1. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) MODULES BIG “I” RISK MANAGEMENT Presented By: James C. Keidel, Esq. Christopher B. Weldon, Esq.

2. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) Who We Are: James C. Keidel, Esq. jkeidel@kwcllp.com Cell: (203) 470-9921 Christopher B. Weldon, Esq. cweldon@kwcllp.com Cell: (203) 984-5394 Keidel, Weldon & Cunningham, LLP URL: www.kwcllp.com

3. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) 925 Westchester Avenue. White Plains, NY 10604 (914) 948-7000 Fax (914) 948-7010 303 Jefferson Blvd. Warwick, RI 02888 (401) 773-7730 190 Old Ridgefield Road Wilton, CT 06897 (203) 869-2200 167 Broadway Bayonne, NJ 07002 (201) 490-7706 400 Greenwood Avenue Wyncote, PA 19059 (215) 821-1172 Keidel, Weldon & Cunningham, LLP 120 West 45 th Street New York, NY 10017 (212) 753-1000 4625 Onondaga Blvd. Syracuse, NY 13219 (315) 425-1100 URL: www.kwcllp.com

4. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) E&O RISK MANAGEMENT: MEETING THE CHALLENGE OF CHANGE Agency Defenses – Documentation

5. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) INTRODUCTION Documentation combined with invariable and consistent agency procedures/practices are key defenses If an E&O claim occurred in your agency today, would the agency be prepared to defend itself? Do you have the proper policies and procedures in place to insure that your Agency could mount a compelling defense?

6. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) INTEGRATION OF MULTIPLE AGENCY SYSTEMS “Agency management information systems” (or “AMIS”) Document management software Email systems such as Outlook Websites, social media, and instant messaging Phone systems Voicemail-to-text software Carrier underwriting and policy issuance systems Computer faxing Integration with your tablet and/or PDA

7. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) HE SAID VS. SHE SAID E&O claims or potential claims can often come down to “he said, she said” scenarios involving a lack of coverage or insufficient limits. Documentation of transactions and interactions with customers is the most important factor in defense of an E&O claim. Documentation must also be tied to invariable and/or consistent internal procedures and practices to bolster your claims defense

8. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) IMPORTANCE OF INVARIABLE & CONSISTENT PRACTICES Documentation can verify what ACTUALLY took place. How do you defend against allegations of failing to follow through on a request when you have no record of any contact between the agency and the other party? When the agency needs to prove that it didn’t do something or the request was never received, that is when consistent business procedures provide a defense. “Everyone doing it the same way, all the time, for everyone.”

9. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) DOCUMENTATION LINES OF DEFENSE Documentation Invariable and/or Consistent Documentation Practices Use of Disclaimers Written Follow-ups E&O Coverage Checklists

10. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) LET THE FILE TELL THE STORY It is not just the quantity of the documentation that is important, but also its quality The sufficiency of documentation is revealed at the point it is retrieved, not when it is created. Documentation can make the difference between providing a defense against the allegation(s) and the need to settle

11. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) WHAT MAKES DOCUMENTATION COMPLETE? WhoWhatWhenWhyWhereHow

12. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) Documentation: The Five Most Important Aspects 1.Date, time and duration 2.Name and title of participants 3.Means by which conversation took place (O/C, T/C and CP/C) 4.Salient points of conversation 5.Follow-up in writing

13. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) CHANGING COMMUNICATIONS METHODS Communication methods have changed. With more ways to communicate it is easy for certain correspondence and conversations to miss finding their way into the customer’s file. More relaxed correspondence with certain communication media. Professionalism must be maintained with all types of communication documented and clear to all parties.

14. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) What types of communications should be in the customer file? In-person Discussions Phone Calls (landline and mobile) Emails Instant Messages Live Chats Faxes (traditional and electronic) Text Messages Websites Social Media Voice Media

15. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) CHARACTERISTICS OF PROPER DOCUMENTATION Documentation should be clear, concise, consistent; include what was done or discussed with specific dates and times. Don’t use random abbreviations or jargon that could be misunderstood. Everyone a the agency should be using the same abbreviations. Documentation should include unalterable date/time stamp (Note: this is only possible in an automated environment). Be able to recreate the transaction step-by-step – Transaction Log

16. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) CHARACTERISTICS OF PROPER DOCUMENTATION All staff should use the same system and procedures in documenting customer files. Daily activity logs, copies of change orders, premium adjustments, premium audits, applications, renewal applications, declaration pages, and access to all policy forms should be in the file first or secondarily easily accessible using a carrier website

17. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) THINGS TO AVOID Comments about a claim, its merits, or your opinion as to whether or not there is coverage Resist the urge to go to bat in writing for your customer when a claim is denied Just the facts - personal asides and comments should not be included Do not put E&O claim information into the file of the customer involved-Keep a separate file Do not create internal memos on the incident as they can be discoverable

18. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) Key Elements of the Customer File The ultimate goal of documentation would be to have every point of contact with a prospect, customer, carrier or outside third party documented- a complete transaction log is key Here are some things you should think about documenting: – New business: coverage and exclusion discussions – Limits and values – Schedules – Coverage checklist – Policy delivery meetings – Endorsements and Cancellations – Claims – Renewals: coverage and exclusion discussions

19. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) CARRIER CLAIMS AGAINST AGENTS Keep in mind that the frequency of claims involving carriers against agents is increasing, so it is important to document all carrier correspondence and conversations.

20. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) DOCUMENTATION AND YOUR DEDUCTIBLE Good documentation protects the agency and can potentially save the agency money at the time of a claim! If your agency’s E&O coverage is with Swiss Re Corporate Solutions and the agency has implemented sound documentation procedures for the offer and rejection of coverage there is an opportunity to save thousands of dollars under Swiss Re Corporation Solutions’ “Deductible Reduction” feature.

21. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) ELECTRONIC VS. PAPER FILES Use only one file storage method and all transactions pertaining to a customer should be located in that file. Electronic files provide a stronger and more credible defense than paper files since as data is created, edited and expanded upon, the automation system records the date and time of these changes. Paper files have the disadvantage, when used as a form of defense, in potentially lacking credible proof as to the exact time and date that the documentation was created Do not maintain a duplicate or “secret” paper file

22. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) ELECTRONIC VS. PAPER FILES Documentation is only effective if the information in the files can be considered accurate Any possibility that the information can be found suspect will diminish or eliminate the protection that documentation provides the agency There needs to be only one source of customer information. Today, that information is likely more effective when it is in electronic form.

23. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SCANNING Agencies may be slow to replace old procedures with new scanning technology. This is a critical area and agencies struggle to eliminate paper, even though the tools to do so have existed for many years. Operations management is the key to successful implementation and oversight. Scan and verify before disposing of paper documents. Once paper has been scanned, it should properly be disposed of. “Scanning” is just one part of total document management.

24. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) Admissibility of Electronic Files Courts have recognized the admissibility of electronic records in court cases. Electronic records may be considered credible because of the ability to determine when information was entered into the automation system. Computer generated correspondence has the date and time produced embedded in the system; therefore, alterations are not easily accomplished. Most copies of original documents are no longer necessary as long as the agent can produce a hard copy of original documents through electronics means.

25. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) ELECTRONIC SIGNATURES The Electronic Signatures in Global and National Commerce Act (ESIGN) was enacted in 2000 ESIGN makes electronic contracts and signatures legal and enforceable as paper contracts with ink signatures. Important for agencies when it comes to signatures on applications, proposals, quotes, and policies. Most states have their own laws relating to electronic signatures which agents should be aware of.

26. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) DEFENSE METHOD - CHECKLISTS Roadmap of products offered to customer. Document coverages offered, accepted, rejected or not applicable. Promote consistency on options offered to customer Makes customers think about risks that they may need to insure Can help avoid claims from: – Failure to procure the coverage requested – Failing to recommend coverage – Failing to identify exposures – Not adequately explaining policy provisions

27. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) Customer sign-off, Acknowledgement Forms, Written follow-up The defense of an E&O claims can be bolstered when the customer file includes a customer acknowledgement that an exposure exists, coverage is offered, and the insured makes the decision not to transfer the risk through the purchase of an insurance product. Customer acknowledgement can be documented by the agency through the use of customer sign-offs, coverage acknowledgement waiver forms, and written follow-up of discussions.

28. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) CUSTOMER PROPOSALS Insurance proposals can provide a wealth of defense documentation, including: – outlines coverages offered – highlights coverage limitations – any insured requirements – E&O coverage checklist Customer sign-offs acknowledging what was discussed should be included It is also a good idea to have the customer initial each page of the proposal and sign at the end

29. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) PROPOSALS – CARRIER SYSTEMS Many agencies may present proposals exactly as they are generated from carrier underwriting systems. The pros and cons of using carrier generated propoals These proposals may not include appropriate disclaimer information or an area for customer sign-off. The agency should add an appropriate disclaimer at the front of the proposal and an acknowledgement line for the insured at the end of the proposal

30. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) WAIVER FORMS Some states require acknowledgement waivers to be signed for various coverages (i.e. – UM/UIM, earthquake, flood) ACORD also offers some template forms. Carriers may specifically require waivers when certain coverages are rejected. Waivers are important for E&O defense; therefore, agencies need to determine when a waiver is required and make sure they are obtained.

31. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SIGNED APPLICATIONS A carrier may not require a completed and signed application; however, a completed and signed application should be obtained from all insureds. Insurance policies are legal contracts and as such are subject to the common law rule of “parol evidence” where the application is part of the policy. Once the policy has been issued the agreement between the insured and the carrier is what is in the policy, not in any proposal or oral promise made before the policy’s issuance.

32. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) DISCLAIMERS Disclaimers aide in the defense of E&O claims and reinforce customer communications with clear guidance. Nearly all of communications media can include disclaimer language. – Voice Mail – Websites – Fax, Email, and Instant Message Sample – Claims Reporting – Social Media – Proposals

33. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SAMPLE VOICE MAIL DISCLAIMER  Please be advised that you cannot bind or modify coverage or report a claim via the voice mail system.

34. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SAMPLE WEBSITE DISCLAIMER Statements on this website as to policies and coverage is not and offer to sell insurance. Insurance coverage cannot be bound or changed via submission of any online form/application provided on this site or otherwise, email, voice mail of facsimile. No binder, insurance policy, change, addition and/or deletion to insurance coverage goes into effect unless and until confirmed directly by a licensed agent. Any proposal of insurance we may present to you will be based upon the information you provide to us via this online form/application and/or in other communications with us. Please contact our office at [insert phone number] to discuss specific coverage details and your insurance needs. All coverages are subject to the terms, conditions and exclusions of the actual policy issued. Not all policies or coverages are available in every state. Information provided on this site does not constitute professional advice; if you have legal, tax or financial planning questions, you should contact an appropriate professional. Any hypertext links to other sites are provided as a convenience only; we have no control over those sites and do not endorse or guarantee any information provided by those sites.

35. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SAMPLE FAX, EMAIL AND INSTANT MESSAGE DISCLAIMER  This transmission contains information that may be confidential or privileged, and is intended only for the recipient identified above. If you received this transmission in error, please notify the sender immediately, delete all copies, and be aware that any disclosure, copying, distribution or use of the contents of this transmission is strictly prohibited. Also, for your protection, coverage cannot be bound or changed via voice mail, email, fax, or online via the agency's website, and is not effective until confirmed directly with a licensed agent.

36. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) AN ADDITIONAL SAMPLE EMAIL DISCLAIMER  Please note that email is not effective to bind or amend coverage or report a claim until such time as you receive a written confirmation from us advising that your request has been processed.

37. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SAMPLE SOCIAL NETWORKING DISCLAIMER  The (Agency Name) cannot bind or alter coverages or accept reported claims via social networking. Further, the information provided is intended for general situations and should not be used to communicate client specific information to the agency. Any content a customer provides became the property of the agency and the agency is at liberty to add, modify or delete any content that is not acceptable.

38. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) SAMPLE PROPOSAL DISCLAIMER TThe abbreviated outline of coverage used throughout this proposal is not intended to express any legal opinion as to the nature of coverage. The abbreviated summary of insurance coverage set forth in this proposal is subject to the terms, conditions and limitations of the policy(ies) in current use by the insurance company listed for the summarized coverage and, for any questions on the limitation of coverage summarized throughout the proposal, one may ask for a specimen copy of said policy(ies) to more fully understand the limits, conditions and exclusions.

39. DOCUMENTATION RETENTION CONSIDERATIONS The documentation contained in the customer file that should be retained and for how long may be dictated by your state’s law. The agency should be familiar with these laws and your IIABA state association or insurance division can likely provide direction about existing laws and how they apply. Agencies should have a records retention and records destruction policy. Best Practices is seven years from when a document becomes inactive

40. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) WHY DOCUMENTATION RETENTION? Customer information is the agency’s largest asset. Retaining policyholder records allows the agency to continue to retain accounts and offer an increased level of service over the customers’ life cycle Agencies should not want to rely on their carriers to retain customer records since the record retention policies of carriers may not be in line with the goals of the agency. File documentation is rule number one when it comes to protecting against an E&O claim. When retaining files, be sure to include any correspondence regarding coverage decisions, waivers, signed applications, etc. Any retained dead file should provide a story in the same manner as active files.

41. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) OTHER DOCUMENTATION RETENTION CONSIDERATIONS Different issues exist with paper and electronic files. Just because it is cheaper to keep electronic files forever, doesn’t mean you should. Older paper records may not contain the same level of documentation as is being utilized in current operations

42. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) KEEPING POLICY FORMS? Some carriers have stopped providing paper policies or give the agency the option. Agencies may have to decide if they will rely on the electronic policy view to access the policies/endorsements from the carrier’s website or to retain policies in their office. Important to have at least one master policy form and to retain declaration pages referencing coverages, exclusions and coverage form numbers and editions.

43. Copyright © 2012, Big I Advantage®, Inc., and Swiss Re Corporate Solutions. All rights reserved. (Ed. 08/12 -1) DISPOSAL OF CUSTOMER FILES Security of private information is an on-going issue The privacy of confidential information is important and security breaches may put the agency at risk of regulatory action or civil or criminal litigation Disposal of private information requires special handling and agencies should have a process in place to protect the disposal of private information. This should be part of the agency’s document retention/destruction procedures