Presented by the Insurance Agents & Brokers Liability Practice Group

Proper Documentation Is the Key to Defeating Claims of Negligent Procurement

Edited by Timothy G. Ventura, Esq.

You, an independent insurance agent, have a client who is starting up a brand new business and asks you to procure a comprehensive general liability policy. Your client is concerned about the cost of new business, so tells you to keep premiums at a minimum. You obtain for her business, commercial liability coverage and commercial property coverage, but it did not contain business interruption insurance.

The policy is delivered to your client, but she is too busy to read it. Several months go by, and your client’s business does much better than anticipated. Unfortunately, an accidental fire destroys the entire premises.

The carrier pays your client the amounts owed for property damage under the policy. Your client now claims, however, that she should also receive business interruption coverage. Further, she claims that she even requested business interruption coverage from you, although the policy delivered did not include it. She sues you for negligently failing to procure business interruption coverage. How do you successfully defend the lawsuit? The answer is proper documentation.

One of the strongest errors and omissions defenses involves producing written accounts of activities and conversations that occur during the insurance procurement process. Agents should habitually confirm any oral conversations with a customer in writing immediately after the communication takes place and document their file accordingly.

Agents should also consider recording all in-bound and out-bound phone calls. Further, in today’s technological age, agents should retain copies of all email correspondence, ideally in paper format, contained in the customer’s physical file.

Fortunately, you were a diligent agent who took good notes contemporaneously with your discussions, during which your client emphatically emphasized the need to keep premiums to a minimum by not adding optional coverages. Further, you recorded the conversation of her comments that she wasn’t even sure she could pay the second or third months of premiums because of the uncertainty of whether the business would be successful or not. Clearly, business interruption coverage was the last thing on her mind.

You also produce in discovery your written acknowledgement to her that no additional coverages have been placed on her behalf. Putting aside the additional defense that she was negligent in failing to review the policy, the implementation of your best practices has put you in the best position to prevail against her negligent procurement claim.

In today’s highly litigious environment, proper documentation enables insurance agents to put themselves in the best position to steer clear of E&O claims. They can set themselves up with strong defenses in the event they ever find themselves on the receiving end of an E&O action.

Ray Freudiger is a shareholder in our Cincinnati, Ohio office and can be reached at


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