Failure to Obtain Proper Coverage

Commercial Auto: In this claim, the carrier alleged that the insured misrepresented the gross weight of a dump truck when it was added to the policy. The carrier's underwriting guidelines stated that they would not insure any truck with a gross weight in excess of 45,000lbs. When the agency attempted to add a truck that weighed (according to the agent) 50,000 lbs., the carrier initially hesitated but after some further dialogue, the carrier added the truck. The truck was involved in a loss where the operator ran a light and injured a man and a woman in a car. Injuries were severe enough to warrant a total settlement of $225,000 and in addition, the carrier spent $38,000 defending the loss. After the loss, an inspection of the truck revealed the gross weight was 74,000 lbs. and this was substantiated by the statement on the door of the vehicle declaring the weight. When pressed, the agent stated that he was familiar with makes/models of trucks and guessed at the weight. The total claim is for $253,000 and it appears that the agent is primarily liable.

Commercial Auto: This E&O claim was based on a claim by an owner of a business who had a bad accident as a pedestrian and sought Underinsured Motorists (UIM) coverage under a Commercial Auto policy. The policy did not list the owner as an additional insured. Several policies were involved but it appeared that when the coverage was moved to another carrier, the UIM coverage listing the owner as an additional insured was not duplicated. When there was an indication that the agent was asked to duplicate cover, Utica realized that its chance for success was less and decided to take the case to verdict. The verdict against the agency was $193,700, considerably lower than the amount demanded.

Commercial Auto: This E&O claim involves a principal of a business who was not named as an additional insured under a replacement commercial auto policy. The prior policy listed the principal as an additional insured. The client's son was severely injured (brain injury) in an auto loss while a passenger in a friend's car, and made a claim under the Commercial Auto policy for Underinsured Motorists benefits. The policy had a $500,000 UIM limit, but the son did not qualify as an insured as he was not occupying one of the covered autos. Had the mother's name (she is the client's principal) been added, he would have been entitled to UIM coverage. There was a question of residency at the time of the loss, as the son would have had to have been a resident relative of the mother in order to qualify for UIM coverage under the Commercial Auto UIM coverage. The case against the agency was settled for $200,000.

Commercial Liability: This is a former “subpoena only” claim where the insured put us on notice of a potential claim involving a rescission action by Co. X against a commercial client of the agency. The carrier claims they were not able to go forward with the rescission because the insured failed to secure the client's signature on the application. The client claims the signature is not his and also stated that the information on the application was not correct. The agent had claimed he did know for sure whose signature it was, as he said he mailed it and got it back with a signature. The client was involved in the maintenance of equipment at an airport (not planes) and a worker was severely injured when he caught his arm in some equipment. The carrier claimed they would not have written the risk, and claims the agent violated his agency contract by not witnessing the signature. The agent claims the information on the application was the information given to him by the risk. The carrier dropped the rescission action and contributed $1,000,000 to settle the case, plus they expended $500,000 in legal. They pursued the insured in a lawsuit. We recently learned from counsel that the agent has now admitted to him that it was his signature on the application. Since he had testified before it was not his signature, his credibility in front of a jury will be zero. The case was settled for $700,000.

Commercial Liability: In this E&O claim, the agency failed to add a sister company of their client to a products liability policy. Both the client and its sister company were involved in the manufacturing and distribution of rock crushing equipment. An employee of a recycling firm was seriously injured by the conveyor belt apparatus of rock crushing equipment sold by the client, resulting in the loss of both legs. When the sister company was sued by the injured party, both the primary carrier ($1mil limit) and the umbrella carrier ($5mil limit) disclaimed coverage, stating the sister company was not an insured under their respective policies. The underlying damages were in the $10mil - $15mil range. Following discussions with the primary carrier, they agreed to honor the claim on behalf of the sister company in exchange for a payment of around $300,000 by Utica.

Commercial Liability: In this E&O claim, a customer had coverage on a previous policy for direct suits by employees, which was allowed under certain circumstances in the state. The law changed, and the agent believed that there was no exposure for direct actions as a result of the change in the law. The endorsement covering direct actions by employees was removed at the agent's request on renewal although the premium savings was minimal. The client was subsequently sued in a direct action by an employee, and the court allowed the claim to stand. A judgment was rendered against the client for over $400,000, and the client in turn sued the agency. The claim was settled for $250,000.

Commercial Property: The client owned a horse farm and built a home on the property himself. His previous carrier decided they no longer wanted to cover the risk. The client then approached our insured for coverage. The insured did a cost estimator, and came up with a value. The policy was in place for a number of years, with regular inflationary increases in the limit, with no complaints from the customer. A fire occurred in 2006 destroying the home. The carrier paid over $1,000,000 for the dwelling and contents, exhausting their limit. A claim was presented against the agent, alleging a $1.8 million shortfall. Unfortunately, this is an example of the agent coming up with a value as opposed to the client requesting a particular limit. While we felt there was comparative negligence on the client for not knowing what his home was worth, we had a problem with liability also, because the agent came up with the replacement cost. Reserves prior to trial were $700,000. The case did not settle prior to trial. Trial commenced, and on the second day of trial the case settled for $1,000,000.

Commercial Property: This E&O claim involved a loss where the agent submitted a photo of the wrong building to the carrier. The agent submitted a photo of a cottage, and the risk was actually a motel converted to a residence. The carrier denied coverage, based on false information regarding the submission of coverage. The error occurred because the agent got confused as to the street address, and took a photo of the building with the right address number, but on the wrong street. The claim was settled for $142,500 with some contribution by the carrier.

Commercial Property: In this E&O claim, the agent procured a property policy for a new customer. The building was destroyed by fire, and because of the size of the loss, a large coinsurance penalty was applied because the amount of coverage requested was nowhere near enough to cover the exposure if the building was destroyed. The difference in what the client could have collected (he did not rebuild) if there was no coinsurance penalty was between $400K - $600K. The case hinged on whether the agent had a duty to suggest higher limits. The agent had actually quoted higher limits several years before to the client in an attempt to get the client's business, but the client decided to stay with his prior agent at that time. The claim eventually settled for $215,000.

Flood: This E&O claim involves a long time client of the insured's. An apartment building owned by the client was on the previous term's policy with the standard $500,000 FEMA coverage for the building. There was an excess flood policy in place, but locations in Flood Zone A were excluded. The client received financing from a bank, and the bank's requirements for coverage on the building were shared with the agent. One of the requirements of coverage was loss of rents coverage which was secured but it excluded coverage for locations in Zone A. The building was flooded, and it was determined the building was in Zone A. The client clearly understood that there was no coverage for flood damages to the building beyond the FEMA coverage, but stated he should have been informed that the loss of rents also would not have been covered if due to a flood loss in Zone A. FEMA policies do not cover loss of rents. Following the loss, he was unable to keep up on the bank note because of decreased revenue from the loss of rents for a period of time. The agent was adamant he did not perform his duty by not securing loss of rents coverage for flood losses and the case was settled at mediation for $163,000.

Flood: In this E&O claim, the agent procured coverage for several buildings for the client and the client had requested flood coverage be included. The proposal from the MGA that the agent was going through stated there was coverage for flood except for Zones A&B. The agent retyped the proposal, left off the limitations for Zones A&B and sent it to the client, who accepted. The agent admitted missing the flood limitations. A flood occurred, and $1,7000,000 in damages was claimed. The intended limit was $1,000,000. Suit was filed against the carrier and the agent. The twist here is the fact that the actual endorsement which purports to limit flood coverage was poorly constructed by the carrier; it says the limit is: "1,000,000, except for flood zones A&B”, and it should have said zones A&B were excluded. This is ambiguous - a reasonable interpretation could be that there is unlimited cover for flood zones A&B. We believed the carrier had some problems because of that language. The case settled with the client, with the carrier paying $700,000 and the agent paying $275,000.

Homeowners/Builders Risk: This claim involves a loss that arose from builder's risk policy written through a carrier that covered a home being renovated by a client. A fire occurred, and the carrier claimed they were only responsible for labor and materials connected to the re-modeling, and not the existing structure. There was no Homeowners or Fire policy in place for the house when the fire occurred. The client claimed the insured should have known the limitations on the builders risk coverage, and there should have been a Homeowner's policy in place to cover the existing house. The client claimed $1.8 million in damages, and the builder's risk carrier stated the total unpaid loss was around 800,000. There was some exposure for the carrier also, due to the confusing language in its policy. Following depositions, the loss was settled with Utica paying $675,000 and the carrier paying $250,000.

Homeowners/Builders Risk: The client owned a horse farm and built a home on the property himself. His previous carrier decided they no longer wanted to cover the risk. The client then approached our insured for coverage. The insured did a cost estimator, and came up with a value. The policy was in place for a number of years, with regular inflationary increases in the limit, with no complaints from the customer. A fire occurred in 2006 destroying the home. The carrier paid over $1,000,000 for the dwelling and contents, exhausting their limit. A claim was presented against the agent, alleging a $1.8 million shortfall. Unfortunately, this is an example of the agent coming up with a value as opposed to the client requesting a particular limit. While we felt there was comparative negligence on the client for not knowing what his home was worth, we had a problem with liability also, because the agent came up with the replacement cost. Reserves prior to trial were $700,000. The case did not settle prior to trial. Trial commenced, and on the second day of trial the case settled for $1,000,000.

Inland Marine: In this E&O claim, the agency dropped the ball in securing flood coverage under an inland marine policy, which was specifically requested by the client. The policy contained an exclusion for properties within a flood plain. Despite this, the agent had informed the client that flood was covered for the location. The damages claimed were $750,000 for damaged/destroyed petroleum coke stored by the agency's client. The loss subsequently settled for $545,000.

Workers Compensation: In this E&O claim, the agency failed to properly replace WC coverage for a trucking firm that had "all states" coverage on a previous policy. The new policy only covered losses in the state in which the client was domiciled. The client had an employee who was injured in another state, and because they had no coverage for losses occurring in that state, the client was obligated to reimburse that state's uninsured WC fund for WC benefits paid to the employee. In this case, the Worker's Compensation Board ruled the carrier does not owe any coverage. The case was settled by reimbursing the client the monies it had to pay the state plus attorneys fees. The case settled for $317,000.

Workers Compensation: In this E&O claim, the agency wrote multi-state coverage for a trucking firm with a carrier that went insolvent. A trucker was injured when she fell off the back of a truck and made a WC claim, which initially was paid by the reinsurer of the insolvent carrier. The payments ceased, and the reinsurer, along with the agent were sued in the state the trucker resided. Although Utica felt that the reinsurer should continue to pay the WC benefits, the claimant hired a new attorney in the middle of litigation, and the suit was amended to included state trade practice violations against the agency for writing WC cover in that state with a non-admitted carrier. In addition, the agent did not have a license to sell a policy in the state. After the judge let the reinsurer out of the action and following an unsuccessful mediation, the case was settled for $1,000,000.