RISK MANAGEMENT
BUYING, SELLING, AND MERGING AN
AGENCY - WHAT SHOULD YOU DO?
By: Ronald Kettner, CPCU and Richard F. Lund, J.D.
One of the most significant decisions of your professional
insurance carrier comes when you decide to either sell
the agency you’ve worked long and hard to create, or to
buy another agency that someone else has worked long
and hard to create. You’ve met with the owners of the
agency, looked at the book of business, agreed on a price,
contacted your attorney to help you draft the buy/sell
agreement, and you’re a few short days away from closing
the deal when suddenly someone asks: what about the E
& O coverage? Who’s doing what? Are you going to pick up
the prior acts, or am I? Can we transfer the E&O policy to
the new owners? What kind of losses have you had? All of
these questions should be asked at the beginning of the
talks regarding the sale/purchase, but unfortunately, they
usually aren’t discussed until the last minute, and they can
have a big impact on the deal.
Think about this: when you buy a new car or are selling
your current one, you should contact your insurance
provider first. It’s no different when you are buying or
selling an insurance agency. It also applies when you are
only buying or selling a book of business. In most, if not
all, your E&O policy states that you must notify your E&O
provider within 90 days of a merger or acquisition (check
your policy for verification of the time limits.) Failure to
notify your carrier on time could result in a gap in coverage.
So let’s go through the steps you should follow when you
are making a life and business changing decision regarding
your agency.
BUYING AN AGENCY
You’ve been talking with a fellow agent about buying their
agency, and now you’ve both decided that the time is right.
There are many details to consider, and the first of which
is to do your due diligence to review the other agency’s
operations, the book of business, finances, and E&O Policy.
At this point, it is advisable to retain an attorney to help you
through the process.
Remember, an attorney can only represent one party,
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