On June 6, IIABNY’s annual errors and omissions telecast seminar was presented live from a studio in Albany and simulcast to 13 remote locations across New York state. This year marked the 25th anniversary of the presentation of IIABNY's annual E&O seminar series that concludes with the telecast. Between the live seminars presented at five locations during May and the June 6th seminar conducted as a videoconference, the seminars were attended by a total of more than 1,100 New York insurance agents and brokers. The telecast seminar alone was attended by more than 750 insurance producers. As usual, the telecast seminar was a combination of a lecture format with videos shown to help illustrate the issues discussed. This year’s videos consisted of clips from videos filmed during the past 25 years. During the telecast, attendees submitted many questions on the topics discussed. Due to time constraints, we were unable to answer all of them during the telecast. Accordingly, in this issue of The E&O Report we will address some of the unanswered questions.

A question by several attendees raised the issue of the New York State Insurance Department (now the Department of Financial Services) circular letters that address an agent or broker making changes to the ACORD 25 certificate of insurance form. One such question is as follows:

Question: You stated during the certificate of insurance topic that the New York Department of Financial Services has various circular letters on its website that state certificates of insurance cannot be modified or altered. I would like to review those circular letters and use them when we are asked to make modifications to the certificate form. Can you tell me the reference numbers for those circular letters and where I may be able to locate those documents?

The names and reference numbers for the circular letters mentioned during the seminar, which relate to the position of the Department of Financial Services, are as follows:

• Circular Letter No. 8 issued 6/7/95 The Use of Certificates of Insurance, and
• Circular Letter No. 15 issued 1/27/98 The Use of Certificates of Insurance as Evidence of Insurance Coverage (Supplement to Circular Letter No. 8).

A question from an attendee raised the issue of how an agency or brokerage can establish mailing procedures that can then be used as the basis for the presumption of receipt of mail sent to a customer.

Question: You spoke about the fact that an agency or brokerage, which has an established mailing procedure for sending out its mail, can use the legal presumption that the person who was sent mail then received that mail. Can you please explain again what an agency or brokerage must do in order to establish mailing procedures and also discuss whether those procedures need to be written or not?

Under New York Law, a business such as an insurance agency or brokerage that can show it regularly follows an established practice and procedure for mailing will be given a legal presumption by the courts that the addressee received the mail delivered by the U.S. Postal Service. It is not necessary that the agency or brokerage have written procedures in place for this presumption to apply. Instead, the agency or brokerage must simply have a procedure in effect that is known and followed by employees whereby all mail is addressed, stamped, collected and then placed in a U.S. Postal Service mail box or delivered directly to a post office. Although written mailing procedures are not necessary, it may be helpful where the legal presumption is sought during a court proceeding to have the procedures available in writing as further proof. If a mailing procedure exists, whether written or not, a legal presumption should arise that the mail sent was received by the recipient unless the person challenging it can show that the agency or brokerage failed to follow its mailing procedures on the particular day when the subject mail was sent.

A question was raised by a number of attendees at several different locations as to the language that should be contained in a letter that customers should sign if insurance documents will be delivered in an electronic format and not paper.

Question: During the seminar, you explained how we should have customers sign an acknowledgement before sending insurance policies and other documents in an electronic format. Can you please provide a sample of the language that should be contained in the acknowledgement?

Any agency or brokerage that is delivering policies or other insurance documents in an electronic format, and not in paper, to customers in New York or any other state, for that matter, should have the customers first sign an acknowledgement that says something to the effect of the following:

Electronic Document Acknowledgement

This is to acknowledge that as of the date set forth below I have requested that the ______ agency provide me with electronic copies of all of my insurance documents. In addition, I further acknowledge my understanding that until such time as I specifically request in writing to the agency that this procedure be changed and the agency acknowledges its receipt of that request, I will only receive electronic copies of my insurance documents and I will not receive any paper insurance documents.

Agreed to this ___ day of ________, 2012.

___________________________
(Name of the Insured)

The actual language of the letter used by an agency or brokerage for the delivery of electronic insurance policies and other documents can be different than the above. However, the most important thing to remember is that every letter concerning this issue should specifically state that, from the point the Electronic Document Acknowledgement is signed by the customer, all insurance documents will be delivered in an electronic format only and that no paper documents will be provided to the customer unless specifically requested by the customer.

A question raised by several attendees concerns the issue of the use of coverage checklists.

Question: You mentioned that insurance coverage checklists should be used by an agency. We have a number of form coverage checklists but some of them are used and some of them are not. Also, there are some people in the agency who like to use coverage checklists and there are others who never use coverage checklists. Can you explain when and how you recommend that insurance coverage checklists are used?

Insurance coverage checklists are a very effective form of documentation that may be helpful when an agency or brokerage is defending itself against an E&O claim or lawsuit, especially in those situations where an insured claims that a certain type or amount of insurance coverage was never discussed or reviewed. If an agency or brokerage is using coverage checklists, it should make certain that the checklists are the same throughout the agency or brokerage. In other words, staff should use one standard checklist. In addition, the agency or brokerage should make certain the checklist is used consistently by all employees when discussing or reviewing insurance coverages with insureds and prospective insureds.

Conclusion

The various questions raised this year during IIABNY’s telecast E&O Loss Control seminar indicate attendees are aware of the importance of using good E&O loss control practices at their agencies and brokerages. In our experience, an agency or brokerage mindful of loss control techniques can substantially reduce the likelihood it will become involved in an E&O claim or lawsuit. As we have said over the years, one of the most effective ways to promote E&O loss control is through education. Therefore, it is our hope that, in addition to attending the annual loss control seminar, agencies and brokerages will encourage E&O education and awareness for all their employees on a regular basis. Our experience demonstrates that following good E&O loss control practices can not only reduce the likelihood of a claim or lawsuit but increase customer service and help sell more insurance in the process.

Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker’s errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Bayonne, New Jersey; Warwick, Rhode Island and Philadelphia, Pennsylvania.

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