The E&O scare: Three ways to reduce exposure at your brokerage


A mid-size brokerage had a longstanding commercial policy with an office maintenance and clean-up firm. The account was coming up for renewal just as the senior producer who handled the account was on a two-week vacation.

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The maintenance company informed a junior account manager, who was covering for the producer, that it was expanding its business into industrial cleaning, including some chemical and oil spill remediation.

Unfortunately, the junior account manager renewed the CGL coverage as is. He made notes from the call, and updated the Word document. However, he accidentally saved the new file to the wrong folder. So, when he sent the renewal request to the insurer, he unknowingly used the previous policy document, not the new one.

Two months later, the client was involved in a lawsuit for third-party environmental damage resulting from an oil spill that was not properly contained. It filed a claim under its CGL policy, but was informed that, due to a common pollution exclusion, the claim would be denied. The client sued the broker for failing to adequately identify and secure coverage for new exposures.

About one-fourth of E&O claims against brokers involve a renewal
  Swiss Re Corporate Solutions 

1. Create standardized workflows at your brokerage

When everyone is doing things the same way, every time, there is less room for error. First, think about the responsibilities of each staff profile: producer, account manager, CSR, marketer. Understanding what each role is expected to do is key.

Next, map out each significant process, step by step, within each role. Identify what the purpose of the step is, who is responsible, and what documents are required, if any.

For example, let’s take a producer meeting with a prospective restaurant client. The workflow could be as simple as this:

  • Print the brokerage’s restaurant questionnaire,
  • Complete the questionnaire on-site,
  • Take pictures of the restaurant, kitchen, & specialized equipment like the CO2 and sprinkler systems, and
  • Set meeting with the marketer to discuss completed questionnaire and hand-off files for quoting.

2. Create shared documents for your commercial lines team exclusively

Creating a library of shared documents codifies the “best practice” knowledge of your most senior, experienced staff. Having each staff member collect the same data for certain classes of risks, or ensure the proper coverages are included, is key to minimizing errors and omissions exposure. This ultimately helps protect the entire brokerage.

Some examples of shared documents you should produce include:

If you’re looking for documents to help get you started, contact us for sample copies of our submissions and proposals. You can use the samples to build out general templates for both.

3. Communicate commercial lines workflows until it becomes cultural

A solid, well-defined workflow in commercial lines leads to greatly improved protection against E&O exposure. But only if it’s followed religiously until it becomes a company-wide habit.

Appoint a champion (read more about what makes a good champion), or several champions, to spearhead the initiative. Send weekly emails to your team members reminding them why it’s important, what they can do, and how to do it. Hold lunch-and-learns about the different processes you have, and what’s expected of each person.

It is critical to get your processes and data under control so that all your employees handle business in a consistent way. Lack of communication is commonly cited as one of the primary causes for work-place problems. Don’t let it be the reason your processes fail.

No silver bullet

There is no silver bullet to protecting your brokerage against errors and omissions. Let’s face it: some risks come out of left field. But if you put the proper processes in place to standardize procedures and documents, you reduce your risk of exposure to an E&O situation. As every risk manager knows, an ounce of prevention is worth a pound of cure.

Become more efficient

Start with this book written by Sean Mulcair, Principal at Gradient Solutions. It provides a framework to help identify those inefficient, and costly, workflows.

Get the Book

Topics: Workflow, Best practices, E&O