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Failure to Advise Promptly of Rejection or Lack of Coverage
Lesson: An appropriate lesson to learn from this E&O claim is that when switching coverage from one carrier to another, evaluate the differences and bring these differences to the attention of the client, asking them to acknowledge that the differences were explained. [Read Claim]
Commercial Liability: In this claim, the agency moved a policy covering the bottling operations of their client from one carrier to another. The replacement policy contained a Designated Premises endorsement limiting General Liability exposure to the insured premises; this endorsement was not on the previous policy. During an outing sponsored by the client, an employee was severely injured by another employee on a jet ski. The new carrier denied the claim based on the Designated Premises endorsement. The injured employee then sued the agency's client, securing a verdict for $622,000. The client then sued the agent for the amount of the judgment, plus interest and defense costs, claiming they were not informed of the change in coverage. The agent admits he did not inform his client of the change. In the defense of the insured, counsel argued that a statutory Stop-Gap Employer's Liability endorsement would have applied to the loss and provided coverage and after the trial court disagreed, the matter was appealed to the State Court of Appeals. The Court of Appeals affirmed the lower Court's decision, stating that the designated premises endorsement also applied to the Stop-Gap endorsement, meaning there was no coverage available for the loss. The matter was settled for $1,000,000 against the agent.
