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Errors and omissions advice The following advice on errors and omissions concerning terrorism coverage comes from the Westport Insurance Company (IIAA). The impact on errors & omissions of agents The carriers you represent are required to provide a quote for terrorism coverage to all of their insureds (except those excluded from the legislation). The procedure for accomplishing this task will vary by insurance carrier. Depending upon the approach a carrier takes, you may be required to present the quote for the terrorism coverage to your insured. You may also be required by the carrier to collect the premium for the coverage and notify the carrier. Furthermore, you may be required to obtain the signed rejection of coverage from the insured and forward it to the carrier. The result is increased exposure to you for an error in offering the terrorism quotation, in explaining the coverage, or in obtaining the proper rejection of coverage documentation. Minimize your exposure to an errors or omissions The first step toward minimizing your exposure to errors or omissions trouble is to educate yourself. Understand the coverage being offered by each carrier you represent so you can explain it to your customers. Understand the carrier's procedures you are to follow in offering the coverage and documenting any rejections of coverage. Be able to explain the risks an insured faces in rejecting the coverage. Protect yourself through proper documentation. Document in writing the offer of coverage and quotation of premium. Obtain signed rejections or signed confirmations of coverage from the insured. Establish a diary system for follow up on receiving confirmation of acceptance or rejection of coverage. For direct billed business, notify insureds of the pending changes to their coverage and what action they must take to accept or reject coverage. Document phone conversations regarding terrorism coverage in a consistent manner. Use appropriate letters and forms, including the following: Samples of these types of documentation are provided for your use. Feel free to copy and paste these letters and forms into a text document as needed. They should provide you with a template to properly document your communication with customers. Terrorism Coverage Offer Checklist Insurance Carrier _________________________ Insured Name ____________________________ Policy Number ___________________________ Date Quotation Was Sent to Insured _______________ Date Acceptance of Coverage Was Received _______________ Date Rejection of Coverage Was Received _________________ Date Premium Was Received _____________ Amount? _______ Terrorism Coverage Phone Conversation Checklist Date of Discussion _________________________ Insured Name ____________________________ Talked to ___________________________ Discussion Points: ___________________________________________ Coverage changes are driven by the Terrorism Risk Insurance Act of 2002. Terrorism Insurance Coverage has been made available to commercial insurance customers. Terrorism Insurance Coverage will only be effective if the quote is accepted and premium paid within the guidelines of the offer of coverage from the carrier. Declination of the offer, failure to respond or failure to pay premium within the time guidelines provided in the offer, will result in a terrorism exclusion immediately endorsed onto your policy. If you have any questions regarding the specific wording of the endorsement, you should contract ___Carrier___________ at _____Phone Number_______. Other Concerns discussed: ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ COMPLETED BY: _____________________________ Sample Cover Letter (Agency-Billed Business) [This letter may be used when your carrier requires you to make the offer of terrorism coverage. Feel free to copy and paste this information into a text document.] [INSURED NAME, ADDRESS, ETC.] IMPORTANT - THIS LETTER DISCUSSES A DECISION YOU MUST MAKE ON COVERAGE FOR TERRORISM UNDER YOUR INSURANCE POLICY - PLEASE READ IT CAREFULLY AND CONTACT ME WITH ANY QUESTIONS YOU MAY HAVE. THIS IS THE ONLY COMMUNICATION YOU WILL RECEIVE FROM US Dear _____________________________: The tragic events of September 11, 2001 have impacted our country in many ways. The insurance industry responded immediately to these events, and has provided literally billions of dollars of payments. Recognizing that the war on terror is ongoing, the federal government has now created a mechanism for the industry and the country to address the possibility of future events. Under the Terrorism Risk Act Insurance of 2002, all property and casualty insurers must offer you the chance to participate in a federally created insurance program. You may either elect to buy this coverage, or decline to buy this coverage, but you must make your decision within 30 days. If you purchase the coverage, you must pay by the premium due date, which is thirty days from the date of this letter plus five days for mailing. This letter explains the Act generally, and the decision that you must make. If you have further questions, please contact me as soon as possible. WHAT HAS HAPPENED? The events of September 11, 2001 resulted in payment of literally billions of dollars from the insurance industry. Even the possibility of future attacks has created what Congress describes as an "unprecedented financial risk" with significant impacts on the economy. As a result, Congress has passed the Terrorism Risk Insurance Act of 2002. The Act provides temporary partial federal backing for the terrorism risk, and provides insurance consumers the option of participating in terrorism coverage. HOW DOES THE ACT WORK? Effective immediately, any exclusion specifically dealing with terrorism in your policy is temporarily nullified as respects acts of terrorism defined under the legislation. With this letter, you will be receiving an offer from __________ Insurance Company to participate in the coverage created by the federal Act, and the premium charge for that coverage. If you elect to pay the charge, you will be covered in the event that there is an act of terrorism as defined by the Act. If you do not elect to pay the premium by the due date, don't respond at all, pay less than the premium charge, or pay after the due date, any exclusion that you have will again become effective. Even if your policy does not have a specific exclusion, you will still be excluded from coverage for acts of terrorism if you elect not to pay the premium for the coverage. If there is another terrorist attack, insurance companies will pay covered losses for those who have elected to participate. For very high losses, the federal government will advance insurers additional support, which will be paid back to the government through future premiums. WHAT YOU NEED TO DO: YOU MUST DECIDE WHETHER YOU WISH TO TAKE THE COVERAGE CREATED BY THE ACT. IF YOU ARE UNSURE WHAT TO DO, PLEASE CONTACT ME AS SOON AS POSSIBLE. YOU MUST MAKE YOUR DECISION AND PAY ANY PREMIUM BY THE PREMIUM DUE DATE -- THIRTY DAYS PLUS FIVE DAYS FOR MAILING -- TO BE COVERED. IF YOU ELECT TO PURCHASE THE COVERAGE AND PARTICIPATE, YOU MUST SIGN AND RETURN THE ATTACHED FORM, WITH YOUR CHECK TO US, IN THE ENCLOSED ENVELOPE WITHIN 30 DAYS FROM THE RECEIPT OF THIS LETTER. IF YOU DO NOT WISH TO PURCHASE THE COVERAGE, YOU NEED TO INDICATE YOUR REJECTION OF THE COVERAGE ON THE ATTACHED FORM, SIGN IT AND RETURN IT TO ME WITHIN 30 DAYS. NOTE, IF YOU DECLINE TO PURCHASE THE COVERAGE, YOU WILL NOT BE COVERED FOR ACTS OF TERRORISM AS DEFINED UNDER THE LEGISLATION. The Insurance Industry is committed to helping our country deal with the uncertainties created by the threat of terrorism. We look forward to working with our insureds in your decision of how that risk may impact you. Yours sincerely, ________________ Insured's Response Sample Letter [COMPANY NAME] PLEASE RETURN THIS FORM IN THE ENCLOSED ENVELOPE. COVERAGE OR EXCLUSION OF COVERAGE UNDER THE TERRORISM RISK INSURANCE ACT OF 2002. DATE OF ISSUANCE: ________________________________ PREMIUM FOR COVERAGE: ________________________________ POLICY NUMBER: ________________________________ NAMED INSURED: ________________________________ YOUR ADDRESS: YOUR PHONE: IMPORTANT: IF YOU FAIL TO PAY THE FULL PREMIUM BY 11:59 PM ON THE THIRTY-FIFTH DAY AFTER THE DATE OF ISSUANCE, YOUR POLICY WILL HAVE AN EXCLUSION FOR ACTS OF TERRORISM. IF YOU DECLINE COVERAGE, YOUR POLICY WILL HAVE AN EXCLUSION FOR ACTS OF TERRORISM. IF YOU DO NOT RESPOND, YOUR POLICY WILL HAVE AN EXCLUSION FOR ACTS OF TERRORISM. ____________ I ELECT TO TAKE COVERAGE FOR ACTS OF TERRORISM AS DEFINED IN THE ENCLOSED ENDORSEMENT. (ENCLOSE YOUR PAYMENT). ____________ I DO NOT WISH COVERAGE FOR ACTS OF TERRORISM AS DEFINED IN THE ENCLOSED ENDORSEMENT. __________________________________________ Representative Signature __________________________________________ Representative Printed Name Page 1 of 2 Endorsement Serial No. SP 1 934 0302 Includes copyrighted material of Insurance Services Office, Inc., with its permission. |
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| Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course. |
