In this second installment of a 3-part blog series, we explore a scenario in which an agent is seemingly caught between a disabled client and the issuer of a life policy. This situation further illustrates the importance of the protection provided to you by your E & O coverage.
E & O Claim 2: This claim was brought in relation to a total disability waiver of premium on a life policy. The agent sold the client a life policy in 1997. In 1999, the client purchased a disability insurance policy with the same insurance company. In 2001, the client became disabled, filed a claim and began collecting disability benefits. At the time he purchased the life insurance policy, he was informed by the agent that if he ever became permanently disabled, then the life insurance issuing company would waive the premiums on his life policy. The agent received an acceptance of the disability claim but may not have filed the proper forms for the premium waiver with the issuer of the life policy. Subsequently, the life insurance company contacted the agent and advised him that he was responsible for paying the 8 years of back premiums which should have been waived.
The agent provided the letter from the issuer to his E & O provider. The E & O company communicated with the life insurance issuer and showed that the client paid the premiums directly to the issuer and that it was the issuer’s responsibility to return the premiums. Since both the disability and life policies were with the same company, a strong argument can be made that the disability insurance claim adjuster should have verified if any other policies were held by the client. The issuer of the life policy agreed and no payment from the E & O policy was made.
While this case had many moving parts and may not be typical for holders of life or disability policies, it is an excellent example of how details that have fallen through the cracks, on the part of either the agent or the policy issuer, can result in an E & O claim.