Agents and brokers make a living by providing expertise to our clients. We promote our services by reminding people that they should seek an expert to help them choose the right coverage and the right price for their assets. “It’s crazy,” we tell them, “to blindly accept coverage and premiums without having an expert review your circumstances and options.” Yet, as agents, we are always signing contracts, non-compete clauses and various wavers, and having clients sign proof of loss; sometimes without even seeing it. And, we forget that special circumstances should be addressed by specialists. Just like a general contractor wouldn’t do the plumbing, electrical and finish work in a house, agents are wise to sometimes defer to specialists in special circumstances. And, it seems like common sense, but I believe it can never be said enough: Beware of what you sign. The choice of examples is so vast, I can hardly choose one to share. So, I’ll rest on the most recent one I heard from a fellow agent, concerning proof of loss: The agent’s commercial client had a bonding claim, when an employee stole merchandise from the client. The insured had proof and provided it directly to the carrier. The insured signed the proof of loss and was paid $11,000. A month later, the insured’s credit card statement came, and low-and-behold:

The same person had charged a bunch of personal items on the corporate credit card. The client submitted a second claim and the carrier declined it, citing the signed proof of loss, which closed the file on related claims for that individual with the company. This is a tough lesson: In this day and age, carriers understandably seek to speed the claims process. They often send proof directly to insureds and not to their agents. If a client calls his/her agent to tell him he got the proof, an agent is likely to say, “Sign and send the paperwork directly” to the carrier without having seen the actual waiver. Would/Should the agent have advised the client not to sign it? Seems like you are damned if you do and damned if you don’t. I asked respected industry expert and attorney Robert Sullivan, Esq., of The Sullivan Law Group, LLP what he thought an agent should do. Here’s what he said: “In circumstances where, as here, the insured has encountered some push back from an insurer on a claim, the best advice to the agent or broker is to refer the insured to seek legal counsel or retain a public adjuster.”

An agent or broker should always at least look at documents about which clients inquire but must be careful in rendering advice on documents that are anything other than routine. As agents, we are always signing various documents without adequately reading and understanding them or necessarily seeing them. And this could be dangerous!

Sullivan continued his warning: “Agents and brokers are routinely put in the posture of a claims adviser by virtue of the fact they undertake to process claims on behalf of their clients, thereby undertaking a duty of care not otherwise imposed upon them by common law. We agree that an agent should always at least look at a document about which he or she is giving advice but must refrain from giving advice on other than the most routine document. In this fact pattern, however, the insured was requested to not only sign a proof of loss, but was requested to also sign a “Release, Assignment and Subrogation Agreement.” This document should have alerted the insured that his rights were in jeopardy. Here, in our view, the agent or broker should never advise the insured concerning the legal effects of other than the most routine document but should advise the insured to retain a public adjuster or seek legal counsel.

“Finally,” Sullivan admonished, “it should be renumbered that insurers who do business in New York are prohibited under Insurance Regulations issued by the superintendent of Insurance from conditioning payment of undisputed portions of claims upon the signing of releases that effect the insured’s rights beyond the amount of the settlement. Such a practice may be deemed to be an unfair trade practice subjecting the insurer to regulatory sanctions and we would argue invalidates the release. [See 11NYCRR 216.6(g)]”

Agents sign contracts with carriers all the time. Another typical situation has to do with agency appointments. When a marketing rep. comes into your office and says, “Here’s your contract, sign it,” many agents will do it. Even if the agent says, “I’d like to read it,” the marketing rep, in an effort to expedite the process, might respond with by saying, “Well you can’t make any changes.” That’s a unilateral contract. But agents are eager to keep their markets, and they accept company appointment contracts blindly more often than I want to imagine. I can’t emphasize the importance of seeking the advice of a good attorney in circumstances like this.

PIA members are lucky. They have access to experts and specialists’ advice both from in-house attorneys who can review a carrier contracts for them and they have access to Bob Sullivan’s E&O expertise when they reach him through PIA’s Industry Resource Center. It’s an easy and cost-effect step to take and I can’t imagine why anyone would not take advantage of these services. But regardless of where you get your advice, for goodness sake, don’t sign a contract without having an expert take a look at it!