Defending Against the Impacts of Impairment

Agents and brokers need to pay attention to insurers’ fi nancial strength and to follow set policies on placing business with riskier insurers.

The legal liability question is only part of the issue. The other part of the issue is: might they be named in suits and have to defend themselves, maybe multiple times if they have multiple clients involved with a subsequently insolvent carrier in an environment where they have no defense coverage under their insurance agent’s E&O policy? That would be a bad situation for most insurance agents.

Robert Sargent, Mercator Pro

Agents and brokers should have procedures in place to make sure they and their clients don’t become victims of insurers that are unable to meet their fi nancial commitments, Robert Sargent said.

Those procedures should include: • Checking on fi nancial ratings;

• Making sure their organization is following internal policies that dictate how to handle placements with lower-rated or unrated insurers; and

• Following policies and procedures that comply with the agent’s E&O policies.

“I wouldn’t want to have to be defending myself in front of a jury as to why ABC company, which was recommended to the Mom & Pop grocery store, went under, let’s say, three months later without a) showing here’s the internal regimen that we went through, I did

all the checks that I should have; and b) some kind of insurance to protect yourself,” Mark Keenan said.

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