Failure to place coverage
A customer requested automobile liability coverage from her agent to be bound as of January 1. The agent misplaced the application and did not find it until January 10. The agent immediately bound coverage effective January 10. On January 11, the customer notified the agent that ton January 8, she was responsible for a three-car accident in which two people were killed. The agent was held liable for the total amount of liability coverage requested by the customer as of January 1. The agent was liable for $500,000.

Failure to update information
In March, a customer, with an agent's help, completed a life insurance application for ABC Life Insurance Company. The agent did not submit the application. On August 5, the agent met again with the customer to discuss coverage offered by XYZ Life Insurance Company. During the meeting, the customer confirmed that there had been no material change in his health since March. He authorized the agent to procure life insurance from XYZ Life. On September 15, the agent prepared an XYZ Life application using information from the ABC application and the August 15 meeting, signed the customer's name, and sent it to XYZ Life. The agent did not ask the customer if his health had changed between the August 15 meeting and September 15. In fact, the customer was treated twice, beginning on September 6, for viral pneumonia. The policy was issued October 6.

When the agent telephoned the customer to tell him that the policy had been issued, the customer's wife informed the agent that the customer had been hospitalized. The agent instructed the wife to pay the premiums, which she did. The agent forwarded the premiums to XYZ Life. The customer died on October 15. After XYZ Life denied the wife's claim, she sued the company. The court awarded the wife $500,000(the face amount of the policy) plus interest. XYZ Life successfully sought indemnification from the agent for the full amount of the judgment.

Cancellation error
A husband requested, in writing, that his agent cancel the term life insurance policy covering his wife. The agent mistakenly canceled the husband's policy, leaving the policy in force for his wife. Three weeks later, the husband died of a heart attack. The life insurance company denied coverage. The surviving wife sued the life insurance company and the agent, ultimately recovering the value of the life insurance policy including interest, plus punitive damages. The insurance company and the agent were held liable for the value of the life insurance policy $250,000, plus interest.

Renewal error
An agent renewed a local business owner's policy through the same carrier with whom the policy had been placed during the prior policy year. The client had disclosed on all prior and current applications that the majority of its cargo was shrimp. The agent failed to inform tthe client that this carrier no longer covered seafood under its cargo provision. The agent's error was discovered three months later when the client had a major shrimp loss and the carrier denied coverage. The agent was found responsible for the damages and incurred defense costs. The agent was held liable for the $35,000 shrimp loss, plus an additional $40,000 in defense costs.

Failure to consult with customer
A customer requested $1 million in replacement-cost coverage on a restaurant. The agent obtained quotes from several insurers, and the customer selected ABC Insurance Company. Before the policy was issued, ABC notified the agent that it could not issue replacement-cost coverage but proposed to write actual-cash-value coverage. The agent accepted the proposal without consulting the customer. When the restaurant was destroyed by fire, ABC paid only $435,000 - the actual cash value of the building. After settling with ABC, the customer sued the agent. The court found that the agent failed to exercise reasonable skill, care and diligence in procuring the requested coverage, and it awarded the customer $135,000, less the deductible and the actual-cash-value settlement already received.

Negligence
In discussing various automobile coverages with a customer, an agent failed to advise the customer that he should have collision insurance. While driving his new car, the customer skidded on a patch of ice and slammed into a telephone pole. The customer's policy did not cover damage to the car. The customer claimed that the agent failed to notify him of the importance of the collision insurance. The parties settled for $25,000.

Negligence
A company's risk manager purchased a directors and officers (D&O) liability policy for his company. The risk manager was not advised that the policy excluded coverage for employment practices claims, or that the company could purchase such coverage by endorsement. The risk manager became aware of the exclusion when an officer of the company was named as the defendant in a wrongful termination action. The company sued the insurance agent for damages suffered by the company, as well as legal expenses incurred, in a wrongful termination settlement. The company recovered from the agent the $250,000 they had paid to settle the original wrongful termination suit.

Misrepresentation
A lawyer decided to switch her professional liability coverage from her existing insurer to a new carrier. She asked her agent whether the new policy covered prior acts; the agent confirmed that it did. After the inception date of the policy, but before the policy was issued, the lawyer was sued for malpractice as a result of a wrongful act that occurred prior to the inception date. When the policy arrived, it indicated that the retroactive date was the same as the policy inception date; therefore, the claim was denied. The lawyer sued the agent for fraudulent misrepresentation. The lawyer was awarded $500,000.

Negligence
A surplus-lines agent placed Smith & Jones' professional liability coverage with Fly-By-Nite Specialty Insurance Company, a new company that offered the lowest rates for the requested coverage. Soon after the binding, Fly-By-Nite went bankrupt and was unable to pay its share of a claim filed against Smith & Jones. Smith & Jones sought recovery from the agent for failing to investigate the financial stability of Fly-By-Nite and for placing coverage with an unsound insurer. Smith & Jones were awarded $250,000 to cover the claim the insurer was unable to pay, as well as an additional $100,000 in punitive damages.

Negligence
ABC Insurance Company prohibited an agent from writing D&O lliability coverage on a bank without a regulatory exclusion. The agent bound the coverage without the exclusion. As a result of the mistake, ABC agreed to pay certain claims that otherwise would have been excluded. ABC sought indemnification from the agent. ABC Insurance Company was awarded $500,000, the cost of the claims that should have been excluded from the original policy.