Part 1 of 6: How a Conditional Receipt Could Have Saved the Day!

errors and omissions checklist: conditional receiptAs an insurance agent, you face the fear of having an errors and omissions claim being made against you on a daily basis.

Though, many agents will insist that they do everything by the book and have no possibility of an errors and omissions claim being made against them, the chances of being named in a lawsuit are still very much a reality. You should always conduct your business practices as a true professional and document all interactions with your clients and prospective clients.

A big part of knowing what mistakes to avoid when handling your clients insurance needs is to review errors and omissions claims that have been made against other insurance agents.

We will be presenting a 6 part blog series on claims scenario’s and provide some helpful information on how to avoid or mitigate such claims being made against you.


The agent assisted the client with applying for a $150,000 term life policy.  The client was not provided with a conditional receipt/binder. The agent gave the application to his assistant to be processed.  The client died several weeks later. His wife, who was intended as the policy’s beneficiary, submitted a claim under the policy.  The life insurer denied the beneficiary’s claim because it had no record of having approved and issued a policy to the agent’s client.

The spouse filed a lawsuit against the agent, alleging that he was negligent in failing to procure a life policy for her husband.  The agent then discovered that his assistant placed the original application in the client’s file.

There was no record of it having been submitted to the insurer. The assistant had no recollection of the client or his application.  The insurer submitted evidence, which established that it never received the application.

Evidence gathered in the lawsuit established that the agent was negligent in handling the client’s application, by failing to ensure that his assistant actually submitted it to the insurer.  The agent’s failure to provide the client with a conditional receipt/binder also prevented the claimant from having any recourse against the insurer.

Settlement was reached at any early stage of the litigation for $150,000, which was the full value of the policy that the client intended to procure.


Some loss prevention measures that could have been implemented to avoid this claim include: using a checklist to be certain that when an application is received, the agent and/or assistant is completing each task necessary to ensure the proper handling of the client application; review files handled by your assistants to be certain that all aspects of the file have been handled accordingly and make sure you have a consistent procedure for accepting checks with applications.

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