What do you mean endorsements can get me into trouble?

By Ken Kukral

Sometimes one of the areas you least expect to be a problem can quickly lead to an E&O issue.  You wouldn’t think how and when you request an endorsement can get you into trouble but it can quickly become one.  The larger the loss, the higher a chance it can become an issue.

Some things to consider:

–        What do your carrier contracts say?  Most agency contracts spell out the procedures and contractual authority for how endorsements are to be handled.  Many times they give you a specific time period to submit requests for endorsements.

–        Is the endorsement you are requesting within your authority?  If not, you may need carrier approval and there may be a delay in getting that.  Make sure your client knows you are REQUESTING the endorsement and are waiting for approval.

–        Backdating issues.  How many times has you client contacted you because they need to add an additional insured and get a certificate of insurance in order to get one of their customers to release payment to them. (So you are finding out AFTER they have already completed the job!!!).  What effective date will the carrier use?

–        How do you handle situations where a carrier refuses to offer a particular endorsement required by your client? (Such as waiver of subrogation).  I am not sure this situation can be completely avoidable, but it does help to know your carriers and what endorsements are available “on their shelf”.  Be proactive and inquire about them during renewal negotiations with the carrier so you can let your client know what might be available (including costs).  They can hopefully then work these extra costs into their bids and cover their costs.  Many clients fail to notify their agents of contracts they sign and what they are required to comply with, until AFTER they have signed the contract.  Educating them beforehand gives you a “fighting chance” to help alleviate these issues later on.

–        How are you requesting endorsements?  Or how are you having your clients request them?   Many agencies have gone to online endorsement requests to help make the process more efficient.  I would recommend an “auto response” from your system, that the request has been received but not yet approved.  Let them know you will respond with a request for additional information or clarification or an approval from the carrier.  In terms of how you are requesting them, are you using an ACORD Policy Change Request form or some other standardized form?  This will bring a consistency to your process.

–        Are you setting up a task in your system to follow up if a response from the carrier has not been received?  Do you feel comfortable if a loss happened that involved the item in the endorsement request? I would rather sleep better and have certainty than have to worry about where things stand.

–        If you are in the process of exiting a contract with a carrier, have they spelled out how endorsement requests should be handled?  You have less leverage when parting company (no pun intended) so you want to make sure the procedures are spelled out precisely.

My intent here is to give you something to think about.  Many agencies do multiple endorsement requests each day and I think it can be an area where procedures and workflows can become lax and lead to future problems.  Please go back, review your procedures, tighten them up if needed and even conduct an internal audit so you can assure yourself that they are being done timely and consistently.  The days of doing endorsement requests via phone, on sticky notes or cocktail napkins or via voicemail are over.  Give your clients a form or specific instructions on how endorsement requests are to be handled when sending them their policies.  Let them know you want to do the best job you can for them and standardizing procedures is a key to making that happen.

Oh ya, don’t assume the carrier properly issued the endorsement.  Double check against your request and file notes before sending to the client.  If they are wrong, have the endorsement voided and have a new correct endorsement done.  I have been down the endorsement to the endorsement to the endorsement road before and if a seasoned insurance professional can get confused with this situation, imagine how a jury could become dazed and confused.

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