An insurance agent wrote a large life insurance policy for a 40 year old client who also requested a premium waiver in case of future disability. Although the agent advised the client that the rider containing the waiver would be issued with the policy, the policy was issued without the rider and neither the agent nor the client reviewed it when received. Years later, the client was injured in an industrial accident and became totally disabled. The client notified the life carrier that he was unable to pay his premium due to inability to work and requested a premium waiver. The carrier responded that the policy had no such rider and the policy ultimately lapsed due to non-payment of premium. Shortly thereafter the client died and his heirs filed a death claim with the life insurer, which was denied. The heirs thereupon filed suit against the agent and carrier claiming breach of contract, bad faith, misrepresentation, and negligence. The agent defended on the basis that the client never requested a premium waiver, and the heirs claimed that the decedent not only requested the waiver but always acted in accord with his belief that he had one. Due to the lack of documentation in the client file, the agent’s E&O carrier settled the claim.
Loss Prevention Tips:
Failure to maintain proper documentation always puts agents at risk in the event of a claim. Good documentation is your first and best line of defense to any client claim. Use care in explaining the terms of any coverages purchased to your clients, especially coverage exclusions. At the end of the meeting, confirm with the client exactly what he bought, and always document in writing any coverage requests and / or declinations of important coverages or limits by clients with copies delivered to the client and filed in the client file. All binders should be issued in triplicate with the original copy sent to the insured, a copy to the company and a copy to the client file. At delivery, review the policy terms and confirm in writing with the client that they reflect the coverage sought by him. Proper documentation allows client disputes to be addressed quickly, calmly and effectively with minimal negative impact on time, costs, reputations and relationships.
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