By: Mallory Cornell | IIAW Vice President & Director of Risk Management 

Reducing Exposures for Direct Commission Payments

Can I get a ‘woohoo’ for talking about E&O exposures?

Hello?

Anyone out there?

Just me, huh?

That’s ok, I’m not offended. I know there are a couple of you out there because I’ve had some great E&O exposure questions come in the past few months. The scenario below came in more than once so that’s my cue to make sure I share it with the greater audience – just in case you don’t want to call and ask.

Scenario: A licensed agent is writing life insurance on behalf of the agency but receives 100% commission and the commission check is sent directly to the agent.

If the commission is going directly to the agent, is there E&O coverage for that agent since its not funneling through the agency?

Sound familiar? It might and so should the term “insurable interest”. That is what your E&O carrier would need to show in order to cover any E&O issues that may arise between the agent and this customer.

E&O Coverage Tip: All company contracts should show the agency, not just the agent. Furthermore, business written between agents and costumers must be on behalf of the agency for that agent to be covered under the agency’s E&O policy.   

If you have a question about E&O coverage feel free to give us a call. Its likely you’re not the only person who is wondering and E&O risk might be more fun to talk about than you think.