ACSR Errors & Omissions Test

unmodified forms format

"Copyright insurance Services Office, Inc."

Modified ISO forms

"Used with permision of insurance services office, inc"

4 reasons to avoid altering the forms on a cert

1. Alteration of forms may violate state regulation and may lead to loss of licensure and fines 2. May violate state form filing and approval laws. 3. may violate copyright restrictions. ACCORD forms are copyrighted 4. may violate the agency's appointment contract with the insurer.

5 Duties an Agent has to the Principal

1. Be loyal to the principal 2. Obey the Principals lawful instructions 3. Agent Must act as a reasonably prudent person would under the same similar circumstances. 4. The agent is responsible to the principal for all of the principal's money and property that comes into the agent's possession 5. Duty of Relaying information and keeping prinipal informed of all facts relating to the agency relationship

6 Common Causes of E&O Claims

1. Changes in Products 2. Customer Relationships 3. Company Relationships 4. Litigation to seek payment 5. Coverage Expectations 6. Insufficient Documentation

3 sources of E&O claims in the application process

1. Client not being paid a claim as a result of an application that wasnt properly filled out. This results in a claim that the agency failed to procure appropriate or adequate coverage for the applicant. 2. Insurer sues the agency if they have to pay a claim from a client they wouldnt have accepted it if the agent provided accurate information on the application 3. Other parties, who may seek compensation from agency when they suffer a loss through E&O in the application process. Forgetting to add a loss payee etc.

Once the proposal & quote is accepted by the insured, the CSR places the business with the insurance carrier. E&O claims may arise from 4 areas

1. Completing the application forms 2. Selecting the appropriate insurer 3. issuing an insurance binder 4. arranging premium financing

4 Typical Coverage Provisions typical to and agents E&O Policy

1. Coverage for claims arising out of negligence in the course of providing professional services. 2. Coverage for defense costs 3. Coverage for claims arising out of the negligent actions of employees, temp staff, or independent contractors performing professional services under direction of agent or broker 4. Coverage for personal injury claims- libel, slander, or invasion or privacy while providing professional services.

3 points addressed at the client review

1. Explains coverages in the policy, as well as differences from what was originally requested. Document this. 2. CSR offers available options such as new deductibles, limits and additional coverages. 3. Documents coverage and options that the client has rejected.

In the event of premium adjustment, the CSR generally follows these 4 guidelines

1. If the agency if responsible for determining final premium, verify and have approval from insurer before advising client of the actual adjustment 2. Advise ASAP that a premium will be due- even if you dont know the definite amount 3. Advise the client in writing of any premium adjustment along with the information used in calculating the final premium. 4. If there is an overpayment, return the refund promtly to the insured.

Five Areas of state regulation that directly affect agents and agency staff.

1. Licensing Laws 2. Unfair Trade Practices 3. Unfair claims settlement practices acts 4. Regulations governing the handling of premium 5. regulations governing selection of proper insurers

8 common types of E&O Claims that arise when placing new or renewal business

1. Misrepresenting insurance coverage 2. Failing to procure requested insurance 3. failing to notify client of inability to procure insurance 4. procuring inadequate coverage 5. Failing to maintain requested Insurance 6. failing to inform client of renewal 7. Failing to investigate an insurer's financial condition 8. failing to explain policy terms or coverage limitations

5 Items that should be verified to match the policy and the binder

1. NI 2. Coverage locations 3. limits of insurance 4. coverages 5. modification of coverage

6 duties owed to client

1. Not to misrepresent the existence or extent of coverage provided by the policy 2. When procuring coverage, must use reasonable diligence in attempting to place the insurance requested by the client. 3. To inform the client promptly if he or she is unable to place the requested coverage. 4. When providing insurance to a client, owes duty to use reasonable care to obtain adequate insurance to meet the clients needs 5. To inform the client when the renewal policy contains changes in coverage or terms 6. to place coverage with a financially sound insurer and disclose solvency info to client.

7 typical exclusions under E&O Policy

1. Punitive and multiplied damages 2. Claims brought by one insured against another 3. Contractual Liability 4. Claims arising as a result of the insolvency of an insurer or other risk-bearing entity 5. Bodily injury or property damage 6. Damages arising out of providing professional advice as a member of a board in the course of consulting activities. 7. Claims arising out of fraudulent or intentional actions.

5 Duties Owed to an Insurer

1. Use reasonable diligence and care in conducting business with the agency's insurers 2. Fully comply with the insurer's instructions 3. Fiduciary duty to the insurer to disclose any material information about the policies the insurer writes for the agency. Material info is any info that if known would affect the insurer's decision to issue coverage 4. Reasonable diligence in forwarding info that the insurer has requested or that is material to the insurance 5. to Understand and comply with binding authorities granted by the insurer and comply with all other terms of the agency/ insurer agreement

two ways to fail to procure insurance coverage

1. failure to comply with a request 2. failure to recognize an exposure

5 tools used to determine an insured's loss exposure

1. physical inspections 2. interviews with the client or the clients key personnel 3. financial statement review 4. review of flow charts of key client operational details 5. review of insured's contractual requirements

Policy Changes can be initiated by these 4 parties

1. policyholder 2. Agent 3. The company 4. third party

5 reasons why a driver may be in the Nonstandard market

1. poor driving record 2. Poor loss experience 3. limited driving experience 4. lapse in prior coverage 5. type of vehicle being driven, such a sports car

4 key functions a CSR performs to ensure complete and accurate Proposals and quotes

1. reviewing the client account 2. Preparing the actual quote or proposal 3. Explaining all of the coverage options 4. advising the client of any preconditions or other requirements to obtain coverage

2 steps agents should take during claims process

1. use the agency written procedure for all claims 2. Following up on outstanding claims with appropriate status checks.

3 steps of the delivery process

1. verify terms and conditions of the policy match the terms and conditions requested in binder and proposals. 2. Deliver to insured, pref in person 3. review coverage with client

The review of existing accounts can serve these 2 purposes

1.Ensure that an agency has performed the services that it has already agreed to perform such as placing coverage or modifying limits 2. Determine if there is anything that the agency might have done but has not yet accomplished

What is the advantage of Standard Forms?

1.Language included in the form has been drafted and modified as the result of numerous court cases. 2. Less Likely to yield unexpected surprises in the form of claims for unintended coverage's.

Retrospective Rating

A ratemaking technique that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period;

Which Certificate form has the most claims associated with it?

ACCORD 25- Cert of Liability

Consent-to-settle Clause

An insurance policy provision, usually found only in professional liability policies, that requires the insurer to obtain consent from the insured before settling a claim.

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

________ accounts for the fastest-growing area E&O claims

COI's

McCarran-Ferguson Act (1945)

Continued state regulations or insurance was in the public interest. Federal Law, however, may apply to insurance to the extent that state laws do not apply.

Actual Authority can be

Express or implied

Non-standardized forms are sometimes requested by:

Large businesses

completing _____ forms in the agency can increase exposure to E&O Claims

Nonstandardized

Unfair Claims Settlement Practices Act

Prohibits adjusters from: - knowingly misrepresenting relevant facts or policy provisions - failing to act in a prompt manner in claim communications and investigations - failing to act in good faith in the claims settlement process

Telephone Consumer Protection Act of 1991

Requires any message sent to a fax machine to display the identity of the sender, the date, and time of transmission.

Apparent Authority

The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Majority of E&O claims related to COI's stem from requests on _____ and ____ policies

WC and General Liability

Fiduciary Duty

a person or entity that holds a position of trust, manages another persons or entity's affairs or funds, and has a duty to that person or entity to act in a trustworthy manner

CAN-SPAM Act

act applies to e-mail messages that are intended to advertise or promote a commercial product or service.Customer correspondence that is obviously as ad for a new product that hasn't been previously discussed with the client should comply with the act.

Express Authority

authority declared in clear, direct, and definite terms

to avoid conflict of interest, CSRs should not use agency claim authority:

claims involving agency personel or family members

Independently crafted Forms

copy right notice that include the name of drafting organization

claims-made basis

coverage is triggered from a claim first made during the policy period.

The account review includes an examination of the insureds

current insured loss exposures, uninsured loss exposure, and uninsurable loss exposure

Department of Transportation (DOT)

does not regulate insurance producers but does specify financial responsibility limits for motor carriers

white list

eligible surplus lines brokers

Agency handled claims are normally:

glass losses, auto- collision repairs up to a certain amount, and small theft losses.

Auditable policies may based on

gross sales, payrolls, or units

Characteristics of Surplus Lines Market

higher chance of loss, higher levels of loss, unique coverage aspects, and require more specialized underwriting.

Sarbanes-Oxley Act

intended to ensure corporate accountability and to combat corporate and accounting fraud by tightening internal accounting controls and holding company execs responsible for financial misdeeds.

Actual Authority

intentionally given by the principal to the agent

NAIC Insurance Fraud Prevention Model Act

knowingly and willfully preparing or presenting false info as part of the issuance of a COI is considered a "fraudulent insurance act."

Unfair trade practices

methods of competition or advertising or procedures that tend to deprive the public of information.

What two factors are used to determine loss experience for Retrospective rating?

paid losses or incurred losses.

Gramm-Leach-Bliley Act (GLBA)

promotes affiliation and diversification in the nations, banks, insurers, and brokerages, and it protects consumers personal info help by financials institutions. Must establish policies on how to protect customers personal Information by establishing limitations on disclosure of such information.

Fair Credit Reporting Act (FCRA)

protects consumers from the disclosure of inaccurate and arbitrary personal information held by customer reporting agencies and includes procedures for reporting and correcting credit record mistakes. Must notify insured if credit checks are being run including MVRs

Guaranty Fun

provides clients with financial protection for losses if insurers become insolvent- not afforded in Surplus Lines mkt except in NJ.

Federal Emergency Management Agency (FEMA)

purpose is to prepare the nation for hazards that can potentially cause major loss of life and property and to effectively manage federal response and recovery efforts after a disaster. Sets rates, coverage limits, and eligibility requirements for flood insurance.

Drivers Privacy Protection Act (DPPA)

restricts access to MVR info to those individuals or entities that have permissible purpose, provided by law, for receiving information.

Insurance is primarily regulated by the

states

Telemarketing and Consumer Fraud and Abuse Prevention Act

the act regulations include prohibiting repeated calls or prolonged conversations, limiting calls to between 8am and 9pm daily, and requiring telemarketers to reveal their identities and purpose or the call. Must enforce a do-not call registry in which consumers can enroll to indicate their unwillingness to accept unsolicited telemarketing.

Who should be the one to complete non-standardized forms?

the insurer