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Bulletproof Your Practice: Lawsuit Defense 101

Bulletproof Your Practice: Lawsuit Defense 101

Insurance agents and agencies are increasingly being targeted by trial lawyers with errors and omissions lawsuits – the financial equivalent of the malpractice claim. According to data from Demotech, Inc., 28.4 percent of sampled agencies reported having had an errors and omissions claim within the last five years – up from 22.8 percent of respondents the year before.

 Use your technology

If your agency or company provides you with an online tool to document client notes and contacts, use it. Religiously. Document every client contact and every action you take on the account. Even if you just field a quick phone call from the client, note that in your automation system. The automation has a number of benefits: First, it is nearly impossible for the notes to be altered after the fact, or by someone else. You will be able to prove the timeline to a jury in a court of law. Second, by documenting even minor contacts, you are demonstrating to any future auditor or plaintiff’s attorney that you are not careless, that you are diligent and thorough. This can go a long way to deterring a lawsuit

 Avoid jargon and abbreviations

 Remember that your client and account notes aren’t just for your benefit and they aren’t just for the benefit of other agents and your management team. Your notes are also there for the benefit of a future plaintiff’s attorney, judge and jury trying to figure out what happened – often years after the fact. If you add abbreviations and jargon, there is a chance your words and abbreviations won’t be interpreted the same way you meant them. Spell everything out.

 Compliance is your friend

 Yes, they can be a pain in the tail to a busy insurance producer – particularly a successful one. But the more successful you become as a producer, the more tempting a target you will become for trial lawyers. The more clients you bring on board, the more chances you have for something to go wrong, and to get hit with an errors and omissions suit. Good compliance professionals see it as their mission to keep you out of trouble – and they are constantly updating themselves on the latest trends and caselaw in the insurance and securities industry, and apprising themselves of the latest lessons learned. Don’t fight their expertise – put it to use. Make your files available. Ask for a courtesy visit and file inspection. If you have support staff, involve them in the file auditing process. Remember – your staff’s attitude towards compliance will mirror yours. If they see you treating compliance as an afterthought, they will reflect your priorities. If they see you taking compliance seriously, they will take it seriously themselves – even when you are out of the office bringing in new business.

 Receipts Matter

 Don’t skimp when it comes to important correspondence. The last thing you want is to be sued for failing to notify a client of an impending renewal or policy change or lapse when the letters you sent them are sitting in their circular file–and you can’t prove it! If you can’t make a personal visit, invest in a certified letter with a return receipt. This is particularly important for impending lapses and coverage changes. Your clients will appreciate the extra effort – and the receipt in your files will be creating a powerful deterrent and defense in the event of a lawsuit.


About Jason Van Steenwyk

Jason Van Steenwyk
Jason Van Steenwyk has been writing professionally about personal finance and investments since 1999. He first learned the trade as a staff reporter with Mutual Funds Magazine, part of the FORTUNE Group of magazines at Time, Inc. While there, he also served as managing editor of Investors’ Digest, a monthly compilation of the best in investment newsletter writing, published by the Institute for Econometric Research. He was also a contributing editor to Market Logic, Income Fund Outlook, Mutual Fund Buyers Guide and The Insiders. He holds a life and health license in Florida, (inactive). In addition to his work for Mutual Funds, Jason has published feature articles in many financial consumer and trade publications, including Wealth and Retirement Planner, Registered Representative, Annuity Selling Guide,, Senior Market Advisor, and and many more. Jason is a full-time freelance writer and editor, an avid guitarist and fiddle player. He currently receives no sales or production-based compensation from any insurance or financial services company. Jason lives in Fort Lauderdale, Florida.

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