Failure to Give Proper Advice

Commercial Auto: In this claim, the agency's client was a new customer of the agency for commercial auto coverage. The policy was written with $1,000,000 limits for BI and UIM. The client company was owned by two partners, one being Mr. X. When the policy was written, neither of the owners were listed as additional insureds on the policy. Following the policy inception, Mr. X was killed while jogging. His estate made a claim against the UIM portion of the Commercial Auto policy. The carrier disclaimed based on the fact he did not qualify as an insured, as he was not in the course of his employment and he was not operating nor was he in a covered auto. Suit was filed against both the carrier and the agent. The Estate produced a witness, the deceased's daughter, who said she overheard her father discuss the need to be added to the policy. This was denied by the agent. Although counsel filed for a dismissal based on the fact the agent owed no duty to advise the partners of the need to be added as additional insured's, the Court denied the motion, stating there was a question of fact as to the duty owed. The case was venued in rural county, and counsel advised there were dangers associated with trying a case in that venue, based mainly on the sympathy factor. The case was settled for $150,000.

Commercial Auto: This E&O claims involves an agency who wrote a CGL and a Commercial Auto for a client. The CGL had a $1,000,000 limit, and the Commercial Auto had a $300,000 limit. One of the client's vehicles struck and killed a motorcyclist, who died 30 days after the loss. The value of the underlying death claim was in the $1,500,000 to $2,500,000 range. After the client was sued by the Estate, the client alleged the agent told him that the CGL would respond in excess of the $300,000 auto limit, and further alleged the insured should have recommended higher auto limits. The insured denied ever telling the client that the CGL would be excess for an auto loss, and further stated the client had been informed numerous times in the past the increase the auto limits. Unfortunately, there was no paper back up of those discussions and due to the long term relationship with this client, the claim against the agent settled for $500,000.

Commercial Liability: This claim deals with the issue of the agent failing to report a loss to a CGL carrier following an auto loss. The client ran a jewelry business and there was non-owned auto coverage on the client's CGL but the agent only reported the loss to the personal lines carrier. The CGL carrier disclaimed when the loss was reported much later. The claim stems from an accident in which one passenger was killed and another rendered a paraplegic while riding in a van owned by the agency's client's principal. It was alleged the van was being used for business purposes, as the parties in the van were on their way back from a trade show. The injured parties had already collected $3,500,000 from other sources, and took an assignment of the rights from the client company to sue the agent. They alleged that the agent's failure to report the loss to the CGL carrier resulted in a disclaimer. There were some defenses to the claim, but it was clear the agent did not report the loss to the CGL carrier, who was successful in maintaining their disclaimer. The claim against the agency was settled for $290,000.

Commercial Liability: In this E&O claim, the agency's client alleged a special relationship with the insured. The insured had secured coverage for a number of operations for the client, but did not obtain coverage for the operation of a small airport owned by the client. The insured informed the client on numerous occasions that there was a gap in coverage as regards liability coverage for the airport. The agency file was well documented to that effect. When an underlying loss occurred (injury to a plane passenger who is now a quadriplegic as a result of injuries sustained in a plane crash at the airport), the client claimed because of a longstanding special relationship the agent had a duty to secure the coverage. While the agent had advised the client of the need to secure coverage, the client claimed confusion. The client and the injured party agreed to a $10,000,000 consent judgment, and the client filed suit against the agent. Other insurance had already paid the injured party $2,000,000 on behalf of the plane owner. The case against the agent was settled for $200,000.

Commercial Property: In this claim, the agent wrote property coverage for their client who was in the business of refurbishing railroad cars. A hurricane destroyed one of the client's locations, and a claim for Business Interruption was made with carrier. The policy was placed through an MGA and had a 90% co -insurance clause for Business Interruption. The agent was confused as to how to calculate the proper limit of coverage for Business Interruption and assumed the proper limit for Business Interruption was merely profits. In actuality, the proper method to calculate limits for that coverage is profits plus continuing expenses. Following the loss, it was determined the agency client was drastically underinsured, resulting in an 82% coinsurance penalty. The loss to the client due the coinsurance penalty was around $160,000 and the case was settled for $135,000.

Homeowners: This claim involves a client who claimed the amount of coverage for her home and contents was insufficient. This was a new customer to the agency and the agent did not inspect the home, seeing it only from a distance. A previous appraisal for $591,000 was given to the insured by the client, and a $600,000 policy was procured with a replacement cost endorsement through the HO carrier. As a result of a fire, the house and contents were destroyed. At that time, it was discovered that the home had expensive ornate fixtures, and was filled with artwork owned by and produced by the client, a world-renowned artist. The house and contents were valued at $2.4mil each ($4.8 million total). The carrier balked at payment, and suit was filed against both the carrier and the agent. The carrier then filed a cross claim against the agency. Although it was believed that the claim against the agent was defensible, following testimony by the carrier's underwriter, who said the insured did not follow proper procedures, and also stated that the carrier would not have written the risk had it known the true value of the property, the claim was reassessed. Utica had some defenses as the carrier failed to inspect the location and accepted an outdated appraisal. The claim was settled with both the carrier and Utica contributing with Utica's share on behalf of the agency being $800,000.

Life Insurance: In this case, the agent sold a life policy (annuity) to a client and told him that after making premium payments of $90,000/year for 5 years he would have no further premium obligations. There were serious questions if the agent understood what he was selling. When the predicted level of investment income for the Life carrier did not pan out, after 5 years, the client was told he would have to continue with annual premium payments of $27,000 to keep the policy in force. The client then cashed in the policy at a loss, and claimed he would not have retired from his business (he owned an agency) had he known he would have to continue with payments. The client also received 50% of the commission for the sale of the annuity. He testified he did not understand annuities, and he had no life license. Counsel believed the provable damages were around $100,000 range. The client was unreasonable, and never lowered his demand of $750,000. Utica offered $80,000 but in view of the impasse in negotiations, Utica entered into a binding arbitration agreement. The arbitrator awarded $384,000.

Life Insurance: The details behind this claim involve a sub-agent, using the named insured agency's list of P&C customers with the insured's permission, to "churn" life policies for a number of customers by replacing existing policies with policies that were on less favorable terms. The total alleged damages were $1.8 million and it was also determined that the sub-agent did not have a license to sell insurance. Some of the wronged customers were not on the list the agent had provided to the sub-agent, and the damages related to customers of the agency were in the range of $800,000. While Utica believed the life carrier bore a considerable portion of the exposure, the carrier settled out, leaving the insured agency and the sub-agent exposed. While the insured agent had no dealings in so far as the life policies sold, he did receive part of the commission for the sales. The case against the agent was settled for $200,000.

Workers Compensation: In this claim, the agent was an exclusive agent to market and sell WC coverage to overseas employees of companies under Federal Contract. A foreign national was working for a subcontractor to a company under U.S. contract to restore electricity to Iraq, and was killed by a vehicular bomb in Iraq. He was determined to be eligible for the benefits, and his family has been receiving the maximum of $1,047 per week (this amount is determined by the provisions of the Longshoremen's Act). The widow made a claim that the brochure prepared by the agent stated survivor's benefits were to be 66 2/3% of the average weekly wage with no maximum. This statement in the brochure was clearly misleading. The brochure was given to the employer, who in turn gave a copy to the deceased. Since the deceased made around $3,380 per week, the widow claims she is entitled to $2,253 per week (2/3) instead of $1,047 per week. Over a 25-year period (her estimated future life span), this amounts to a difference of $2,868,203 between what she will get and what she believes she is entitled to. This matter is still ongoing with attempts to settle underway.