Errors and Omissions Coverage- Guest Bloggers- Dale Moore and Michael Hale for CPLIC

February 8, 2008

We’d like to thank Dale Moore, Client Relations Director and Michael Hale, President of CPLIC at www.cplic.net for providing answers to initial E & O questions posed by members at ClaimSmentor which we share with our blog readers as well today. Please feel free to pose additional questions in reply to this blog posting and we’ll get Dale to answer them in reply to this guest blog entry!

1)    Question:  Is Errors and Omissions (E & O) occurrence based?  Does it only cover what happens during the policy period?

Answer:  A few companies do offer E & O on an occurrence form but most professional liability insurance, of which E & O is a part, is written on a claims made basis and has been since around 1985.  On a claims made policy you can purchase retrospective coverage back for as long as you have been continuously insured.  Since this cost money you should look at the statue of limitations where you do your work and buy what you need.  Then as long as the inspection that you made or the event occurs that brings about a claim is within the retrospective period and you report to your carrier as soon as the claim is made against you, coverage at the time of your report would apply.

 2)    Question:  How long should the policy be kept in effect to cover one?

Answer:  The coverage should be in effect when you first start handling claims and should remain in effect by annual renewals until you retire or leave the business.  Most companies will offer you a one, two or three year extended reporting period after you cease handling claims for any reason which will apply to any claims brought against you during that time as long as the error occurred before you elected to start that extension. 

3)    Question:  What are the normal limits of Liability?

Answer:  Most companies offer limits from $500,000 to $5,000,000.  Most adjusters buy limits that are required by their clients as they do not have those size assets to protect. 

4)    Question:  What are minimum and maximum limits?

Answer:  A few companies will insure you for limits lower than $500,000, say $100,000 or $250,000 but not many above $5,000,000.  To obtain limits above you would buy an excess policy. 

5)    Question:  Do the different states regulate E & O?

Answer:  If you insure with a traditional insurance company that is admitted in the state that you do business then your state would regulate that insurance company.  Increasingly, adjusters are choosing to belong to and be insured by the only Risk Retention Group specifically created for adjusters. As a Risk Retention Group it is regulated by the state of domicile and registered in all other states. 

6)    Question:  What are the policies for Florida?

Answer:  Many of the traditional insurance companies would use the ISO forms to support their policies.  Some of the surplus lines companies may use some type of manuscript.  Claim Professionals Liability Insurance Company, RRG uses a manuscript policy written specifically for independent claim professionals and it may be viewed at www.cplic.net by clicking on the bar for policy.

 7)    Question:  If I already have E & O and work a storm for a company that offers E & O, what happens then?

Answer:  Your E & O is to protect you.  The company you are working for may also have a program that will protect you but you will have to see and read their actual policy to be sure.  However, their policy would not normally protect you from claims brought by them against you.  You are always better protected to have coverage specifically in your name.

 8)    Question:  Are attorney fees and court costs covered by E & O?

Answer:  A primary policy would cover defense costs if the claim against you is covered.  Defense costs would include both.

 9)    Question:  Are costs to travel to a different jurisdiction for depositions or court appearances covered?

Answer:  When your insurance company instructs you to travel that cost is generally covered; however, your lost income is not generally covered.  You will have to look at the specific language to be sure.  

10)    Question:  Is E & O higher when you are new and does it go down with experience?     

Answer:  The basis for charging for the coverage is generally the revenue you produce.  Therefore, your premium will generally increase as you become more productive.

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Note that we also think this article  from Sept 2007 which includes quotes by another CPLIC representative to be excellent info on E and O as well over at the Roughnotes.com site:

http://www.roughnotes.com/imp_cybercast/Archives/v004_September2007/index.htm

Direct contact information for Dale if you are more comfortable directly contacting them is: 

 

Dale Moore, CIC
Director Client Services
CPLIC, RRG & Carter Claims
17742 Irvine Blvd., Ste 102
Tustin, CA 92780
Tel: 877-572-7542
Fax: 714-731-4605
www.cplic.net
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CPLIC is endorsed by both the National Assn of Independent Insurance Adjusters (NAIIA) and the National Assn of Catastrophe Adjusters (NACA) based on information on both of their websites.
There is also informative information found on the Claim Professional Liability Insurance Company (CPLIC) website.
Here is also a link to their E & O survey application form found on their website.
http://www.cplic.net/Short_App.pdf
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Again, feel free to post your additional questions on E & O by replying below or in the ongoing topic at ClaimSmentor for replies by CPLIC. We’ll be sure to get the links to your additional questions to them for a response.
I’ll start off the first additional questions I’ve recently received below:
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1) What should an adjuster ask the adjusting firm for IF they are going to use their E & O carrier for coverage? At minimum, I would think they should get the carrier appropriate information such as policy number and limits and contact information. How about the coverage forms? Do you know if this is normally supplied by the Adjusting firms?
2) You mentioned the limits available. What do you recommend as a minimum for adjusters?
3) Is it hard for a new adjuster to be approved with no experience for E & O coverage?
4) What are some of the common reasons for claims…i.e..mistakes of adjusters/adjusting firms that bring forth claims under their policies?
5) Do attorney fees/ court costs mentioned in your Q & A reduce the E & O limits to pay a claim?
6) What are common exclusions on an E & O policy and typical reasons besides non payment for cancellation of an E & O policy?
7) Do needs differ for catastrophe adjusters who travel nationwide vs a daily adjuster working claims in a fixed territory?
8) Given the large number of adjusters named in lawsuits after Katrina, have you seen a large increase in E & O claims since 05 creating a need for higher limits and a definite higher priority that adjusters carry their own individual E & O policy?
9) If an adjuster does carry their own E & O policy and they are covered on an adjusting firms E &O, what is a typical “other” insurance clause as to which policy would be primary?
10) Should an adjuster work claims for multiple adjusting firms, would that change their coverage needs?
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Stayed tuned for E & O Part II when we get responses to the 10 new questions we’ve received!

 

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McKinsey Allstate Documents continue to be requested…why did FL Ins Comm McCarty want them in 2008?

February 8, 2008

 Why are we still talking about the McKinsey documents prepared for Allstate back in 1995?

Adjusters need to stay abreast of current issues in the news as issues such as these are constantly in the news and insureds, public adjusters, and attorneys constantly bring up these issues while you are out there in the field handling claims. You need to understand these hot topics to deal with the constant comments from the public. As staff employees, it’s amazing how little the insiders handling these claims are told about what is going on. A typical scenario might involve a very brief “talking points” type corporate email advising of an upcoming press release so they can be prepared for questions a day or moments before the press release goes out but day-to- day, claims folks hear very little about ongoing current litigation on files. The internet has done much- especially with blogs and forums- to reveal court documents and news articles we rarely would have seen years ago at the regional claim management or adjuster level. Even today, speaking with former co-workers/management associates and adjusters alike, I’m amazed that they are not aware of current issues at all in many cases. If it is this difficult for staff claim employees to know, how are independent adjusters to be aware of current issues they will have thrown at them in the field?

Checking regularly the websites of many independent adjusting firms, they may have news reels going to some of the major news sites but rarely is anything published on their websites with details and court documents,etc… I continue to be amazed at the lack of information available for adjusters and try to provide links to important documents that they would care to know about if they had the time to do all of this constant research. How are adjusters to improve their claim file quality without a better understanding of what is happening in claim litigation? There is much to be desired about the current events education needed for insurance adjusters and claim managers out here. The majority of court documents on high profile claim lawsuits these days is coming from blogs and the press articles covering some of the major issues, not from the carriers or in claim training classes independents are attending.

If you are not familiar with the Allstate McKinsey documents issues, here are links to some links to many summaries by various law firms that explain them to bring you up to speed on the issue. They have even been the subject of a book as Merlin’s blog points out.

Although these documents were allegedly produced by McKinsey for Allstate back in 1995- they continue to come up repeatedly in lawsuits involving claims for Allstate and most recently that I am aware of during the FL Insurance carrier rate hearings in January and February of 2008. I find this particularly interesting that Fl Insurance Commissioner Kevin McCarty jumps right into asking Allstate during the rate hearing atleast 3 times if I count correctly about production of the McKinsey documents. Recent news stories indicate that Allstate has begun to produce them. Allstate during the hearing- prior to production (if they have in fact supplied them or in the process of doing so) was looking for assurances they would not be turned over into others hands. When you read the link below to the hearing transcript, note where McCarty seems to be using the fact Allstate is being fined by the MO Insurance Dept for not turning over the documents….seems to me he was using that fact as an example of why he thought Allstate was delaying submitting documents to the FL committee?

I’m curious about this since McCarty has now been named as the 2008 Committee chair for the Property and Casualty committee for the National Association of Insurance Commissioners (NAIC). I’ve written to Attorney David Rossmiller who had previously written three blog entries over on his blog to see if he can provide some opinion as to why these are being requested at the rate hearing. From reading the January and February 2008 blogs over at the Merlin Law Group blog, it possibly has to do with asking for higher rates after allegedly low balling claim settlements. Is it more to do with the fact he is over the Property committee for NAIC? You review these current activities and you decide. Personally, I think that they will become subject of even more Insurance Dept inquiries with McCarty’s new position. They are the subject of inquiries in NM, KY, MO, CO, and FL in recent years also though either lawsuits on claim files or insurance department inquiries. To anyone in claims- especially catastrophe adjusters- asking for 10 year old plus documents is inconceivable when you consider that things on catastrophe assignments can change as often as hourly as far as carrier guidelines for adjusters. Your lucky if your closed file can hit the closed basket and management review before estimating or file handling guidelines have changed!

Should Rossmiller find time to review the links I sent him and provide some clarity to the recent activities, I’ll provide an update and link to the new blog as an update to this topic.

According to this Merlin Law Group article, Allstate is paying fines in MO and CO for NOT turning over the McKinsey group documents for a substantial amount of fines:

http://merlinlawgroup.wordpress.com/2008/01/19/states-seek-mckinsey-reports/

Merlin also wrote two other recent blogs on the McKinsey reports and the hearing here:

http://merlinlawgroup.wordpress.com/2008/01/23/66/

http://merlinlawgroup.wordpress.com/2008/02/04/allstate-testifies-today/

Regarding the NAIC committee, here is the NAIC press release on McCarty and other committee chair announcements:

http://www.naic.org/Releases/2008_docs/2008_committee_leadership.htm

Here is a recent blog from the Charlotte Injury board reporting that Allstate is now producing the McKinsey documents to the Florida rate review committee:

http://http://charlottesville.injuryboard.com/defective-products/allstate-finally-begins-handing-over-important-mckinsey-documents-to-florida.php?googleid=14809

In this 2007 case in KY, Rossmiller writes about Allstate’s win in this case that involved the McKinsey documents:

http://www.insurancecoverageblog.com/archives/bad-faith-mckinsey-documents-smoking-gun-or-blowing-smoke.html  

Here us a link to Rossmiller’s list of McKinsey document blogs:

http://www.insurancecoverageblog.com/admin/search?IncludeBlogs=20&search=McKinsey+documents&Search.x=13&Search.y=4

Here is the link to the FL Allstate rate hearing transcript (initial hearing that drove McCarty to trying to suspend Allstates writing of new business):

http://www.flsenate.gov/data/committees/Senate/meeting_packets/spa.pdf

Thus far, the FL Senate recommendations have not again mentioned the McKinsey documents and I have not seen a link to the 2nd Allstate hearing this past Monday and will post when I do locate it on one of the blogs if it again brings up the McKinsey documents they were to produce like the first hearing did.

I expect we’ll be hearing much more this year in new cases about requests for the documents in spite of the KY win for Allstate linked to above.

So….what are your thoughts on the McCarty connection and request during the hearing? Interesting to say the least!