in a potential costly claim, your E&O carrier rescinds your policy based on material misrepresentation on the application.
Your premium is returned in full, and you’re now left defending the suit on your own. Once you’ve exhausted your savings and 401K, you are forced to obtain a second mortgage on your home and eventually file for bankruptcy.
Wake Up! A Nightmare AvoidedYou can feel relieved again, because this is NOT you. You are in the clear because you take the time to read all applications carefully – and to answer all questions honestly.
In the scenario above, had the license termination from seven years ago been disclosed on the application, there’s a good chance the Underwriter would have approved coverage subject to a satisfactory explanation of the events in question.
Honesty (and accuracy!) will always prevail at claim time.
And while we’re on the subject of ensuring your applications are thorough and honest, we’d like to pass along a friendly reminder that first impressions are also important.
Channel the voice of your strictest grade school teacher, and keep your handwriting neat, your grammar meticulous – and make sure you answer all questions.
You’ll earn yourself an A+ – and more importantly, ensure that the nightmare scenario above never becomes a reality.
Have additional questions – or need advice on filling out your applications? The Rockwood team is happy to help!