E&O Prevention
Strategies for the Professional Agent
January 28, 2016

Agents of America


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AOA News, Views, Tips & More

By Joseph L. Petrelli, ACAS, ASA, MAAA, FCA, President, Demotech, Inc.

You read about or watch the insurance news and see mega-billion dollar, international insurance transactions such as Exor SpA buying PartnerRe Ltd for nearly $7 billion and ACE Limited completing a nearly $30 billion deal for The Chubb Corporation. You find it tough to wrap your mind around that type and size of transaction because you are used to losing a $3,000 account because the competition quoted a premium of $2,750 and your underwriter would not match it. Take heart and read on as I respectfully and confidently submit to you that the headlines can be deceptive. Today is a great day to be an independent producer.

By Donald A. O'Brien, Esq. of Hinshaw & Culbertson LLP

First Chicago Insurance Company v. Molda, No. 1-14-0548 (Ill. App. 1st Dist. June 26, 2015)

Defendant Molda was a salesman for the insured, Metrolift, when he had a collision while driving a noncompany-owned automobile on August 17, 2005 with plaintiff Wilson. Molda had his own automobile insurance, and proceeded to give notice of the accident to both his insurer and Metrolift.

By Thomas Paschos, Esq. of Thomas Paschos & Associates, P.C.

In  Faush v. Tuesday Morning , 2015 U.S.App.LEXIS 19977 (3d. Cir. Pa. November 18, 2015), Matthew Faush, an African American was an employee of Labor Ready, a staffing company that provides temporary employees to clients, including Tuesday Morning, Inc. Faush was sent by Labor Ready to work at a new Tuesday Morning store.

Faush claimed that he and fellow African-American employees were subject to racial slurs and discriminatory treatment by staff at Tuesday Morning.

By Seth L. Laver, Esq., Jennifer M. Mannion, Esq. and Eric S. Cohen, Esq. of Goldberg Segalla

Insurers are entitled to make decisions as to the professionals they will insure and the terms of the relationship. To that end, insurers expend considerable energy evaluating risks and assessing the likelihood of a potential claim. The scope of underwriting and the key metrics may vary from carrier to carrier but without exception each insurer relies upon some form of insurance application. Insurers are entitled to rely upon the representations of their applicants and, when faced with a misrepresentation in an insurance application, have the right to deny coverage. Accordingly, we've cited previous examples of applicants caught in a lie in their insurance applications. Don't do it. Consider another recent example.

By Danielle Feldman, Esq. of Tressler LLP

Personal injury protection (PIP) class action claims were related to claims made outside the policy period, rejecting arguments that prior "plain vanilla" PIP demands were separate and distinct from later class actions. Direct General Ins. Co. v. Houston Cas. Co. and National Specialty Ins. Co ., Case No. 14-20050-CIV-COOKE/TORRES, 2015 WL 6160361 (S.D. Fla. September 30, 2015).

Direct General Insurance Company (Direct General) issued automobile insurance policies that provided PIP benefits required under Florida statute. Direct General was sued by plaintiffs alleging that it used an incorrect methodology to determine recovery for PIP claims. The suits against Direct General fit into three categories: (1) a class action filed in October 2008; (2) a class action filed in September 2012; and (3) individual claims numbering more than 70,000, the earliest of which was dated April 3, 2008.

By Jason C. Gavejian, Esq. of Jackson Lewis P.C.
You've spent extensive time and effort, not to mention money, establishing your company's reputation only to have the company defamed or disparaged anonymously online. This is a scenario which many organizations face in today's virtual marketplace. As a recent decision by the Delaware Superior Court illustrates, dealing with these types of issues is often difficult and complicated, especially from a legal perspective.

By Lalit K. Loomba, Esq. of Wilson Elser
The past several years have seen a slew of high-profile excessive force cases, often highlighted by cell phone or dash-cam video. These cases have placed increasing pressure on local police departments, which continue to struggle with balancing the public interest in community safety against the individual rights of suspects on the street. At the highest level of the legal landscape, however, the United States Supreme Court recently issued a decision favorable to police officers that arguably expands the qualified immunity defense, at least in certain kinds of deadly force cases.

By Robert Tugander, Esq. of Rivkin Radler LLP

The U.S. Court of Appeals for the Ninth Circuit, affirming a decision by the U.S. District Court for the Central District of California, has ruled that insurance companies had no duty to defend the insured against claims that it had violated a California privacy law.

By Marc Zimet, Esq. of Jampol Zimet LLP

On June 12, 2014 the California Supreme Court decided what constitutes disparagement under a commercial general liability policy in Hartford Casualty Insurance v. Swift Distribution, Inc. Its findings clarify what constitutes disparagement within the meaning of an insurance policy, as well as when an insurer's duty to defend is triggered. 

By Allison Livezey, Esq. of Marshall Dennehey Warner Coleman & Goggin, P.C.

FTC v. Wyndham Worldwide Corp., 2015 U.S. App. LEXIS 14839 (3d. Cir. Aug. 24, 2015)

In this matter, the Third Circuit found that the FTC has authority to regulate cyber security as "unfair" practices under Section 45(a) of the Federal Trade Commission Act (Section 45(a)). The defendant, a hotel chain, experienced cyber security breaches on three separate occasions, exposing hundreds of thousands of consumers' personal and financial information to hackers. As a result, the FTC filed a lawsuit in District Court against the defendant, alleging the defendant's conduct related to its lack of cyber security protection was an "unfair" practice under Section 45(a).

Letter From  the Publisher
Protecting Your Reputation

As every Insurance Agent knows, their most important asset is their reputation, it takes years to build and just one mistake to ruin. Understanding the issues is the first steps in avoiding E&O Claims. AOA has created a three book series dealing with 56 different E&O topics and issues agents face every day. Enter promo code
WPD20 at checkout for an additional 20% discount.

Book One - 
A Comprehensive Guide To Avoiding E & O Claims
Book Two - 
E&O Exposures in the Sales Process

Book Three - 
E & O Exposures By Line of Business

Demotech, Inc.
Since 1985, Demotech, Inc. has served the insurance industry by assigning accurate, reliable and proven Financial Stability RatingsĀ® (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer.  You can search the most current FSRs  here .
Do You Need Continuing Education?
Complete your entire  State-Required CE Online with WebCE!   AOA has partnered with WebCE, a leading nationwide provider of Continuing Education for insurance professionals to provide you with state-approved self-study CE courses to satisfy your CE requirements online!  Check out your  CE State Requirements.  

Is Your Insurance License Renewing Soon?
Is your agency licensed in multiple states? Does your agency maintain nonresident licenses? Do you know when renewals are due? Did you know a resident change requires address changes in the states in which an individual holds licenses? If you need assistance with any of your licensing needs go to the experts Supportive Insurance Services.

Excess & Surplus Lines Laws
We are happy to provide the 2015 Edition of Locke Lord LLP's Excess and Surplus Lines Law Manual.

This edition reflects all of the pertinent changes in the surplus lines laws and regulations of the 50 states and U.S. territories during the past year. We sincerely trust you will find this manual to be a valuable desk reference and if you have any questions regarding the contents, please contact John P. Dearie, Jr., Esq. Editor and Partner at Locke Lord LLP at jack.dearie@lockelord.com or (212) 912-2737
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-- Ronald Reagan (1986)
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