Insurance agencies fill a niche in the industry, bridging the gap between underwriters and consumers. But they face some dangers in that niche. Liability considerations for insurance agencies include the obvious business owner’s protection, as well as errors and omissions coverage.
Business owner’s protection insurance is exactly what it sounds like – coverage that protects a business owner against losses to his business. Coverage will vary according to policy, but generally you can expect it to cover you against financial loss that is out of your control, such as theft, fire and acts of God. It will also usually encompass your worker’s compensation insurance, so that employees that are injured while on the job are protected in regard to cost, and your agency is protected against liability.
Errors and omissions coverage is that coverage which seeks to protect the insured against his own neglect in his duties. Some courts have ruled that insurance brokers and agents have a duty of care in regard to their clients. That duty of care can include such tasks as filling out applications for coverage from an underwriter, advising them on the specific riders and clauses necessary to obtain the coverage they seek, and even finding the best rate for the coverage in question. If a broker or agency should fail to provide the proper care of their clients, they can be held liable in a court of law for that failure. For example, improperly completing an application for coverage could result in inadequate insurance to cover the risks present. Errors and omissions coverage for the agent will protect the agent against any penalties assessed by the judicial system in that scenario.
These are just a few of the liability considerations for insurance agencies. Others may exist depending upon the nature of your business. Examining your business from an insurance agents perspective may help you to define other areas of risk.