E&O Risk Management - Meeting the Challenge of Change (1 Event): 5/23/13 Self Study Questions: Agent Carrier Relationships – Law of Agency 1. Which of the following is NOT a type of authority allowing agents to bind a principal insurer? a. Express Authority b. Unexpected Authority c. Implied Authority d. Apparent Authority 2. The legal term “agency” is used to describe: a. A profit center of an insurance carrier. b. A branch of the government. c. A relationship when one party acts on behalf another. d. None of the above. 3. Agency/carrier agreements outline the extent agents can act on behalf of the principal and can be described as this type of authority: a. Express Authority b. Unexpected Authority c. Implied Authority d. Apparent Authority 4. Which of the following may NOT be considered implied authority?: a. Binding coverage outside of the limits available. b. Acceptance of payment of premium on behalf of the carrier. c. Issuing automobile ID cards or other evidence of insurance placed with the carrier. d. Placing a carrier’s logo on the agency’s website to advertise relationship. 5. In recent years, if a carrier is financially harmed as a result of an agency’s wrongful act they are more likely to: a. Ignore the agent’s mistake altogether. b. Immediately reduce agency commission.
Transcript
E&O Risk Management - Meeting the Challenge of Change (1 Event):
5/23/13
Self Study Questions:
Agent Carrier Relationships – Law of Agency
1. Which of the following is NOT a type of authority allowing agents to bind a principal insurer? a. Express Authorityb. Unexpected Authorityc. Implied Authorityd. Apparent Authority
2. The legal term “agency” is used to describe:a. A profit center of an insurance carrier.b. A branch of the government.c. A relationship when one party acts on behalf another.d. None of the above.
3. Agency/carrier agreements outline the extent agents can act on behalf of the principal and can be described as this type of authority:
a. Express Authorityb. Unexpected Authorityc. Implied Authorityd. Apparent Authority
4. Which of the following may NOT be considered implied authority?:a. Binding coverage outside of the limits available.b. Acceptance of payment of premium on behalf of the carrier.c. Issuing automobile ID cards or other evidence of insurance placed with the carrier.d. Placing a carrier’s logo on the agency’s website to advertise relationship.
5. In recent years, if a carrier is financially harmed as a result of an agency’s wrongful act they are more likely to:
a. Ignore the agent’s mistake altogether.b. Immediately reduce agency commission.c. Discontinue sending logoed mouse pads to the agency.d. Pursue direct action against the agency for recovery of damages.
6. This type of agent’s authority occurs when a third party (i.e.: a customer) reasonably believes , by all appearances, that the agency has authority to transact business on behalf of the principal, even when no authority actually exists:
a. Express Authorityb. Unexpected Authorityc. Implied Authorityd. Apparent Authority
7. Which of the following is NOT a general duty or obligation an agent has in the agent-principal relationship?:
a. To collect and hold premiums on behalf of the carrier.b. Giving the carrier the right of first refusal to review and quote every single customer
that approaches the agency.c. To disclose material information on the insured to the carrier.d. To refrain from communicating confidential information that may put the carrier in a
competitive disadvantage with competitors. 8. Disclosing material information to the carrier is important for which of the following reasons:
a. It affects the carrier’s decision for accepting or denying a prospect.b. Influences the extent of coverage that may be offered.c. Allows the carrier to charge the appropriate premium for the risk.d. All of the above.
9. Customer information known to the agency is considered known to the carrier. When an agent becomes aware of a customer’s claim they have a duty to:
a. Always report it to the carrier.b. Sometimes report to the carrier.c. Ignore the conversation with the customer ever happened.d. All of the above.
Understanding Agent Duties
1. Which is NOT a reason of why it’s important to know the agency’s legal duties:a. Lays the foundation for how the agency operates.b. Allows the agency to balance legal duties with servicing customers in a way the feel
appropriate.c. To find ways to circumvent legal duties to make life easier.d. Minimizes E&O exposure.
2. All of the below are required elements for a customer to prove that the agency was negligent in their services, EXCEPT:
a. A duty to the customer existed and was breached.b. Filing an E&O claim against an agent.c. Breach of duty was the proximate cause of the loss.d. Actual damages occurred as a result of the breach.
3. Which of the following is TRUE about an agents standard of care:a. It is the degree of prudence and caution required when rendering services to customers.b. The level of standard of care required is closely dependent on the circumstances.c. Legal standard of care varies in each state.d. All of the above.
4. When a court finds a “special relationship” to exist with a customer the standard of care the agent owes to the customer is likely to be:
a. Increased.b. Decreased.c. Be the same.d. None of the above.
5. Which of the following is NOT a factor that may create a “special relationship” in the eyes of the courts:
a. Rendering of advice.b. Claims of expertise.c. Procuring the exact coverage requested by the customer.d. Length of customer relationships.
An E&O Claim – 360˚ View
1. On the average, approximately how many agencies will report a potential E&O incident to their E&O carrier?
a. 1 in 7 agenciesb. 1 in 35 agenciesc. 1 in 150 agenciesd. 1 in 330 agencies
2. What percentage of E&O claims reported to the carrier are closed with no defense reserves or indemnity payments made?
a. 1%b. 5%c. 50%d. 75%
3. Generally speaking, an uncovered loss that leads to an E&O claim is caused by:a. The customer not having the appropriate type of coverage.b. Inadequate values or limits to fully cover a customer’s loss.c. Both of the above.d. None of the above.
4. E&O claims can generally be broken down into which two categories:a. Procedural and knowledge-based errors.b. Oral and written errors.c. Smart and dumb errors.d. None of the above.
5. All of the following are examples of procedural-based E&O errors, EXCEPT:a. Failure to deliver policy in a timely manner.b. Inadequately explaining coverage provisions.c. Failure to submit a claim to the carrier.d. Failure to add an additional insured as requested.
6. All of the following are examples of knowledge-based E&O errors, EXCEPT:a. Failure to duplicate prior coverage.
b. Inadequately explaining coverage provisions.c. Failure to submit a claim to the carrier.d. Misrepresenting coverage to the customer.
7. Which of the following is important in helping the agency avoid E&O claims:a. Establishing a culture of E&O awareness among agency staff.b. Having strong agency procedures in place.c. Providing educational opportunities to help avoid knowledge-based errors.d. All of the above.
8. Reviewing E&O claims frequency statistics is helpful for all of the following reasons, EXCEPT:a. Provides information on which positions within the agency to reinforce the importance
of E&O risk management.b. It is a step towards mastering the actuarial science.c. Gives insight into areas of potential weakness within agency operations.d. Offers direction on where to focus product education and training needs.
9. E&O claims can be brought against the agent by all of the following:a. Customers.b. Carriers.c. Third parties.d. All of the above.
10. The majority of E&O claims are made against agents by:a. Customers.b. Carriers.c. Third parties.d. All of the above.
11. In the past decade there has be a visible trend in claims brought against agents by:a. Regulatory/governmental entities.b. Third parties.c. Carriers.d. Agency employees.
12. E&O claims brought by carriers can be a result of all of the following, EXCEPT:a. Exceeding carrier binding authority.b. Being properly licensed and appointed by the carrier.c. Failing to comply with underwriting guidelines.d. Providing inaccurate or incomplete information to the carrier.
13. Agents can have E&O claims made by third parties for which of the below reasons:a. Failure to add an additional insured or loss payee.b. Misrepresentation or inaccurate information on Certificates of Insurance.c. Failing to procure coverage that was relied upon by a third party.d. All of the above.
14. Which position in the agency is most frequently involved in E&O claims:a. Producers.b. CSRs.
c. Account Manager.d. Owner/Principal.
15. All of the following are common E&O allegations made against producers, EXCEPT:a. Inadequate identification of exposures.b. Failing to duplicate prior coverage.c. Providing accurate information to the carrier.d. Not explaining policy provisions properly.
16. Which is a common E&O allegation involving CSRs:a. Failure to procure coverage resulting from a mishandling of the application.b. Failing to provide carrier with timely notice of a claim.c. Failing to add additional insurance or loss payee.d. All of the above.
17. What percentage of E&O claims result from new business transactions:a. 10%b. 15%c. 40%d. 75%
18. What types of policies are most frequently involved in E&O claims:a. Personal Linesb. Commercial Linesc. Life Insuranced. Health Insurance
19. To avoid E&O claims, the agency can do all of the following, EXCEPT:a. Procure coverage requested in a timely basis.b. Misrepresent actual coverage provided by the policy.c. Adequately identify exposures and offer coverage.d. Duplicate prior coverage and point out coverage differences, if any.
Agent/Carrier Contracts – E&O Considerations
1. Which of the following statements about agency/carrier agreements is FALSE:a. Agreements lay the foundation and responsibilities within the relationship.b. Breach of duties can open the agency up to E&O claims.c. Agency management should NOT make staff aware of agreement provisions that affect
their job responsibilities.d. Agreements should be reviewed in tandem with underwriting guidelines.
2. Which of the following statements regarding agency agreements is FALSE:a. Agency should be properly licensed with carrier appointments in place.b. Agency should expand in to additional states beyond those authorized without
agreement from the carrier. c. Agency should only sell the product in states they are authorized.
d. Agency staff should be current on Continuing Education requirements.3. As it relates to binding authority and processing instructions, which of the following could lead
to a potential E&O claim made against the agency by the carrier:a. Exceeding binding authority without carrier authorization.b. Backdating coverage without carrier agreement.c. Making unauthorized changes to quotes issued by the carrier.d. All of the above.
4. All of the following are common provisions found in agent/carrier agreements, except:a. Leasing of office space.b. E&O coverage requirements.c. Indemnification language.d. Binding Authority.
5. Traditionally, carrier underwriting guidelines often include all of the following , EXCEPT:a. Targeted business to be written.b. Customer prior loss experience required to be reviewed.c. Commissions payable to the agency.d. Required number of years the customer has been in business.
Agency Defenses- Documentation
1. E&O claims can often be described as involving :a. “He said, she said” scenariosb. Pleasant feelings from both parties.c. Very little time or expense for the agency.d. None of the above.
2. Since E&O claims are often “he said, she said” swearing matches between the agency and customer, what is the number one way to protect the agency?
a. Solid documentation in the customer file.b. A good security system.c. Allowing fire arms in the agency.d. Selectively choosing where to write business.
3. Which of the following can aid in the defense of an E&O claim:a. Use of disclaimers. b. Written follow-ups.c. E&O coverage checklists.d. All of the above.
4. Which of the following are critical to being able to defend the agency from an E&O claim:a. Well-appointed office furniture.b. A full-time IT manager.c. Thorough documentation in customer files and invariable agency practices/procedures.d. Eye-catching marketing materials.
5. The sufficiency of customer file documentation is truly revealed when it is:a. Created.
b. Retrieved by others to service customers.c. Deciphered.d. None of the above.
6. Which of the following should be included in the customer file:a. Salient points of what the customer is requesting or being communicated and the
required action.b. Date and time of customer request and deadline for completing specific action.c. Details on why the request is being made.d. All of the above.
7. Communication with customers and carriers from all of the following should be documented in customer files in the agency management system:
a. Phone calls (landline and mobile)b. Emails and Faxesc. Text messages and Instant Messagesd. All of the above.
8. All of the following are characteristics of proper documentation, EXCEPT:a. Clear, concise, and consistent.b. Include random abbreviations other staff will not understand.c. Unalterable date/time stamp.d. Recreates the interaction with the customer step-by-step.
9. Which of the below is the least important to document in the customer file:a. A call wishing a customer happy birthday.b. Coverages requested by the customer and those offered and rejected.c. Limits and insurable values selected by the customer.d. Date an endorsement to the policy was requested and issued.
10. When it comes to customer files stored as paper or electronic files, which of the following is FALSE:
a. It is best to have one file storage method, not both paper and electronic customer files.b. Paper files are more creditable than electronic files.c. The data and time stamp of electronic files increase credibility.d. Courts recognize the admissibility of electronic records.
11. All of the below are benefits of E&O coverage checklists, EXCEPT:a. They serve as a roadmap of products to offer customers.b. They can increase sales.c. They increase E&O claims related to failing to recommend coverage.d. They can be used as a learning tool for new agency employees.
12. All of the following are useful in the defense of an E&O claim:a. Customer sign-offs acknowledging coverage was offered and not taken.b. Written follow-up of discussion with customer.c. Applications signed by the customer.d. All of the above.
13. Which of the following regarding the use of disclaimers is FALSE:
a. They help manage customer expectations.b. Disclaimers do not aide in the defense of an E&O claim.c. They reinforce customer communications with clear guidance.d. Nearly all communications with customers can include disclaimer language.
14. Customer proposal language should include all of the following, EXCEPT:a. The agency procured coverage requested by the customer based on the information
they provided.b. Additional coverages and increased limits are available should the customer want them.c. A reminder for the customer to read their policies to make sure they are acceptable.d. All of the above.
15. Which of the following is FALSE about customer file retention:a. Agents should rely solely on carrier systems to retain customer records.b. The minimum customer files should be retained may be dictated by state law.c. Agencies should develop a standard practice for retaining records.d. Retaining customer files may allow the agency to offer an increased level of service over
the customers’ life cycle.
E&O Considerations of Agency Operations
1. Which of the following regarding marketing the agency is FALSE:a. The ways agents market their services have changed over the years.b. Statements made in marketing materials can influence the standard of care expected
from customers.c. Agencies procedures and service should match representations made in advertising
materials.d. Agency management should NOT review and approve all marketing materials created by
employees.2. Which of the following is NOT a good practice during the application process:
a. Have the insured review the application and sign and initial each page.b. Signing applications on the behalf to the customer.c. Using ACORD forms when possible.d. Using secure email to send applications including personal information.
3. Even if not required by the carrier, it is a good idea to have a signed application because: a. The agent can later be blamed for inaccurate information provided from the customer.b. Customers love to complete paperwork.c. It gives CSRs something to do.d. None of the above.
4. Producers are sometimes hesitant to offer additional coverage options because:a. The increased workload involved.b. They are not interested in growing the agency.c. They believe the customer is simply looking for the best price.d. They don’t want to put the burden the customer with coverage decisions.
5. In addition to using questionnaires and coverage checklists all of the below are common methods that can be used to evaluate a customer’s loss exposure, EXCEPT:
a. Hiring a private eye.b. A physical inspection of the customer’s operation.c. Researching the customer’s website.d. Interviews with the customer’s management team.
6. Visiting the customer’s premises is a good practice because it can:a. Help avoid E&O claims.b. Uncover exposures that have not been calculated.c. Indicate that the risk is outside of the underwriting guidelines.d. All of the above.
7. When a customer is placed with a new carrier the agent should:a. Simply rely on the prior agent’s coverage assessment of the risk.b. Point out any coverage differences.c. Provide the customer with a mouse pad with the logo of the new carrier.d. None of the above.
8. All of the following are E&O risk management tips for assessing customer exposures, EXCEPT:a. Stay within your area of expertise in terms of coverage and type of account.b. Gather information from the right person within the customer’s operation.c. Do not visit the customer operation in person to save on the cost of gas. d. All of the above.
9. Carrier underwriting systems have changed the traditional way agencies handle:a. Applications.b. Issue proposals.c. Deliver policies.d. All of the above.
10. Proposals generated directly from carrier underwriting may NOT include the following:a. Quoted premium.b. Requested limits.c. The offer of other applicable standalone coverage along with appropriate customer sign-
off.d. None of the above.
11. All of the following are E&O risk management tips for handling quotes and customer proposals, EXCEPT:
a. Do NOT include a disclaimer in the proposal reminding the customer to read their policy.b. Document any coverage discussions with customers and carriers.c. Do NOT make coverage decisions for the customer.d. Have the customer initial or sign-off on coverage options that are rejected.
12. Which of the following is FALSE:a. Agency staff should know their binding authority.b. Agency staff should know the carriers underwriting restrictions.
c. The speed that policies are generated from carrier underwriting systems has reduced the usage of binders.
d. None of the above.13. All of the following are E&O risk management tips for issuing binders, EXCEPT:
a. Automatically binding coverage through a surplus lines market, without prior approval.b. Know binding requirements for all agency contracted carriers.c. Be familiar with state binder laws.d. Create reminders in the agency management system for receipt of policy.
14. When delivering policies electronically, the agency should do all of the following, EXCEPT:a. Know their state’s law relating to policies being delivered electronically.b. Send policies over secure email.c. Get insureds consent to receive or access the policy electronically.d. All of the above should be done.
15. All of the following are E&O risk management tips for delivering policies, EXCEPT:a. Review policies for accuracy against applications, quotes, and proposals.b. Discourage policyholders to read the policy.c. Delivery policies in a timely fashion.d. Email policies using a secure connection to protect sensitive information.
16. The types of errors made when handling policy changes and endorsements include:a. Failure to add endorsement requested.b. Failure to add additional insured/loss payee.c. Making policy changes requested by an unauthorized person.d. All of the above.
17. All of the following are E&O considerations when handling policy changes, EXCEPT:a. Changes to the policy that cannot be made immediately should have a reminder set in
the agency management system.b. No change should be made unless it is requested by the named insured.c. Requested changes from a third party should NOT first be verified by the named
insured.d. Consider the effect the requested policy change will have on the customer’s other
policies.18. All of the below can help the agency avoid E&O claims when handling claims reported by
customers, EXCEPT:a. Making coverage determinations on behalf of the carrier.b. Reporting claims to the carrier the same day they are received.c. Reporting claims to all carriers where the insured has policies that may include some
coverage.d. None of the above.
19. When remarketing customer accounts all of the following are E&O risk management considerations, EXCEPT:
a. Identify any reductions in coverage.b. Rely on data from the prior year’s application.
c. Be cautious when changing carriers.d. Review changes to exposures.
20. All of the below can help the agency avoid E&O claims when handling auditable policies, EXCEPT:
a. Never discuss audit provisions at the time of writing new or renewal policies.b. Verify in writing that the premium is provisional and explain the downside of under
estimating.c. Provide information on how the audit premium will be determined.d. Consider sending a six month notice to remind accounts of the audit provision at the
end of the policy term.21. How cancellations are handled can vary by:
a. Policy terms.b. State law.c. Type of cancellation (non-payment or insured request)d. All of the above.
22. All of the below are best practices for handling cancellations and non-renewals, EXCEPT:a. Instead of reminding late payers, have an exit interview process as to not raise the
standard of care expected by the customer.b. Clearly communicate with the customer on whether the agency will attempt to replace
coverage.c. Continue to remind non-pay accounts to pay their premium.d. Don’t interfere with the carrier’s right to notify an insured of cancellation or
nonrenewal.
Total Question Count for 1 event (6 hrs) 75
E&O Risk Management - Meeting the Challenge of Change - Part 1:
Understanding Agent Duties
1. Which is NOT a reason of why it’s important to know the agency’s legal duties:a. Lays the foundation for how the agency operates.b. Allows the agency to balance legal duties with servicing customers in a way the feel
appropriate.c. To find ways to circumvent legal duties to make life easier.d. Minimizes E&O exposure.
2. All of the below are required elements for a customer to prove that the agency was negligent in their services, EXCEPT:
a. A duty to the customer existed and was breached.b. Filing an E&O claim against an agent.c. Breach of duty was the proximate cause of the loss.d. Actual damages occurred as a result of the breach.
3. Which of the following is TRUE about an agents standard of care:a. It is the degree of prudence and caution required when rendering services to customers.b. The level of standard of care required is closely dependent on the circumstances.c. Legal standard of care varies in each state.d. All of the above.
4. When a court finds a “special relationship” to exist with a customer the standard of care the agent owes to the customer is likely to be:
a. Increased.b. Decreased.c. Be the same.d. None of the above.
5. Which of the following is NOT a factor that may create a “special relationship” in the eyes of the courts:
a. Rendering of advice.b. Claims of expertise.c. Procuring the exact coverage requested by the customer.d. Length of customer relationships.
The Role of Agency Procedures
1. Having good agency procedures in place does all of the following, EXCEPT:a. Allows the E&O carrier to mount a compelling defense.b. Improves customer service.c. Increases the efficiency of agency operations.d. Makes job requirements of agency staff harder to follow.
2. How does an internal procedures manual and consistent business practices help in the defense of a claim:
a. Allows the agency to prove that the request was never received.b. The procedures manual is a good place to store old subpoenas.c. They keep employees too busy to get anxious about meeting with their defense
attorneys.d. None of the above.
3. Invariable practices/procedures benefit the agency in the following ways, EXCEPT:a. They are a practical way for training personnel.b. Increases agency operational costs.c. Staff workload can be better monitored.d. Provides the agency with a defense where follow-through on procedures is being
questioned.
An E&O Claim – 360˚ View
1. On the average, approximately how many agencies will report a potential E&O incident to their E&O carrier?
a. 1 in 7 agenciesb. 1 in 35 agenciesc. 1 in 150 agenciesd. 1 in 330 agencies
2. What percentage of E&O claims reported to the carrier are closed with no defense reserves or indemnity payments made?
a. 1%b. 5%c. 50%d. 75%
3. Generally speaking, an uncovered loss that leads to an E&O claim is caused by:a. The customer not having the appropriate type of coverage.b. Inadequate values or limits to fully cover a customer’s loss.c. Both of the above.d. None of the above.
4. E&O claims can generally be broken down into which two categories:
a. Procedural and knowledge-based errors.b. Oral and written errors.c. Smart and dumb errors.d. None of the above.
5. All of the following are examples of procedural-based E&O errors, EXCEPT:a. Failure to deliver policy in a timely manner.b. Inadequately explaining coverage provisions.c. Failure to submit a claim to the carrier.d. Failure to add an additional insured as requested.
6. All of the following are examples of knowledge-based E&O errors, EXCEPT:a. Failure to duplicate prior coverage.b. Inadequately explaining coverage provisions.c. Failure to submit a claim to the carrier.d. Misrepresenting coverage to the customer.
7. Which of the following is important in helping the agency avoid E&O claims:a. Establishing a culture of E&O awareness among agency staff.b. Having strong agency procedures in place.c. Providing educational opportunities to help avoid knowledge-based errors.d. All of the above.
8. Reviewing E&O claims frequency statistics is helpful for all of the following reasons, EXCEPT:a. Provides information on which positions within the agency to reinforce the importance
of E&O risk management.b. It is a step towards mastering the actuarial science.c. Gives insight into areas of potential weakness within agency operations.d. Offers direction on where to focus product education and training needs.
9. E&O claims can be brought against the agent by all of the following:a. Customers.b. Carriers.c. Third parties.d. All of the above.
10. The majority of E&O claims are made against agents by:a. Customers.b. Carriers.c. Third parties.d. All of the above.
11. In the past decade there has be a visible trend in claims brought against agents by:a. Regulatory/governmental entities.b. Third parties.c. Carriers.d. Agency employees.
12. E&O claims brought by carriers can be a result of all of the following, EXCEPT:a. Exceeding carrier binding authority.
b. Being properly licensed and appointed by the carrier.c. Failing to comply with underwriting guidelines.d. Providing inaccurate or incomplete information to the carrier.
13. Agents can have E&O claims made by third parties for which of the below reasons:a. Failure to add an additional insured or loss payee.b. Misrepresentation or inaccurate information on Certificates of Insurance.c. Failing to procure coverage that was relied upon by a third party.d. All of the above.
14. Which position in the agency is most frequently involved in E&O claims:a. Producers.b. CSRs.c. Account Manager.d. Owner/Principal.
15. All of the following are common E&O allegations made against producers, EXCEPT:a. Inadequate identification of exposures.b. Failing to duplicate prior coverage.c. Providing accurate information to the carrier.d. Not explaining policy provisions properly.
16. Which is a common E&O allegation involving CSRs:a. Failure to procure coverage resulting from a mishandling of the application.b. Failing to provide carrier with timely notice of a claim.c. Failing to add additional insurance or loss payee.d. All of the above.
17. What percentage of E&O claims result from new business transactions:a. 10%b. 15%c. 40%d. 75%
18. What types of policies are most frequently involved in E&O claims:a. Personal Linesb. Commercial Linesc. Life Insuranced. Health Insurance
19. To avoid E&O claims, the agency can do all of the following, EXCEPT:a. Procure coverage requested in a timely basis.b. Misrepresent actual coverage provided by the policy.c. Adequately identify exposures and offer coverage.d. Duplicate prior coverage and point out coverage differences, if any.
Reporting An E&O Claim
1. Which is TRUE about following statement - The earlier an E&O claim is reported and the E&O carrier involved:
a. The more likely the E&O claim will be resolved quickly.b. The less likely the E&O claim will be resolved quickly.c. The greater chance of your agency’s E&O policy being terminated mid-term.d. None of the above.
2. Which of the following are TRUE:a. Reporting an E&O claim to Swiss Re Corporate Solutions does not automatically result in
any negative underwriting action against the agency.b. Since most E&O policies are written on a claims-made basis, claims and potential claims
should be reported immediately. c. The cost of not promptly reporting an E&O claim far outweighs the risks of reporting it. d. All of the above.
3. Should the agency experience an E&O claim, it should do all of the following, EXCEPT:a. Do not admit liability to insured or their insurance company.b. Offer to pay claim itself.c. Follow claims reporting requirements outlined your E&O policy.d. Do not discuss or provide copies of your E&O policy to anyone.
4. Good documentation can help the agency defend E&O claims and another benefit is that it could:
a. Make for a good start to the agency principal’s autobiography, “Growing Up with Insurance in My Veins”.
b. Overburden agency staff with unwanted work.c. Save money on their E&O deductible.d. None of the above.
Risk Assessment Questionnaire and Coverage Checklists
1. One of the most important things producer can do to avoid E&O claims for failure to procure coverage is:
a. Use a risk analysis checklist with all new business clients.b. Take shorter lunch breaks.c. Make fewer cold calls.d. Stop writing new business.
2. All of the following are benefits of risk assessment questionnaires and checklists, EXCEPT:a. Help provide a better understanding of customers’ business operations.b. Offer valuable documentation to the customer file should an E&O claim occur.c. Make it more difficult for producers to identify customer exposures and fill gaps in
coverage.d. Facilitate an increase in sales through cross-selling.
3. Which of the below is a leading driver of E&O claims:a. Failure to procure coverage.b. Offering additional coverage not requested.
c. Offering increased limits.d. Properly explaining policy exclusions.
4. Risk assessment questionnaires and checklists can help the agency avoid this type of E&O claim allegation:
a. Failure to procure the coverage requested.b. Failure to identify exposures.c. Failure to recommend coverage.d. All of the above.
5. All of the following are recommended in using a coverage checklists, EXCEPT:a. A single checklist or system should be used by all agency staff.b. Using commercially available checklists is preferable to the agency creating their own. c. It is not a good idea to use checklists on renewals.d. Agencies should establish a written procedure outlining when, how, and what checklists
should be used.
Total Questions - Part 1 - (3 hrs) 36
E&O Risk Management - Meeting the Challenge of Change - Part 2:
Agency Defenses- Documentation
1. E&O claims can often be described as involving :a. “He said, she said” scenariosb. Pleasant feelings from both parties.c. Very little time or expense for the agency.d. None of the above.
2. Since E&O claims are often “he said, she said” swearing matches between the agency and customer, what is the number one way to protect the agency?
a. Solid documentation in the customer file.b. A good security system.c. Allowing fire arms in the agency.d. Selectively choosing where to write business.
3. Which of the following can aid in the defense of an E&O claim:a. Use of disclaimers. b. Written follow-ups.c. E&O coverage checklists.d. All of the above.
4. Which of the following are critical to being able to defend the agency from an E&O claim:a. Well-appointed office furniture.b. A full-time IT manager.c. Thorough documentation in customer files and invariable agency practices/procedures.d. Eye-catching marketing materials.
5. The sufficiency of customer file documentation is truly revealed when it is:
a. Created.b. Retrieved by others to service customers.c. Deciphered.d. None of the above.
6. Which of the following should be included in the customer file:a. Salient points of what the customer is requesting or being communicated and the
required action.b. Date and time of customer request and deadline for completing specific action.c. Details on why the request is being made.d. All of the above.
7. Communication with customers and carriers from all of the following should be documented in customer files in the agency management system:
a. Phone calls (landline and mobile)b. Emails and Faxesc. Text messages and Instant Messagesd. All of the above.
8. All of the following are characteristics of proper documentation, EXCEPT:a. Clear, concise, and consistent.b. Include random abbreviations other staff will not understand.c. Unalterable date/time stamp.d. Recreates the interaction with the customer step-by-step.
9. Which of the below is the least important to document in the customer file:a. A call wishing a customer happy birthday.b. Coverages requested by the customer and those offered and rejected.c. Limits and insurable values selected by the customer.d. Date an endorsement to the policy was requested and issued.
10. When it comes to customer files stored as paper or electronic files, which of the following is FALSE:
a. It is best to have one file storage method, not both paper and electronic customer files.b. Paper files are more creditable than electronic files.c. The data and time stamp of electronic files increase credibility.d. Courts recognize the admissibility of electronic records.
11. All of the below are benefits of E&O coverage checklists, EXCEPT:a. They serve as a roadmap of products to offer customers.b. They can increase sales.c. They increase E&O claims related to failing to recommend coverage.d. They can be used as a learning tool for new agency employees.
12. All of the following are useful in the defense of an E&O claim:a. Customer sign-offs acknowledging coverage was offered and not taken.b. Written follow-up of discussion with customer.c. Applications signed by the customer.d. All of the above.
13. Which of the following regarding the use of disclaimers is FALSE:a. They help manage customer expectations.b. Disclaimers do not aide in the defense of an E&O claim.c. They reinforce customer communications with clear guidance.d. Nearly all communications with customers can include disclaimer language.
14. Customer proposal language should include all of the following, EXCEPT:a. The agency procured coverage requested by the customer based on the information
they provided.b. Additional coverages and increased limits are available should the customer want them.c. A reminder for the customer to read their policies to make sure they are acceptable.d. All of the above.
15. Which of the following is FALSE about customer file retention:a. Agents should rely solely on carrier systems to retain customer records.b. The minimum customer files should be retained may be dictated by state law.c. Agencies should develop a standard practice for retaining records.d. Retaining customer files may allow the agency to offer an increased level of service over
the customers’ life cycle.
E&O Considerations of Agency Operations
1. Which of the following regarding marketing the agency is FALSE:a. The ways agents market their services have changed over the years.b. Statements made in marketing materials can influence the standard of care expected
from customers.c. Agencies procedures and service should match representations made in advertising
materials.d. Agency management should NOT review and approve all marketing materials created by
employees.2. Which of the following is NOT a good practice during the application process:
a. Have the insured review the application and sign and initial each page.b. Signing applications on the behalf to the customer.c. Using ACORD forms when possible.d. Using secure email to send applications including personal information.
3. Even if not required by the carrier, it is a good idea to have a signed application because: a. The agent can later be blamed for inaccurate information provided from the customer.b. Customers love to complete paperwork.c. It gives CSRs something to do.d. None of the above.
4. Producers are sometimes hesitant to offer additional coverage options because:a. The increased workload involved.b. They are not interested in growing the agency.c. They believe the customer is simply looking for the best price.
d. They don’t want to put the burden the customer with coverage decisions.5. In addition to using questionnaires and coverage checklists all of the below are common
methods that can be used to evaluate a customer’s loss exposure, EXCEPT:a. Hiring a private eye.b. A physical inspection of the customer’s operation.c. Researching the customer’s website.d. Interviews with the customer’s management team.
6. Visiting the customer’s premises is a good practice because it can:a. Help avoid E&O claims.b. Uncover exposures that have not been calculated.c. Indicate that the risk is outside of the underwriting guidelines.d. All of the above.
7. When a customer is placed with a new carrier the agent should:a. Simply rely on the prior agent’s coverage assessment of the risk.b. Point out any coverage differences.c. Provide the customer with a mouse pad with the logo of the new carrier.d. None of the above.
8. All of the following are E&O risk management tips for assessing customer exposures, EXCEPT:a. Stay within your area of expertise in terms of coverage and type of account.b. Gather information from the right person within the customer’s operation.c. Do not visit the customer operation in person to save on the cost of gas. d. All of the above.
9. Carrier underwriting systems have changed the traditional way agencies handle:a. Applications.b. Issue proposals.c. Deliver policies.d. All of the above.
10. Proposals generated directly from carrier underwriting may NOT include the following:a. Quoted premium.b. Requested limits.c. The offer of other applicable standalone coverage along with appropriate customer sign-
off.d. None of the above.
11. All of the following are E&O risk management tips for handling quotes and customer proposals, EXCEPT:
a. Do NOT include a disclaimer in the proposal reminding the customer to read their policy.b. Document any coverage discussions with customers and carriers.c. Do NOT make coverage decisions for the customer.d. Have the customer initial or sign-off on coverage options that are rejected.
12. Which of the following is FALSE:a. Agency staff should know their binding authority.b. Agency staff should know the carriers underwriting restrictions.
c. The speed that policies are generated from carrier underwriting systems has reduced the usage of binders.
d. None of the above.13. All of the following are E&O risk management tips for issuing binders, EXCEPT:
a. Automatically binding coverage through a surplus lines market, without prior approval.b. Know binding requirements for all agency contracted carriers.c. Be familiar with state binder laws.d. Create reminders in the agency management system for receipt of policy.
14. When delivering policies electronically, the agency should do all of the following, EXCEPT:a. Know their state’s law relating to policies being delivered electronically.b. Send policies over secure email.c. Get insureds consent to receive or access the policy electronically.d. All of the above should be done.
15. All of the following are E&O risk management tips for delivering policies, EXCEPT:a. Review policies for accuracy against applications, quotes, and proposals.b. Discourage policyholders to read the policy.c. Delivery policies in a timely fashion.d. Email policies using a secure connection to protect sensitive information.
16. The types of errors made when handling policy changes and endorsements include:a. Failure to add endorsement requested.b. Failure to add additional insured/loss payee.c. Making policy changes requested by an unauthorized person.d. All of the above.
17. All of the following are E&O considerations when handling policy changes, EXCEPT:a. Changes to the policy that cannot be made immediately should have a reminder set in
the agency management system.b. No change should be made unless it is requested by the named insured.c. Requested changes from a third party should NOT first be verified by the named
insured.d. Consider the effect the requested policy change will have on the customer’s other
policies.18. All of the below can help the agency avoid E&O claims when handling claims reported by
customers, EXCEPT:a. Making coverage determinations on behalf of the carrier.b. Reporting claims to the carrier the same day they are received.c. Reporting claims to all carriers where the insured has policies that may include some
coverage.d. None of the above.
19. When remarketing customer accounts all of the following are E&O risk management considerations, EXCEPT:
a. Identify any reductions in coverage.b. Rely on data from the prior year’s application.
c. Be cautious when changing carriers.d. Review changes to exposures.
20. All of the below can help the agency avoid E&O claims when handling auditable policies, EXCEPT:
a. Never discuss audit provisions at the time of writing new or renewal policies.b. Verify in writing that the premium is provisional and explain the downside of under
estimating.c. Provide information on how the audit premium will be determined.d. Consider sending a six month notice to remind accounts of the audit provision at the
end of the policy term.21. How cancellations are handled can vary by:
a. Policy terms.b. State law.c. Type of cancellation (non-payment or insured request)d. All of the above.
22. All of the below are best practices for handling cancellations and non-renewals, EXCEPT:a. Instead of reminding late payers, have an exit interview process as to not raise the
standard of care expected by the customer.b. Clearly communicate with the customer on whether the agency will attempt to replace
coverage.c. Continue to remind non-pay accounts to pay their premium.d. Don’t interfere with the carrier’s right to notify an insured of cancellation or
nonrenewal.
Agent Carrier Relationships – Law of Agency
1. Which of the following is NOT a type of authority allowing agents to bind a principal insurer? a. Express Authorityb. Unexpected Authorityc. Implied Authorityd. Apparent Authority
2. The legal term “agency” is used to describe:a. A profit center of an insurance carrier.b. A branch of the government.c. A relationship when one party acts on behalf another.d. None of the above.
3. Agency/carrier agreements outline the extent agents can act on behalf of the principal and can be described as this type of authority:
a. Express Authorityb. Unexpected Authorityc. Implied Authority
d. Apparent Authority4. Which of the following may NOT be considered implied authority?:
a. Binding coverage outside of the limits available.b. Acceptance of payment of premium on behalf of the carrier.c. Issuing automobile ID cards or other evidence of insurance placed with the carrier.d. Placing a carrier’s logo on the agency’s website to advertise relationship.
5. In recent years, if a carrier is financially harmed as a result of an agency’s wrongful act they are more likely to:
a. Ignore the agent’s mistake altogether.b. Immediately reduce agency commission.c. Discontinue sending logoed mouse pads to the agency.d. Pursue direct action against the agency for recovery of damages.
6. This type of agent’s authority occurs when a third party (i.e.: a customer) reasonably believes , by all appearances, that the agency has authority to transact business on behalf of the principal, even when no authority actually exists:
a. Express Authorityb. Unexpected Authorityc. Implied Authorityd. Apparent Authority
7. Which of the following is NOT a general duty or obligation an agent has in the agent-principal relationship?:
a. To collect and hold premiums on behalf of the carrier.b. Giving the carrier the right of first refusal to review and quote every single customer
that approaches the agency.c. To disclose material information on the insured to the carrier.d. To refrain from communicating confidential information that may put the carrier in a
competitive disadvantage with competitors. 8. Disclosing material information to the carrier is important for which of the following reasons:
a. It affects the carrier’s decision for accepting or denying a prospect.b. Influences the extent of coverage that may be offered.c. Allows the carrier to charge the appropriate premium for the risk.d. All of the above.
9. Customer information known to the agency is considered known to the carrier. When an agent becomes aware of a customer’s claim they have a duty to:
a. Always report it to the carrier.b. Sometimes report to the carrier.c. Ignore the conversation with the customer ever happened.d. All of the above.
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