On June 6^th, the annual errors and omissions telecast seminar was presented live from Hudson Valley Community College in Troy and transmitted to 6 remote locations across New York State; the telecast seminar was also transmitted via the internet for agents and brokers to watch on their computers. This year, over 600 insurance agents and brokers attended the telecast seminar either by watching it live in Troy, watching it at one of the 6 remote locations, or watching it on their computers. During the telecast seminar, we received a large number of questions from the attendees. Since we were unable to answer all of the questions submitted during the telecast seminar, we will devote this issue of The E&O Report to respond to some of the unanswered questions we received.

A question submitted by an attendee asked the following:

Question: You mentioned that the family of a producer who dies can receive commissions for policies that the producer placed while he/she was alive. Are you saying that the agency is required by law to continue to pay these commissions or is it by agreement that the commissions could be paid? Can you please clarify this?

As mentioned during the seminar, New York law allows for commissions to be paid to the unlicensed representative of the estate of a deceased producer for policies that they sold during their lifetime. The unlicensed representative of the estate of a deceased producer can continue to receive commissions even though the estate representative will not be soliciting, negotiating, or selling insurance contracts or acting as an insurance agent or producer. If an endorsement or policy change is made to an existing policy sold by a deceased producer, the estate representative may continue to receive the commissions on that policy. However, if a different insurance policy is sold to the customer of the deceased producer, then no commissions may be paid to the estate in connection with that policy.

While the above mentioned exception to the New York licensing law allows for the commissions to be paid to the estate of a deceased producer, there is no requirement under New York Law that the commissions must continue to be paid to the estate of a deceased producer. The continued payment of commissions would depend on whether there was an agreement in effect with either the agency or brokerage that the producer worked with during their lifetime, or another agency or brokerage that purchased the deceased producer's business.       

Another question submitted by an attendee asked the following:

Question: I communicate with some of my customers by text messages. How should I deal with saving these text messages as a form of documentation?

As we all know, a great deal of communication that agencies and brokerage have with insureds and insurers is through e-mail. Very often e-mail communication is important documentation needed to defend against an E&O claim or lawsuit. It is for this reason that we suggest that agencies and brokerages have a procedure in effect whereby employees save all e-mails that pertain in any way to coverage or claims. Although not as common as email, text messages are also increasing in popularity as a way for agents and brokers to communicate with their customers.

Text messages present a different issue, since they are not easily printed or saved to a customer's electronic file within the agency management system. Accordingly, one recommendation that we have concerning text messages is as follows: if a producer or another employee of an agency or brokerage sends or receives a text message, they should create a corresponding note or activity within the agency management system to document the content of that text message. The note or activity should contain the language of the text massage as well as any action that the agency may take in connection with the message.  Another way to deal with a text message is to email a copy of the message to yourself and then save that email in the customer file within the agency management system. By doing so, the agency will have the documentation that it needs to defend against a potential E&O claim or lawsuit that may arise.

Another question submitted by an attendee asked the following:

Question: What should we do if we have companies that only send us electronic copies of insurance policies but a customer is not willing to accept anything other than a paper copy of their insurance policy?

This question was addressed by the NYDFS in an Office of General Counsel Opinion issued on August 7, 2009. In that opinion, the NYDFS said as follows: If delivery of an insurance policy is required, the insurer, as the party in privity with the insured, is obligated to deliver the policy to the insured. However, nothing in the New York insurance law or regulations prohibit the insurance company from delegating to an insurance agent or broker the task of delivering the policy to the insured. But, even if the insurer sends the insurance policy to the insurance producer electronically, the insurance producer may not electronically forward the insurance policy to the customer unless the insured first consents to receive the policy in that format. If the insured refuses to accept the policy electronically, the insurance producer must provide the insured with a paper copy of the insurance policy.  

 Conclusion

The number of questions we received during this year's Big I NY telecast E&O Loss Control seminar indicate that the attendees are aware of the importance of using good E&O Loss Control practices in their agencies and brokerages, and they are thinking about how to avoid potential problems from occurring. In our experience, an agency or brokerage that consistently practices good E&O Loss Control techniques may substantially reduce the likelihood that it will become involved in an E&O claim or lawsuit. As we have said over the years, one of the most effective ways to promote E & O Loss Control is through education. Therefore, it is our hope that, in addition to attending the annual Loss Control Seminar, agencies and brokerages will encourage E&O education and awareness for all of their employees on a regular basis.

Submitted by:

 James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP