By Chris Boggs | CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, is IIABA's Executive Director Risk Management and Education

Focus is key! From an errors and omissions (E&O) perspective, agents cannot lose focus during this disrupted work setup. Working from home does not change the fact that all procedures and processes that apply in the home office also apply at the "home" office.

From now until we are released from our lockdown and able to return to normalcy, we must remember that every action or inaction has consequences - good or bad. There are a few simple rules or guidelines agencies and agents should follow during this unprecedented moment in time to avoid or lessen the effects of an errors and omissions claim. 

Rule #1: Document! Document! Document!

Franklin D. Roosevelt may be the most famous cheerleader of all time (other than Toni Basil). It’s true. As a student at Harvard he was a cheerleader for home football games. Some years later, he led the country through World War II, using his fireside chats to calm America’s tensions and fears. He was still a cheerleader. Given the tensions and even insecurity some feel as we live through our current pandemic panic, we need a cheerleader and simply a leader to keep us calm and to keep us focused. Roosevelt was a forward thinker; he actually wrote a cheer to help agents remember Rule #1 for working from home. Are you Ready? OK! Document day; Document night; Document left; Document right; Document, document, document! Yea, document! OK, so maybe this isn’t a Roosevelt original, in fact it’s a pure fabrication – but the point is no less relevant. Even when working in a non-traditional space, remember to document every conversation, text, email, yell, whatever. When it involves a client, document it.

Rule #2: Keep the Schedule You Had at the Office

No, this isn’t limited to “open” and “close” times; this refers to regularly scheduled staff and team meetings. Not being in the same room is no excuse for ending activities necessary for the successful operation of the agency. Basically, if it was important for the agency and the teams leading up to the disbursement, it still is.

“We have our normal commercial lines staff meeting on Mondays at 10. We go over new and renewal business, lost accounts, cancellations, claims, accounts with issues, industry news and current events and any issues that popped up that need to be addressed,” reports one agent. “We also have individual team meetings for personal lines and employee benefits.”

Another agent tells us, “Zoom is our new contact method for client meetings and for meetings with staff. We have ‘Town Hall’ meetings every Friday afternoon with all employees; producer meetings every Monday morning; the commercial lines, personal lines and employee benefits teams have staff meetings once per week; and the Leadership team has probably had Zoom meetings 10 times over the past three weeks.” E&O Exposures: Increased When Working from Home? PROFESSIONAL LIABILITY. Keeping everyone connected and informed is paramount when everyone is in the office. But when there is no office “atmosphere,” keeping everyone connected and informed is even more important.

A cornerstone of these meetings should be policies and procedures. Pick one errors and omissions topic and remind every person on the call of the office procedure relevant to that topic. This conversation does not have to take more than three or four minutes. One topic, one reminder - this keeps the staff on course. 

Rule #3: Keep "Them" Close and Informed

Your clients and your carriers are living in this same altered reality in which you are living. Any sense of normalcy is welcomed.

Stay in contact with your clients and keep them informed. As their agent, your insureds will likely turn to you more now than in the past. News reports, press releases and the problem of “someone told me” will certainly spread a lot of misinformation among your customer base.

To manage and hopefully end the spread of misinformation, you need to know the correct information. Know policy language, know the carrier’s processes and plans, know the insurance regulations, and know when to say “No.” From an E&O perspective:

• Never answer a coverage question without the insured's policy in front of you. Even the most "common" policy has "uncommon" endorsement you may forget were attached.
• Not every carrier is the same; in fact, no carrier is like any other carrier. Know the underwriting guidelines and what can and can't be done for the client. Don't promise something until after you know it can be delivered. 
• Don't practice outside your licensure. As a licensed agent, your job is to procure and manage the insurance program with and for the client. You are not licensed or qualified to offer an opinion on contract wording or other legal matters. 

Remember also, you are not licensed to help complete federal forms unrelated to insurance. Direct the insured to the proper professional; don’t create an E&O problem by being too helpful.

Your underwriters need to hear from you as well. In fact, they may want to hear more from you now than in the past because they may be lonely. Kind of a weird thought, but many underwriters are used to working in an office with other humans; being alone is hard on them. Even field underwriters who normally work at home are accustomed to meeting with and talking with agents face to face on a regular basis.

Keep the underwriters informed when something new is learned about a client. Talk with them about unusual situations or unusual requests made by the insured. You and your underwriter may be able to find creative solutions that best serve your client and the carrier. You also want to know what the carriers are thinking and planning in regard to renewals. Are there new endorsements coming that may limit coverage? Find out during these “keeping in touch” calls, it may help avoid an E&O situation.

Many insureds are concerned about money as a result of state-mandated lockdowns. Commercial lines clients may essentially be out of business, personal lines clients may be out of a job; the result is the same for both clients - fear. The fear of having to choose among feeding their family, paying the bills or paying insurance premiums. When this question arises, this is a conversation that involves both your insured and your insurance carrier. Everyone must be informed.

When the specter of policy cancellation appears, address it directly and appropriately. 

• Know if your state has enacted any temporary measures regarding cancellation for non-payment. Current information is available here.
• If a regulation is in place, advise your client of the regulation and give them a copy of the wording. 
• Advise your insured to never cancel any policy and document the conversation. 
• If the insured insists on cancelling any policy, make use of a cancellation notification letter. 

Rule #4: Recognize Potential Weaknesses

“One of my E&O concerns is our new producers and what they are telling prospects and customers. Are they writing the correct coverages on new and renewal accounts? We do have mentors for each of the new producers and we hope nothing is falling through the cracks,” reports one agent.

This agent’s concern is probably the same as many other agents, what are the new, less experienced employees doing? Are coverages being written correctly? Are questions being answered correctly? Do they know and understand the agency procedures well enough to properly protect the client and us?

These are valid concerns. One drawback of working from home is the loss of “quick confirmation.” Generally, employees have the ability to quickly check their understanding of the policy language, an underwriting guideline or anything else with someone in the office; all they have to do is walk to someone’s desk and ask for help.

Well, unless there is an open-line Bat Phone there is no one to ask and get an answer from quickly. Emails, instant messages and/or phone calls have to be made to get the answer. Some agents feel like the insured is unwilling to wait for an answer and will just “wing it” and hope they are correct, or that if they are wrong, nothing will happen to highlight the error.

Make sure every employee understands this is NOT OK. It is never acceptable to “wing it,” and the current situation does NOT change that fact.

Train every employee, not just the new employees, that it is acceptable for them to explain to the client that they don’t know the answer or that they want to confirm the answer. Rarely is the insured unwilling to wait for a correct answer. “Mr. Insured, that is a great question. Let me confirm the answer and call you right back. I would rather give you the correct answer the first time.”

Then, do what you promised. Get the answer as quickly as possible and call the insured back as soon as possible. The insured will be satisfied and you will be able to sleep well. (Oh yeah, don’t forget to document the conversation and follow up in writing with the insured.)

Last Rule: Don't Forget Your Upbringing

As my kids got old enough to go out with friends and on their own, I would always say, “Remember who you are; whose you are; and who you represent.” My goal was to impress upon them that their actions affected more than just them.

Every employee’s actions affect the agency – positively or negatively. It is necessary to remind your employees, often, that what they do matters; not only does it matter to them, it matters to everyone in the office.

Train them, retrain them, and train them some more on E&O avoidance. Make it part of the fabric of the agency. Make it important. When it is important to the leadership, it is important to everyone.

Now that they are “out on their own,” in some respects, training will show. That statement should bring you comfort, not scare you. If it scares you, let’s talk. 

Learn more about Big "I" agency risk management here. 

By: Chris Boggs | Big "I" Virtual University Executive Director

Company Bulletin 2020-15 issued June 8, 2020, by the Illinois Department of Insurance (IDOI) threw key provisions of the business income policy out the proverbial window. In its  bulletin, the IDOI addressed the recent riots and how thedepartment expects insurance carriers to respond.

In a press release accompanying the bulletin, the IDOI and Governor’s office stated: “Damage to businesses followsdramatic declines in revenue for businesses across the state as a result of COVID-19 pandemic. As the state works with businesses to recover, the governor’s office and IDOI have made expectations clear to insurance companies.”

To clarify the IDOI’s expectations, the bulletin states, in part:

The Department hereby requests that all insurers licensed or authorized to transact insurance business in this Stateimmediately implement the following protective measures:

• To the extent business interruption provisions are included and operative under a policy, insurers should base payouts on business activity levels that eliminate the impact of COVID-19.

Note the highlighted phrase. The IDOI is directing theinsurance carriers to pay losses they do not owe. Why do the carriers NOT owe the loss when coverage is written using Insurance Services Office (ISO) or similar language? Because both business income policies, CP 00 30 10 12 - Business Income Coverage Form-With Extra Expense and CP 00 32 10 12 - Business Income Coverage Form-Without Extra  Expense, apply the same methodology for determining

business income loss payments, specifically both policies state:

3. Loss Determination

a. The amount of Business Income loss will be determined based on:

(1) The Net Income of the business before the direct physical loss or damage occurred;

(2) The likely Net Income of the business if no physical loss or damage had occurred, but not including any Net Income that would likely have been earned as a result of an increase in the volume of business due to favorable business  conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses;

(3) The operating expenses, including payroll expenses,necessary to resume “operations” with the same quality of  service that existed just before the direct physical loss ordamage; and

(4) Other relevant sources of information, including:

(a) Your financial records and accounting procedures;

(b) Bills, invoices and other vouchers; and

(c) Deeds, liens or contracts.

Paragraph 3.a.(2) in both ISO’s business income policies state that the loss is partly determined based on the LIKELY Net  Income. If the business was considered “non-essential” and was thus closed in an attempt to control the spread of COVID-19, the likely Net Income is zero. No dollars were being earned.

IDOI is strongly suggesting (maybe requiring) insurancecarriers to ignore this and similar policy language. Carriers appear to be expected to pay business income claimsresulting from riots and looting as if the business was fully operational.

The Independent Insurance Agents and Brokers of America (Big I) addressed the issue of covered losses occurring during the period of shut down as a result of COVID-19 in late March. As was specified in this article, the only business income loss any carrier should owe is the amount of income lost AFTER the business COULD have opened but was not able to because of the property damage.

Any carrier paying claims not supported by policy language is doing so in violation of the principle of indemnification, the cornerstone of property insurance. Paying losses unsupported by policy language puts the insured in a better position than they would have been had these losses not occurred. This is a slippery slope carriers need to stay off.

In this week's Big I Buzz, we are discussing new changes coming to IIAW Committees, how agents can adapt to the "new normal" and how major US insurers see lower coronavirus costs than expected. 

New, Exciting Changes to IIAW's Committees

The IIAW Committees are more important than ever! With the launch of our Online Community on November 1st, we will be moving our current committees online, and committees will now be called "Groups".

Group participation in our Online Community with be recognized and awarded! Earn gift certificates to your hometown restaurants, donations for your favorite local charity, IIAW swag and prizes.

If you're new to the Association or have thought about joining a committee in the past, now is the time to join as a Thought Leader on our new Online Community. A "Thought Leader" is an industry leader for topics within a Group. If you want to join a Group without being a Thought Leader, you can! Three is no limit to the number of Groups you can be a member of. The invitation to join a Group as a member and not a Thought Leader will be sent at a later date. Learn more about the Online Community, its Groups and Thought Leaders here. 

Digital, Accelerated: How Agents Can Adapt to the New Normal

With easy, instant, online buying experiences now the norm, consumers have come to expect the same from every company they do business with. COVID-19's impact on our everyday normal has accelerated the shift towards digital. Foundational tools for a digital shift internally include agencies setting up a virtual private network (VPN), investing in a cloud-based agency management system (AMS) and also, setting up a Voice over Internet Protocol (VoIP) phone system to let your staff make and receive calls from your office number even if they are working from home. Read more from Independent Agent here. 

Major US insurers see lower coronavirus costs than expected

A new Q2 2020 report of five insurers that have large US operations shows what they call a 'relatively modest $2.5 million blow'", according to analysts cited by Reuters. "The $2.5 billion loss is lower than was initially feared and the loss has been absorbed by the industry without insurers resorting to more bad tidings in the form of major claims just around the corner, considering that the coronavirus continues to spread," according to Insurance Business Magazine.

For more news, check out the Action News section of our weekly e-newsletter, Big I Buzz. If you aren't subscribed, click here to add your email to our mailing list. We hope that everyone has a great rest of their week!

States are in various stages of reopening following months of COVID-19 lock downs. As the states progress through the phases, businesses are making key decisions regarding masks, should masks be required or optional? Some legislatures have taken the    responsibility for this decision away from business owners and are requiring masks be worn; but other states leave the decision to the business owners.

In states where the decision rests with the business, some operations have made the corporate decision to require masks be worn by all who enter the premises. From a legal liability perspective, is this necessary?

Legal Liability

Legal liability is liability imposed by the court or regulators on the person or entity legally responsible for injury or damage suffered by another party. Such legal obligations (or liability) can arise from intentional acts, unintentional acts, contracts (express or implied) or regulations. Legal liability generally focuses on civil wrongs but can include criminal wrongs. “Legal liability” exists when:

• The wrongdoer is found guilty of “Negligent Conduct” (breached the duty owed);

• The injured party suffers actual damages; and

• The wrongdoer’s “negligent conduct” is the proximate cause of the injury or damage.

A key requirement towards proving “negligent conduct” and ultimately legal liability is proving that the supposed tortfeasor (the wrongdoer) has or owed the injured party a specific duty of care and breached or failed to satisfy that duty. The degree of care owed to an injured party is based on the relationship between the wrongdoer and the injured party.

The greater the degree of care required or expected, the lower the threshold for breaching a duty owed (it is easier to breach a duty when greater care is required). Courts generally recognize four degrees of care or “levels” based on relationships are:

• Slight Negligence: A high degree of care is required;

• Ordinary Negligence: Requires “reasonable” care such  as would be provided by a reasonable and prudent  person;

• Gross Negligence: Very little care beyond slight care (not to be  confused with slight negligence) is required. This is represented by a deliberate or reckless disregard of a duty to exercise care which is  likely to cause foreseeable and significant harm; and

• Negligence per se: A breach of duty because the law says it is.  Negligence per se requires: 1) the at-fault party to violate the  law, 2) the law to pertain to public safety, 3) the violation of the  law be the cause of the injury, and 4) the injured person be a  part of the class of persons the law was designed to protect.

In a business/customer relationship, the business generally owes the customer a duty of reasonable care. While there are certain business relationships that increase the duty owed (such as that owed by an operation transporting passengers in a vehicle), reasonable care is the most common duty owed. For sake of this review, assume the business owes a duty of reasonable care.

Examples of duties owed by business establishments under the concept of reasonable care include repairing/correcting known hazards; warning against intrinsic/unrepairable hazards; and taking steps to avoid preventable hazards.

Consider the example of a restaurant that has several sets of steps in the path to the dining area, where a member of the wait staff has spilled some water and where the plate comes out of the oven very hot. Reasonable care in such a restaurant might include actions such as the person showing the customer to a table warns of the steps (“watch your step”), the wait person puts up a little yellow sign warning of the wet floor, and the person delivering the food says, “Be careful, the plate is hot.” These are examples of reasonable care.

Let’s return to the question of masks and legal liability associated with requiring or not requiring them. For this discussion, the injured party moves from a restaurant (it’s hard to eat while wearing a mask) to a retail location.

From the perspective of reasonable care, are masks necessary to avoid legal liability?  

(Note, this discussion does not and will not address the availability or applicability of liability insurance coverage. Only the concept of legal liability regarding customers in a typical retail setting is addressed in this article.)

Effectiveness of Masks

Before exploring the relative differences in legal liability between requiring masks and allowing customers the option, the purpose and effectiveness of masks must be considered. Discussions focused on the effectiveness of masks may be more complicated than the  concept of legal liability because of the emotions and the lack of clear

information surrounding the wearing of masks.

Purpose: The Centers for Disease Control (CDC) and the World Health Organization (WHO) both state there are essentially two “grades” or levels of masks: 1) those that filter out the virus designed to protect the wearer from contracting the virus and prevent the wearer from spreading the virus; and 2) those intended to prevent the wearer from spreading the virus, but that do not necessarily prevent the wearer from contracting the virus. The masks most often worn by the public are the second type – masks intended only to prevent the spread and not the contracting of the virus.

Effectiveness: Unfortunately, the question of effectiveness seems to be unanswerable. Some claim the masks are very effective (giving percentages of protection without credible source substantiation) and some say they are little more than a “feel good” measure using drywall dust and even smoke to prove the point. Even the CDC and WHO are inconsistent in their messages. In regard to legal liability, effectiveness is largely irrelevant.

Masks Optional

Business operations choosing to allow the customers to make the mask-wearing decision may subject themselves to accusations by a customer that he or she contracted the virus from an unmasked  person or persons in the store. The injured person may assert that close contact with an unmasked person or persons led to their  sickness.

Such charges may be impossible to prove. A virus is a humankind exposure and is not limited to a location where people are not wearing masks. If the claimant visited the grocery store, bank,  pharmacy, office and/or other places during any particular day, proving the only place where they were exposed to the virus was the grocery store would be of utmost difficulty. Add to this the reality that other members of the family may have been several places, contracted the virus, and brought it home to everyone else in the house. Lastly, the masks worn in public are not designed to keep the virus from getting in, they are designed to limit the expulsion of the virus from the nose and mouth.

Frankly, lacking a law to the contrary, the business owner does not owe the customer a duty beyond reasonable care. Reasonable care is limited to the premises and what the business can actually control; viruses exist in more places than just the business premises and a business cannot be expected to protect a customer from exposure in all aspects of a customer’s life. Narrowing the person’s exposure down to one business on one particular day is truly picking gnats out of pepper.

Additionally, the legal concept of assumption of risk may be an affirmative defense to the mask-optional discussion. Assumption of risk is a legal doctrine under which an individual is barred from   recovering damages for an injury sustained when he or she voluntarily exposed him or herself to a known danger. Put another way,   assumption of risk prohibits the injured party from seeking damages on the basis that the plaintiff (injured person) knew of a hazardous or potentially hazardous condition and willingly exposed him or herself to it.

Assumption of risk defenses require the defendant to show:

• The injured party had actual knowledge of the risk involved  (conspicuously post signs warning “Enter at your own risk, masks are  optional”); and

• The plaintiff voluntarily accepted the risk (they entered the store).

When a customer visits a business where masks are optional, they make a conscious decision to enter the premises or not. If the injured party assumed the risk by entering the premises, the law generally  recognizes the defendant no longer owes a duty to protect the plaintiff against that risk.

Given the relatively unclear requirements of reasonable care, the difficulty in proving the virus was contracted at a particular place on a particular day, the doctrine of assumption of risk, and the limited purposes of the masks, business owners are unlikely to be held legally liable solely because masks were not required of all customers.

Requiring masks may exceed the requirement of reasonable care. In fact, certain disabilities and ADA laws may make it impossible for all customers to wear a mask. If courts made mask wearing the  minimum standard of reasonable care, removing the freedom of personal choice generally granted to the business owner and the customer/citizen, in a sense, the court would “legislate” masks by making mask wearing the minimum standard of care while ignoring the protection of assumption of risk. Some states have already undertaken legislative efforts to protect business owners.      

Masks Required

Previous paragraphs addressed the types and relative effectiveness of masks. Does requiring all customers to wear a mask decrease the business owner’s potential for being held legally liable?

Health officials recommend (where not a requirement) masks be worn that prevent the spread of droplets and mists from the nose and mouth that may contain the virus. Again, these masks aren’t  necessarily designed to prevent the wearer from contracting the virus, but when every customer wears masks, the theory is everyone has a reduced (though not completely eliminated) chance of contracting the virus.

On the surface, requiring everyone to wear a mask appears to lower the chances that the business will be accused of contributing to or causing a person to contract the virus. Requiring a mask seems to be a physical manifestation of an exculpatory statement such as, “Not Responsible for Broken Windshields” or “Enter at Your Own Risk, Not Responsible for Injury.” The statement doesn’t make it so.

Individuals may be less likely to sue but requiring masks may not lower or heighten an operation’s legal liability for injury to a  customer – if it can be proven the virus was contracted at the location. What other steps were taken to protect the customer?

Legal liability is a function of duty and facts. Requiring masks of all customers may be above and beyond the duty of reasonable care owed to customers.

To Mask or Not Mask

Requiring masks or allowing customers to make a personal choice apparently has no effect on the business owners’ ultimate legal liability. What is the duty owed (reasonable care)? Did the owner meet the duty owed? If both questions are answered “yes,” the business is not legally liable for any injury suffered.

Can the infected person prove the virus was contracted at the business? Given the facts of a virus and particularly this virus (with its long incubation period), proving it was contracted in any one place on any given day is nearly impossible.

Holding a business legally liable without other clear and convincing evidence simply because customers were not required to wear masks forces the court to set a standard of care almost impossible to  maintain in the future. Every flu season or the event of another community sickness will subject business owners to a higher degree of care than ever required in history or should be considered   reasonable.

A virus is a natural organism that man can avoid only so long. Holding a business owner legally liable is unreasonable given the facts of care and the reality of a virus.

Requiring masks may dissuade some from naming the business in the suit; but not requiring masks likely does not increase the overall chances of being held legally liable.

In the final days of its 2019-20 term, the Supreme Court issued a decision with potentially vast implications for religious organizations.  In Our Lady of Guadalupe School v. Morrisey-Berru, the Court ruled that parochial school teachers do not, for the most part, enjoy protections under federal employment laws.  This decision, and the potential for the Court to expand on it in the years to come, could have a major impact on insured claims against religious institution employers.

The Our Lady of Guadalupe School Case and Decision

The Our Lady case is actually a combination of two employment discrimination cases brought by Catholic school teachers in the Los Angeles area.  In both cases, the teachers argued the schools terminated them for discriminatory reasons.  The first plaintiff, Agnes Morrisey-Berru, claimed her former employer fired her based on her age.  The second plaintiff, Kristen Biel, argued her former school terminated her because she had breast cancer.

Before delving into the Court’s opinion in Our Lady, however, it is necessary to discuss a bit of background.  In 2012, the Supreme Court considered a similar case in which a terminated parochial school teacher sued her former employer for discrimination under the Americans with Disabilities Act.  In that case, the Court recognized a “ministerial exception” to federal employment laws rooted in the First Amendment’s protection of the free exercise of religion.   Specifically, the Court dismissed the plaintiff’s suit, holding that the ministerial exception precluded her claim given that she had received extensive religious training, was considered a minister of her church, and her firing fell into a category of decisions religious institutions make that are essential to their central mission.

Despite important differences between the two cases, the Court reached the same decision in Our Lady as it did in 2012.  In the 2012 case, the Court ruled the ministerial exception barred the teacher’s ADA claims based on evidence that the fired teacher had extensive religious training and was considered by her church to be a “minister.”  The same could not be said for the Our Lady plaintiffs, as the two teacher plaintiffs in the case did not have any specific religious education credentials, and one of them testified that she was not even a practicing Catholic.  However, according to the Court’s majority opinion, whether a teacher has religious training is

inconsequential to the ministerial exception analysis.  What mattered in Our Lady was that the teachers taught religious curriculum, prayed with their students, and accompanied them to mass.  Ultimately, in dismissing the teachers’ claims, the Court held that the schools had initially made the determination that the teachers knew enough about Catholicism to teach the subject, and “judges have no

warrant to second-guess that judgment.”

Now What?

Despite the fact that both the Our Lady decision and the 2012 case involved teachers, the rulings could have much broader implications.  In her dissent, Justice Sotomayor criticized the majority, arguing it had destroyed the existing standard of review for the ministerial exception and replaced it with a single consideration: “whether a church thinks its employees play an important religious role.”  Not only could this “strip[] thousands of schoolteachers of their legal protection,” according to Sotomayor, it could also extend to “countless coaches, camp counselors, nurses, social-service workers, in-house lawyers, media-relations personnel, and many others who work for religious institutions.”

If you or your agency have religious institution clients, this decision, and its progeny, could have a considerable impact on the scope of potential employment-related claims and litigation.  If lower courts consistently (or even more 

broadly) apply the holding from Our Lady, it could greatly reduce the amount (or at least the success) of employment discrimination claims against religious institutions. Moreover, if Justice Sotomayor’s dissent proves prescient, the opinion could serve as the backbone for future decisions dismissing discrimination claims brought by any employee of a religious organization, or even claims brought by parishioners involved in community outreach or charity work.

Conclusion

In Our Lady of Guadalupe School v. Morrisey-Berru, the Supreme Court expanded the ministerial exception to employment discrimination claims brought against religious institutions.  While the case involved teachers at parochial schools, the decision may impact claims brought by any employees of religious organizations.  Keep an eye on this column and updates from the IIAW for related developments.