By Richard Giroux, Chartered Insurance Broker (C.I.B.)
Manager, RCCAQ Insurance
As an expert in the area of errors and omissions insurance for RCCAQ Insurance, I've noticed that the concept of E&O claims is not always crystal clear in policyholders' minds.
What we need to do is make a clear distinction between "claims" and "potential claims". The term "claim" means that a procedure has been set in motion. We may become aware of this via a notice of legal proceedings (or trial or subpoena) or via the submission of a payment/benefit request. In general, the entire process is documented.
It's actually the term "potential claim" that can lead to confusion. This means that the broker has been informed of a procedure, an event or the aftermath of an incident that has led to or could lead to the filing of a claim.
In other words, if any doubts come to mind while going over your client's file, that means it's time to stop, make the right decision and act accordingly.
A common error is to admit fault right away: it's may be good for the soul, but it's terrible for your insurance coverage.
In actual fact, most E&O insurance policies containing wording along the lines of "the Insured must not acknowledge any liability, nor must he or she make any voluntary settlements, incur any expenses or make any disbursements concerning a claim without the Insurer's written consent ".
In other words, there is a major difference between recognizing the existence of a problem and taking the blame for it!
So listen to your client, show empathy but be careful what you say. You can tell your client that you'll report the facts of the matter to your E&O insurer, but don't make any promises concerning potential outcomes, such as "If the insurer doesn't pay you, my E&O insurer will".
Of course, there are times when brokers should play a more active role in such situations, in particular by encouraging the insurer to cover the loss. But as soon as you are dealing with what looks like a claim or a potential claim, you are advised to seek guidance from your E&O insurer.
So be careful the next time you have to deal with a situation that could involve your personal liability. Always take precautions as a matter of course—that way, you'll avoid diving into the deep end of a tricky situation!
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