One sure way for an insurance agent to anger a customer is by failing to communicate reasonable expectations or monitor their carrier’s activities, or lack thereof.
A Delaware couple purchased a farm in 1998 and insured the property through a local independent agent. They added a liability policy with the same carrier a few years later.
During the winter of 2010, two major storms battered Delaware in the space of a few days. The carrier paid out multiple large claims after the heavy snows caused farm structures to collapse. Consequently, they non-renewed all of the chicken farms they insured outside of two regions. In the other two regions, they stopped offering coverage for losses caused by the weight of snow and ice to new customers. They continued coverage for existing customers, but provided snow and ice coverage only on a case-by-case basis following inspections of the structures.
The couple who owned this particular farm did not comply with the carrier’s request to inspect their chicken houses. In turn, the carrier cancelled the property policy in May 2011 and the insureds replaced it.
In late 2014, they borrowed $900,000 to build two new chicken houses and hired a builder. The builder obtained builders risk insurance on the construction; the couple had to obtain permanent coverage by the time they received the first flock of chickens. They asked their agent to obtain coverage from their old carrier.
The agent contacted an underwriter who agreed to offer coverage but without weight of snow and ice coverage until a satisfactory inspection was performed. By the summer, construction was nearly complete, and the insureds asked the agent to obtain the property insurance. They did not request any specific types of coverage. The carrier bound coverage as previously agreed to with the agent, with an offer of snow and ice coverage subject to a truss inspection.
The producer had not discussed snow and ice coverage with the insureds, but assumed they would want it and initiated the inspection process. In July, an agency employee emailed the carrier’s inspector to request the inspection. Emails went back and forth, but the inspection was never performed, and the agency did not follow up on the request.
The following January, a blizzard hit the area and one of the new chicken houses collapsed under the weight of the snow. The carrier denied coverage and the insureds sued the agent. The agent argued that he was not obligated to obtain the snow and ice coverage or to make sure the chicken houses were inspected. He further argued that the insureds could not prove that snow and ice coverage was available in the market at the time.
The judge didn’t buy the first two arguments, writing that the agent’s own statements and actions undermined his claim that he had no duty to obtain the coverage. He also criticized the agent for not following up, writing that it was “not too much to expect” of the agent and noting that he and the carrier “did nothing for over six months.”
However, the agent won because the judge agreed with the third argument, stating the insureds provided no evidence that the coverage was available.
This agent got sued because he 1) did not communicate with his clients about a coverage of clear importance, and 2) did not monitor the status of the required inspection. Had he told them that the coverage might not be available even with an inspection, their case might have been too weak to proceed.
The lesson: Clear communications and staying on top of processes can prevent E&O claims.
