A Look Through the E&O Lens | Part 1

Magnifying Glass Over Contract PapersIt’s easy to look upon E & O insurance as simply a requirement for doing business in your agency, however, the reality behind E & O claims is complex and eye-opening. In a 3-part blog series, we’ll take a look at various scenarios which prove the criticality of E & O coverage. As an agent, your responsibilities are innumerable. This important protection eliminates some of the headaches that could pop up, no matter how diligent you are in your day-to-day dealings.


E & O Claim 1:  An agent was accused of recommending an improper life policy for her clients. The clients claimed that the agent convinced them to surrender their 10 year, $250,000 life policy, which they purchased in 2008. According to the clients, the agent replaced that policy with a Joint Last-to-Die contract that would not serve the needs of the family. The clients discovered that they would not have enough money to fund the premiums and purported that the agent convinced them to refinance their home and subsequently use $10,000 to fund the policy.


According to the agent, the Joint Last-to-Die Policy (JLTD) was part of a larger financial plan for the clients that included a permanent life policy. The agent initially recommended a Joint First-to-Die policy, however the insurer denied the application for reasons related to the wife. The insurer offered two alternatives: a single permanent life policy, or a JLTD with one life excluded. The clients accepted the JLTD and opted to review the account in one year. Ultimately, the clients were unhappy with the product and level of service. The matter was submitted to insurance and the E&O carrier worked with the life insurer to show that the client didn’t lose any money or value by choosing a JLTD policy. The investigation by the E & O carrier showed that the client was able to pay the premium and received the benefit of the insurance for one year. The clients’ claim was rejected and no payment was made to them.


Have you ever considered “buyer’s remorse” on the part of a client, or even a lack of full understanding regarding a policy as a matter that could trigger an E & O claim?  It is one of many reasons this coverage protects you and your business.

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