E & O Risk Management Alert : Crop Insurance
E E & O Risk Management Alert : Crop Insurance Over the past several years there has been a clear
upward trend in the number of E & O claims involving crop insurance . Heading into the time of the year where agents begin working with their customers to place their crop coverage , the Big “ I ” and Swiss Re wanted to provide agents with some E & O risk management considerations . The goal of this information is to help agencies avoid E & O claims , reduce an agency ’ s potential liability exposure if faced with an E & O claim , and to help agents better meet the needs of their customers . In addition to the bulleted points below , members who are Swiss Re policyholders have exclusive access to the Crop Risk Management Checklist and the new E & O seminar module , “ Reducing E & O Exposure in Placement of Crop Insurance ” by logging into the E & O Happens website . With the unique complexities and time constraints of the national crop program , it is very important that agents are aware of the proactive risk management steps they can take to protect themselves . Agency E & O Risk Management Considerations When Placing Crop Insurance :
• Know the Product – Staying abreast of changes to the crop policy and additional coverage options is very important . From year-to-year there are changes in the coverage options as well as the process for writing coverage . Knowing the product can help avoid E & O claims related to coverage misrepresentations . Attending carrier update training sessions should be required by all agency staff that will be working with crop insurance . And when you have customer questions about a coverage , don ’ t hesitate to involve your crop carrier .
• ARC-CO / ARC-IC / PLC : The 2014 Farm Bill created three new programs offered through and administered by the Farm Service Agency ( FSA ). Farmers must choose one of these programs prior to the final sign up date authorized by FSA . Since these are FSA farm programs and require a 5 year commitment on behalf of your customers , from an E & O perspective it is a good idea to have the customer investigate the coverage directly with the FSA and not to recommend a program choice . Should one program outperform the other over time , then the agent could be
faced with an E & O claim related to their recommendation . That ’ s why it is best to let the customer decide and to document your file accordingly .
• Supplemental Coverage Option ( SCO ): The 2014 Farm Bill authorized a new MPCI product known as Supplemental Coverage Option ( SCO ). This product is available if your client chooses the PLC - FSA program . Make sure you have a thorough understanding of this new product as you discuss coverage options with your farm customers . Again , document your discussions , especially the acceptance and rejection of coverage .
• Avoid Application / Forms Traps – Just like with other P & C coverages , much care should be taken in the completion of the application . A properly completed application that is completed , signed , and each page initialed by the customer can be an agent ’ s best defense in an E & O claim . Agents increase their E & O exposure by having customers sign blank applications as well as not having the customer verify and initial changes to existing applications . In addition , the crop application can change from year-to-year and agents need to review and discuss these changes with their customers . Don ’ t simply rely on last year ’ s data as things change over time , whether it is crop or ownership related changes .
• Anti-rebating language : The anti-rebating language prohibits agents from providing inducements such as rebates , discounts , credits or reductions in premium . Both the customer and the agency must sign the application . The incorporation of this language on the applications increases the visibility to both the agent and the customer that RMA prohibits rebating .
• Authority to Sign : Applications contain a section “ Authority to Sign ”. Take special care to understand when and if this section should be used . Contact your AIP to discuss this “ Authority ” section and specific cases where this section could be used . When discussing this option with your client document your file . Remember customer signatures are vital to an E & O defense .
• Meet Deadlines – The dates that RMA sets are firm and a missed deadline can equal an E & O claim . Make sure all
26 KANSAS INSURANCE AGENT & BROKER | MARCH - APRIL 2016 |