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E&O Issues for Broker

Type of Case:  E & O Issues for Broker
Issue:  Can Insurer deny coverage if an E & O policy terminates before a claim is tendered?
Answer:  Yes

Facts:  Real Estate Broker received a claim in the form of a letter alleging professional negligence. He called the Insurance Agent to whom the claim was supposed to be reported. The Agent advised him not to tender it until a lawsuit is actually filed. Subsequently a lawsuit was filed and the claim was tendered. The Insurer denied coverage saying that the claim was not tendered until after the policy terminated.

Result:  Fortunately, Broker had documentation of his phone call to the Insurance Agent including a phone bill showing the call was made the day the letter claim was received, which was before the policy term had expired. Once the Insurance Carrier received this information, it reversed its position and provided coverage.

Lesson:  This is actually a common occurrence. E & O policies are issued on a Claims Made or Claims Made and Reported basis. Under a Claims Made policy the claim must be made during the policy period in order for coverage to apply. Under a Claims Made and Reported policy the claim not only has to be made during the policy period but it must be reported to the Insurer during the policy period. The best choice is to always submit any claim or potential claim to avoid the risk of losing coverage. This is particularly important if the policy is going to expire in the next thirty days.

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