Failure to Place Coverage After Agreeing to Get It

Businessowners Coverage: In this case, the agency owner apparently suffered from dementia while still performing as an agent. It appears that the agent's total disorganization caused this loss. The agency's client had come to the insured for BOP coverage for a parts store and although the agent took an application and a premium check, nothing was done with either. Of significance was the fact that the agent had no binding authority with the carrier for this type of risk. Over the course of several months, the client called several times inquiring about the whereabouts of his policy, and was told that the carrier was behind in issuing policies, but not to worry. The premium check apparently was cashed by the agent and never forwarded to carrier. The client's premises suffered heavy storm damage but was then informed they had no policy. After inspection of the loss, damages for the building, contents and business interruption totaled approximately $250,000. A settlement with the client's attorney concluded the matter.

Commercial Auto: In this E&O claim, the agent procured a commercial auto binder, through an MGA, for their client, a delivery service. The agent collected a premium, which was forwarded to the MGA, who in turn forwarded the premium to the carrier. Following several losses, the carrier denied there was a policy, and said that the MGA did not have authority to bind coverage outside of the state, and no policy was issued .The agent in this instance failed to timely follow up for a policy prior to the underlying loss occurring. Several losses occurred that were not covered. The loss that has the most exposure involved a gentleman, who was struck by a truck owned by the client. His injuries were serious and after working with the Uninsured Motorists carrier, the case was settled with Utica paying $185,000 on behalf of the agent.

Commercial General Liability: In this E&O claim, a manufacturer of lifts approached the agency for products liability coverage. The agency went thru a broker, who in turn went thru an MGA for coverage. The MGA was a fraud; he pocketed the premium and never procured coverage. The agent did not follow up, and assumed coverage was in place. A worker was injured when he fell off the lift manufactured by the client and the client. The underlying loss was settled for $333,000 and Utica is pursuing the broker for recovery.

Commercial General Liability: In this E&O claim, the agency's client, a bar owner, alleges he asked specifically for assault and battery coverage under a CGL and an Umbrella policy. A loss occurred where a bar patron was assaulted and the CGL carrier denied coverage based on the client allegedly lying on his signed application, and the umbrella carrier denied coverage due to an assault exclusion. When suit papers were served (after disclaimers were issued), the insured told the client he would take care of the matter, hoping he could convince the carrier(s) to rescind the disclaimers. The agent did not take care of the matter, no answer was filed to the suit, and a default judgment was taken against the client for $200,000. The client had to expend money in an attempt to get the default lifted, to no avail. He then filed for bankruptcy, and needed a lawyer to try and get the judgment discharged by the bankruptcy court. The underlying injury was not worth anything near the $200,000 judgment, and we hoped to settle the matter on behalf of the client for much less. Unfortunately, when the bankruptcy court ruled that the debt could not be discharged, and ordered the client to pay the entire amount, that option was lost. Utica settled the matter with the client for $320,000.

Commercial Liability: This E&O claim involves a loss where there is a sharp question of fact between the agent and the carrier as to whether or not the agency had been given the green light to bind Technology coverage for a client computer software company. The client had prior Technology coverage with a different carrier which had expired, and had asked the insured to replace the coverage. The insured agent states he was given the green light to quote the coverage from the carrier's underwriter, and did so. The underwriter went on an extended vacation, and another underwriter decided to decline the coverage, but never told the agent. The agent thought the coverage was in place. After a loss by the client's customer, the carrier denied coverage. With damages of $1mil, the client sued both the carrier and the agent, claiming damages that will flow from a settlement of the underlying action, plus attorney fees in defending that suit, and attorney fees for prosecuting the claim against the carrier and agent. Due to poor testimony by the carrier's underwriters, and questions as to what, if any, of the underlying case damages would have been covered under the carrier's Technology coverage had it been in place, the case was settled with Utica paying $150,000 and the carrier $850,000.

Commercial Property: In this E&O claim, there was confusion between the insured and the MGA as to whether coverage was bound for a beer distributor. The agent thought coverage was bound, and was holding premium for the policy but they never followed up, and a $600,000 fire loss ensued. No policy was in place. There is ample correspondence to the MGA in the agency's file which would benefit the agent's position. Mediation was held, and Utica was advised that the agent would bear the majority of liability. The case was settled for $575,000 with the MGA paying approximately 43%, and Utica paying the balance, or $327,500.

Commercial Property: This E&O centers involves a long time client who sold his printing business, and the insured let the policy expire. The new owner contacted the insured for quotes, and an application was obtained. The insured did not follow for quotes, as the coverage for the building was obtained elsewhere. The building was destroyed by fire several months after the sale of the business. After the fire, the agent learned that the terms of the sale included an arrangement for the business equipment, whereby the old owner (the agent's client) retained an interest in the equipment. The equipment was worth approximately $190,000. When the agent was informed of the sale of the business, he did not ask about the equipment. The claim was settled for $145,000, as it was deemed the longstanding relationship with the client was a “special relationship”, and as such the agent owed the client a heightened duty.

Commercial Property: In this E&O claim, the agency owner had significant personal and medical problems while still performing as an agent. This caused some organizational problems. When a client came to the agency for a BOP for a parts store, the agent took an application and a premium check but did nothing with either. The agent had no binding authority with the carrier for this type of risk. Over the course of several months, the client called several times inquiring about the whereabouts of his policy, and was told that the carrier was behind in issuing policies, but not to worry. The premium check apparently was cashed by the agent (never forwarded to carrier). The client's premises suffered heavy storm damage, and the client was informed they had no policy. The claim was settled for $250,000.

Homeowners: This E&O claim involves an agent procuring a policy for a farmhouse for the daughter of the client. The property was sold to the client's daughter and son-in-law under a land contract but the client still had an interest in the property. The carrier cancelled the policy following receipt of a credit check. Following the cancellation, the client asked the agency to insure the property under his name, and the agency proceeded to procure the policy at a building limit of $161,000. When the policy was written, the carrier informed the agent: 1) they were not going to cover the contents, as the client had no insurable interest in the contents and 2) they estimated the value to be $384,000. The agent never relayed that information to the client. A fire occurred, and the building was totaled. A claim was presented against the carrier, and they denied the contents claim of $62,000 and only paid the client $41,000 for the building, which was based on a bank lien on the property. The carrier refused to pay more, stating that was the insurable interest the client had in the property. Since the agent clearly erred in not securing a contents policy, Utica settled the contents claim and argued a reformation with the carrier, stating that there was clear understanding between the client and the agent that the entire building exposure was covered (and the premium collected reflected this) but the carrier refused. There is case law in the state that clearly would pin the building loss on the carrier since they took a premium for a known risk. Utica settled the loss for $263,000 pursued the carrier for all damages paid except for the contents.

Homeowners: This E&O claim involves Hurricane Katrina. The client had just paid cash for a house on the coast and asked the agent to procure coverage for it. Prior to the Hurricane, the agent took the premium check and the application and faxed the application and a request to bind to a wholesaler. The agent did not follow up, and the CSR who worked the request went on vacation. When Katrina hit, the house was destroyed by wind. When the agent contacted the wholesaler after learning of the loss, the wholesaler said they never received the fax. The agent's fax machine did not provide confirmations and we had no way to prove the fax was sent. There was no policy in place and the loss was settled for $320,000.

Homeowners: In this E&O claim, the insured did not take steps to insure a 21' 330 horsepower boat under a homeowner's policy. The agent was aware of the boat, but mistakenly thought the homeowner's carrier would automatically pick up coverage for the boat. The homeowner's carrier disclaimed coverage following a fatality involving the boat due to the size and horsepower of the boat. The umbrella carrier stated that until $1,000,000 in coverage was exhausted, it would not participate in the defense or indemnity of the underlying claim. The deceased, an owner of a modeling agency, was struck by the boat while waterskiing. The case settled, with the agent paying $640,000 and the umbrella carrier paying $250,000.

Homeowners: The agency's client, Acme Real Estate, had previously insured nine buildings under a $500,000 blanket flood policy with Co X. The client refinanced three of the buildings, and the bank required $500,000 coverage for each building. The insured cancelled the Co. X policy and wrote those three buildings under the NFIP program. The remaining six buildings were to be insured for $100,000 each, as per a new application signed by the client for those six buildings. There was a premium refund from CO. X due to the mid-term cancellation. The client has testified that he was told by the agent that the refund from Co. X was to be used to finance the flood policies for the remaining six buildings. The refund was enough to pay the premium. The agent stated that he told the client that he was going to use the refund to pay premiums that were overdue on other properties owned by the principal of the client that were not owned by Acme Real Estate. The agent has stated that he told the client that he would not place the policies on the remaining six properties until the client came up with the premium. There is no documentation whatsoever in the agency records on those conversations. An expert will testify that an agent should have clearly documented those discussions, especially since the refund due one entity was being used to pay the premium for another entity. The six buildings were severely damaged in a flood, far exceeding $600,000. We were unable to reach a settlement with the client, as their demand was $675,000 prior to trial, which was more than the amount of coverage that would have been available had it been in place. We were, however, able to agree to a high/low arrangement with the client's attorneys prior to a verdict. We agreed that in the event the verdict was less than $300,000 we would pay $300,000; and if the verdict exceeded $900,000 the client would take $900,000. The case was tried and lost, and the verdict was $1,200,000. Due to the hi-low agreement, we paid $900,000.

Workers Compensation: In this E&O claim, the agency's client requested a Worker's Compensation policy for a sub-contractor of the client. The client was a general contractor, and the terms of the contract with the sub-contractor called for the general contractor to supply the Worker's Compensation coverage. There was no policy in place when an employee of the subcontractor fell from a roof and was seriously injured. Because no WC coverage was in place, the worker sued the employer directly. The client incurred expenses defending itself, and had to pay fines for not having coverage in place. Utica reimbursed the client for all expenses incurred and settled the injury claim for a total of $378,000.

Workers Compensation: In this E&O claim, the client requested U.S. Longshoreman and Harbor coverage be provided for their employees. The agency went through a broker to place the coverage. An employee of the client was injured, and the carrier disclaimed, saying there was no policy in place. The employee incurred medical bills, lost wages and incurred attorney fees. The client was faced with the cost of an attorney and had to pay fines for not having coverage in place. Utica felt that the broker was at fault, as there was documentation in file that supported the position that the broker had agreed to procure the coverage. The total damages claimed were in excess of $700,000. Following a bench trial, the Court found our insured equally liable with the broker. The case settled, and the agent's share was $315,000.