An agent wrote a commercial property policy with a Special Causes of Loss form attached. That is, the agent thought the attached perils form was the ISO Special Causes of Loss which includes theft. Actually, the form attached was a “Special Excluding Theft” form. Neither the customer nor anyone in the agency noticed. According to the agent:
“[N]o one identified that there was no coverage for theft. I depend on the brokerage to make us aware of any major exclusion since they are the ones dealing with the carriers directly. They know the products we sell for them.”
In my book “When Words Collide: Resolving Insurance Coverage and Claims Disputes,” I discuss at least seven reasons why the best way to resolve a claim dispute is to PREVENT one from happening. One of those reasons (aside from the obvious role of the RTFP! Doctrine) involves the risk identification and insuring process. Specifically, 3 sources of coverage gaps that lead to disputes are:
- Failure to identify exposures
- Failure to insure known exposures
- Failure to QC policy deliverables
Apparently, the agent was well aware of the theft exposure, so #1 is OK. However, the agency failed to make it clear that theft coverage was essential, so #2 was the initial source of the lack of coverage. But #3 is just as critical. When reviewing policy deliverables, you certainly want to make sure that everything you asked for is there, but just as important, you want to check for policy forms the insurer includes that you did NOT ask for. You can be assured that they are ALWAYS there.
Sometimes limiting or exclusionary forms are required by the commercial lines manual or underwriting guidelines (e.g., some CG 21 xx endorsements). Even when mandated for automatic inclusion, they may be removable, at least for an additional premium. Also, some of these forms may be attached at the underwriter’s discretion and, for the right agent or argument, might be removed. It’s incumbent upon the agent to identify such policy forms and take the indicated action to have them removed or otherwise advise the customer of their existence.
Perhaps the broker or underwriter share some of the blame, but often the E&O buck stops at the agent’s desk.