Failure to Renew or Service Policies

Commercial Auto: In this E&O claim, it was alleged the agent allowed a layer of excess coverage to lapse for a large trucking firm, resulting in a large gap in coverage above the primary layers. There was a dispute over premium between the carrier and the client, and the policy was cancelled. Following the cancellation, a suit was brought by the client against the carrier, which was eventually settled. A new policy was written by the carrier. The agent assumed there was continuous coverage, but in fact there was a gap between the old policy's expiration and the inception of the new policy. In the interim, a trucking loss occurred during the period when a gap in coverage existed, and a party in another vehicle was rendered a quadriplegic. Upon learning there was no excess coverage in place, the client sued the agent. The exposure because of the gap in coverage to the client was somewhere between $5,000,000 and $7,000,000. Following significant litigation (over $1mil), the case against the agent was settled for over $5,000,000.

Commercial Liability: In this E&O claim, Utica "dropped down" into the shoes of a GL policy that the agency failed to replace for their client, a maintenance company. The prior policy was non-renewed, and the agency failed to secure replacement coverage before a loss involving the client's rug cleaning operations occurred. A woman slipped on a tile floor after walking on carpets that were still damp from cleaning. She claimed no warnings were given, even though she was well aware of the cleaning activity. She suffered minor bruises, but 10 days following the fall, she lost a fetus. There were questions of liability as regards the client and questions as to the relationship of her minor shoulder injury and the loss of a fetus. The underlying claimant produced witnesses who said a sign was missing in the area of the fall. She also produced an expert who was to testify that his review of the placenta indicated the fetus was damaged in the fall. The case was settled for $485,000 including legal fees.

Commercial Liability: This E&O claim involves an agent who acted as a broker for a risk that installed fire suppression systems. The policy was written through a surplus lines carrier. When the policy was renewed, the surplus lines carrier had lowered the property damage limits on the CGL policy from $2mil to $1mil. Although the MGA had sent an advisory note with the renewal package advising that coverage may be changed, and to look over the proposal before renewing the policy, no specific notice was given that the property damage limits had been lowered. The renewal quote clearly listed a reduced limit in liability for property damage. Since surplus lines carriers do not have to abide by any state guidelines that mandate a specific notice be given to insured when there is a reduction of coverage, the agent missed the reduction and renewed the policy. The actual policy was not received until after the underlying loss had occurred involving a loss to a building as a result of a pressure build-up in the sprinkler system, resulting in $1,000,000 damage to the building and over $10,000,000 damage to contents owned by tenants. One tenant claimed in excess of $10,000,000 for a new computer system that had to be replaced. The agency's client was a target defendant in the suits that were filed. Utilizing the $1,000,000 that was available under the surplus lines CGL policy, the agency's client was released from the suit for $2,000,000. The agent's share was $1,000,000.

Commercial Liability: In this E&O claim, the agent allowed a restaurant's liquor liability coverage to lapse for a 3-day period.The prior liquor liability carrier had decided to non-renew the coverage, and the managing general agent, through which the coverage was procured, gave the insured agency 60 days notice to find another carrier. The agency secured an application for a new carrier for the client from the managing general agent, gave it to the client, and received it back from the client two weeks prior to the non-renewal date. There were conflicting stories as to whether or not the application was ever sent back to the managing general agent. The agent says it was sent, and the managing general agent said it was never received. When the agent received the cancellation notice the day after the cancellation date, the agent called the managing general agent and discovered the new application was never received. Coverage with the new carrier was then put into place, but there was a 3-day gap in coverage. During the period in question, a patron of the client became intoxicated and several hours later the patron struck and killed a pedestrian, a young mother with 3 children. The client and another bar/restaurant were sued. The other restaurant settled, as did the auto carrier, leaving the agency's client as the sole defendant. Utica provided a defense for the client restaurant and eventually settled the claim for $200,000.

Commercial Property: This claim involves the agency sending a renewal premium for a property policy to the wrong carrier, causing the policy to lapse. Unfortunately the lapse was not discovered until a fire occurred, causing damages of $352,000. Following legal research into the issue, it was determined that the insured was primarily responsible, not the bank or the carrier.

Commercial Property: In this E&O claim, the agent failed to replace business property of others coverage under a CPP when the coverage was moved from one carrier to another. The agency's client was a contract packager of beauty products, and at any given time was in custody of their client's products, which they would repackage for a fee. A theft occurred, resulting in the loss of the customer products. A claim was submitted to the current carrier, which had very limited coverage for items in the care, custody and control of the agency's client. The prior policy had full coverage for items in the client's custody. Using an offset for what was paid by the current carrier, the loss was settled for $120,000.

Homeowners: In this E&O claim, the agency procured Homeowners coverage for the client through the Fair Plan in the amount of $240,000, the amount requested by the client. During the first policy term, the client asked the agent to increase the limits to $400,000. The agency submitted the change request to the Plan on the wrong form, and the Plan returned the form to the agent with instructions to re-submit on the correct form. The agent dropped the ball, and the change request never went through. The policy renewed several times without either the agent or the client noticing the limits had not changed. A fire occurred, causing approx. $400,000 in damages and a claim was submitted for the difference in limits for both the structure and loss of rents. Although Utica contended that there was comparative negligence on the client for failing to read his policy, the bulk of the liability rested with the agent. The loss of rents claim was settled for $14,700; the remaining portion of the claim was $160,000 for the structure. Utica argued comparative negligence, took a premium offset and settled that portion of the claim for $110,000.

Homeowners: In this E&O claim, the agency switched policies on renewal covering an expensive home for the client. The old policy had a guaranteed replacement cost provision, and the new policy had restrictions on guaranteed replacement cost. The amount of coverage sought by the agent was determined by the agent's use of outdated estimator software, and insufficient coverage was placed. Following a fire, it was determined that the shortfall between what the client can collect under the new policy compared to the old policy was in the range of $357,000 and $407,000. The loss was settled for $270,000.

Professional Liability: In this E&O claim, the agency failed to replace coverage for a nursing home, resulting on the nursing home going without coverage for 9 months (the previous carrier had sent a non-renewal notice). During the period in which the client was without coverage, a loss occurred involving a resident of the nursing home. An elderly patient was burned badly in her bed, and a claim was made against the home. An investigation revealed the patient may have been partially responsible due to smoking in bed. The claim against the agent was settled for $50,000.

Various Coverage: In this claim, the insured while acting as a managing general agent agreed to let a client's broker collect premiums for a carrier when the duty to collect premiums was restricted to the insured. The broker committed fraud by sending in requests to three different premium finance companies for premiums for coverages (CPP, Commercial Auto, CGL) that had already been paid previously. The additional monies sent to the broker from the premium finance companies were pocketed by the broker. The broker is now bankrupt, and the three finance companies looked to our insured for payment as they were out over $692,000. The case was settled for $330,000.

Workers Compensation: In this E&O claim, the agent let a client's worker's compensation coverage lapse, even though the client (a subcontractor) had given the agency a check for the premium. This caused the general contractor's insurance rates to increase, as the laws of that state mandate if a subcontractor has no coverage, the general contractor becomes responsible for worker's compensation. The general contractor had to pay the additional costs for worker's compensation to cover the client's employees. A claim was made against the agency's client by the general contractor for the increased costs. In turn, the agency's client made a claim against the agent for failure to have the coverage in place. Following an audit of the general contractor's records, it was determined the loss was $132,540 to the general contractor. The claim against the agent was settled for that amount.