| October 2014 |
Volume 26, Number 11 |
A Few Things We Learned 2 Years after Superstorm Sandy This month marks the two-year anniversary of Superstorm Sandy. As a result of that devastating event, many New York insurance agencies and brokerages reacted by changing certain aspects of how they conduct business. In this issue of The E&O Report, we discuss a few steps every insurance agency or brokerage should take in preparing for another potential catastrophic event. Although most insureds in New York affected by Superstorm Sandy were located near the coastline, the points discussed below apply across the board. So whether your agency or brokerage is located in Montauk, Plattsburgh, Binghamton, Buffalo or somewhere between, they pertain to you.
First, we discovered a large number of Sandy-related errors and omissions claims and lawsuits were filed by customers suffering a flood loss but had no flood insurance in effect at the time of the storm. As a result of this type of claim, many New York insurance agencies and brokerages have adopted a procedure whereby every customer is offered the option of purchasing flood insurance. Since most customers will usually opt against purchasing flood coverage, it is a good practice for the agency or brokerage to document the customer’s rejection of that coverage.
One of the best ways to do so is to use the ACORD 60 Flood Acceptance/Rejection form. The ACORD 60 form should be completed by the customer, indicating that the coverage is either accepted or rejected; and it should also be signed and dated by the customer. An added benefit of using the ACORD 60 Flood form is that it specifically states that once it is signed, it will apply to all future policy renewals. By adopting a practice where the option of purchasing flood coverage is offered to each customer and the ACORD 60 is then completed for every customer, insurance agencies and brokerages will help protect themselves from potential E&O claims or lawsuits if a customer sustains a loss due to an uncovered flood claim. There’s another lesson many insurance agencies and brokerages learned from Superstorm Sandy. Only as a result of the storm, many customers discovered they had insufficient coverage, inadequate coverage limits or did not fully understand their deductibles. Now, many agencies and brokerages use Sandy’s aftermath as a learning tool for their customers. For instance, when discussing coverage, a good practice is to walk the customer through their insurance coverage, limits and applicable deductibles in the event of a catastrophic event. This review is a good practice, whether it is a hurricane, ice storm, blizzard, fire or any other type of disaster. Agents and brokers following this practice tell us that it is a good way to help identify possible changes in coverage that need to be made in order to adequately insure the customer.
An additional lesson Sandy taught us is that every insurance agency or brokerage, no matter how large or small, should have a disaster plan in effect. Additionally, it should be known and understood by all employees. The first aspect of any disaster plan should be the duties and responsibilities of each employee if a catastrophic event occurs. A key element of any disaster plan is how the agency or brokerage can remotely access its data in the event its offices are not accessible or fully functioning. And, the agency or brokerage should also have the ability to forward its phone calls and email so communications with customers can continue despite the catastrophe. An agency or brokerage that plans ahead in this way will be able to continue to operate and assist customers in the crucial times immediately following a catastrophic event.
The prudent insurance agency or brokerage is the one that thinks well in advance of a catastrophic event. It should encourage its customers to do the same, so that both it and its customers are prepared when a catastrophe occurs. By doing so, the agency or brokerage will not only help protect itself from a potential E&O claim or lawsuit, it will also enhance customer service and, in the process, very often sell more insurance.
Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP
Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker’s errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island and Philadelphia, Pennsylvania.
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