As court activity against nearly all business sectors heats up, it’s a good time for insurance agents to revisit client coverage—particularly errors and omissions (E&O) policies.
It’s also prime time to grow books of business in the E&O sector, and these four business classes may be a good place to start.
In the aftermath of the housing crisis, real estate professionals are facing more professional scrutiny than ever. That makes a viable E&O policy from an educated agent more important than ever, particularly for those in appraiser roles.
That’s a trend John Torvi, vice president of sales and marketing for Landy Insurance Agency, has watched emerge.
“Someone will complain that the given value of a property was too low, which caused the owner to sell the house at too low of a value. Or, the appraiser gave too high of a value and someone ended up paying too much,” Torvi said. “That happened a lot after the mortgage meltdown. Real estate prices were out of sight, with people paying $500,000 for $300,000 homes and then suing pretty much everybody involved.
“The appraiser took the brunt of it.”
On a similar note, mortgage professionals are finding themselves the subject of more E&O lawsuits as financially strained consumers seek redress.
While mortgage litigation has decreased since a high in 2012’s second quarter (264 lawsuits), the business sector is still experiencing more than 200 cases of legal action per quarter—a 440% leap from the early quarters of 2008, when lawsuits numbered in the low 40s.
Despite the increase in claims volume and some “minor price increases,” Torvi says mortgage is still a solid business class for Landy.
“We came out of [the mortgage crisis] at the top, frankly,” he said. “We picked up a lot of new business, gained a lot of new professional relationships and I think our stature in those areas was enhanced.
Torvi added that more carriers are coming back to the market as well, providing more option to agents working in this class.
Given their high net-worth clients and access to sensitive data, accounting firms are always a safe bet as E&O prospects. They also yield high commission rates, as successful E&O litigation can yield as much as $300 million in awards, according to data from McGraw-Hill.
“Lawyers, when they file a lawsuit, will go for the deep pockets, where they can get a settlement for a plaintiff client,” said Ralph Summerford, president of Forensic Strategic Solutions in Birmingham, Ala. “Accountants are a natural.”
As American litigiousness heats up, so do professional lawsuits against attorneys. No matter which areas an attorney practices in, liability has grown. Events such as a firm’s breakup or bankruptcy often leads to professional liability complications, requiring a savvy insurance agent to plug all potential holes in coverage.
Although not quite to the level of medical liability, Connecticut State Insurance Law Center Executive Director Peter Kochenburger believes lawyers now face the same level of liability as real estate brokers or insurance agents.
“I understand lawsuits against lawyers have been going up over the years,” Kochenburger said. “That doesn’t really surprise me.”
Though Kochenburger mentioned that it is extremely difficult to prove a case of legal malpractice against a lawyer, it can nevertheless be a very expensive ordeal and proper insurance coverage would be of good use.
Overall, however, Torvi believes the best approach to growing an agency’s book of business is to identify business sectors in which they already feel strong.
“I don’t think there’s any one industry in the US that is about to take off. Opportunity is already there within existing industries, and agents should align themselves with industries they are familiar with,” he said. “Identify industries you have some type of influence in and then align yourself with a specialist because professional liability is very specific, very quirky.
“Growth means aligning yourself in an industry you’re familiar with and then finding the right MGA to assist you.”