The Top 5 Causes of Agency E&O Claims in 2020 – IA Magazine

Errors and omissions claims are the insurance agency version of stepping on a rake in a cartoon: the handle pops up fast, hits hard, and usually could have been avoided with one small change in behavior. In 2020, agencies were dealing with a strange mix of pandemic disruptions, remote work, changing client exposures, reduced driving, business shutdowns, coverage disputes, renewal pressure, and customers who suddenly read their policies with the intensity of a detective examining a ransom note.

IA Magazine’s 2020 agency E&O claims review, based on Swiss Re Corporate Solutions claim observations, offered a useful snapshot of where insurance agencies were most vulnerable. The broad lesson was not mysterious: most E&O trouble did not come from exotic coverage puzzles. It came from everyday agency workplacing coverage, explaining coverage, collecting accurate information, recommending appropriate limits, handling renewals, and documenting the conversation before everyone’s memory turns into soup.

This guide breaks down the top causes of agency E&O claims in 2020, explains why they happened, and offers practical prevention ideas for independent insurance agencies, producers, account managers, CSRs, and agency principals who would prefer their professional liability carrier to remain bored.

What Are Agency E&O Claims?

An agency E&O claim is usually an allegation that an insurance agent, broker, or agency made a professional mistake that caused a client financial harm. That mistake may involve failing to secure requested coverage, explaining a policy incorrectly, missing a renewal, sending wrong information to a carrier, mishandling a certificate, or failing to communicate an important insurer requirement.

In simple terms, the client says, “I thought I was protected.” The policy says, “Not for that.” The client then looks across the table at the agency and asks, “Why not?” That is the moment an E&O file can be born.

The 2020 Claims Landscape: Commercial Lines Led the Way

In 2020, commercial lines continued to generate the larger share of agency E&O claims, while personal lines still represented a substantial portion of the overall claim picture. Commercial general liability, commercial property, professional liability, commercial auto, and business owner policies were among the most frequent commercial lines involved. On the personal lines side, homeowners, auto, dwelling fire, crop, and farm owners coverage appeared prominently.

The pandemic shaped the year in unusual ways. Auto claim frequency eased in some areas because fewer people were driving. At the same time, business interruption questions, changing operations, remote work, property valuation issues, and renewal uncertainty created a very different kind of pressure. Agencies were not just selling policies; they were translating risk in real time while the world kept changing the script.

The Top 5 Causes of Agency E&O Claims in 2020

1. Coverage Was Not Procured

The most common and painful E&O allegation is also the most direct: the client expected coverage, but the agency did not place it. In 2020, failure to procure coverage was the leading error type in both commercial and personal lines. It is the classic “we asked for it” versus “we never got that request” dispute, and it can become expensive quickly.

Failure to procure can happen in several ways. A producer may forget to bind coverage. A request may sit in an inbox without a suspense date. A quote may be discussed but never accepted in writing. A renewal may be assumed to be automatic when it is not. A customer may request flood, cyber, employment practices liability, liquor liability, hired and non-owned auto, or umbrella coverage, only to discover after a loss that nothing was placed.

For example, imagine a restaurant owner asking about “full business coverage” before opening a new location. If the agency places a business owner policy but never addresses liquor liability, employment practices, cyber liability, or ordinance or law exposure, the client may later argue that the agency failed to identify and place needed coverage. The agency may respond that the client never specifically requested those coverages. Without documentation, both sides are left waving at a fog machine.

How agencies can reduce this risk

Use coverage checklists by industry, document all declined coverages, confirm binding instructions in writing, and send clear proposals that distinguish between quoted, bound, rejected, and unavailable coverage. A short email saying, “You declined cyber liability and umbrella coverage at this time” can be worth more than a heroic memory six months later.

2. Failure to Explain Policy Provisions

Insurance policies are not exactly beach reading. Even experienced business owners may not understand exclusions, sublimits, valuation clauses, coinsurance, actual cash value, replacement cost, vacancy conditions, business income waiting periods, professional services exclusions, or how additional insured status actually works. When an agency does not clearly explain important policy provisions, the client may believe coverage is broader than it really is.

In 2020, this issue became especially visible because clients were asking difficult questions about business interruption, civil authority, communicable disease exclusions, event cancellations, supply chain disruption, and changing business operations. A rushed or overly confident explanation could later become Exhibit A in an E&O claim.

The dangerous phrases are familiar: “You’re covered,” “That should be fine,” “It’s basically the same,” or “Don’t worry about it.” These words may sound comforting in the moment, but they can age like unrefrigerated seafood. Coverage determinations belong to the carrier, not the agency. The agency’s role is to explain options, identify issues, document requests, and encourage claim submission when there is a possible loss.

How agencies can reduce this risk

Explain major limitations in plain English. Avoid jargon unless you define it. Do not summarize complex coverage with casual promises. When a client asks whether a claim is covered, encourage prompt reporting to the insurer and avoid making final coverage decisions. A good rule: if the explanation would embarrass you when read aloud in a deposition, rewrite it.

3. Inaccurate Information Was Provided to the Carrier

Applications matter. Underwriters make decisions based on the information agencies submit. If the application contains incorrect payroll, sales, property values, driver information, loss history, occupancy details, square footage, operations, prior coverage, or safety controls, the carrier may issue terms that do not match the actual risk. When a claim occurs, that mismatch can become a coverage problemand then an agency problem.

Inaccurate information can be accidental. A client may guess at revenue. A producer may reuse last year’s application. An account manager may copy data from an old file. A field may be completed because the system requires an answer, not because anyone verified it. Unfortunately, “the system made me do it” is not a strong legal defense, even if it is emotionally satisfying.

Personal lines agencies face the same problem. A homeowners application may list the wrong roof age, occupancy status, distance to hydrant, business use, prior losses, or property condition. Auto applications may omit household drivers or business use. When the carrier later says it would have charged more, excluded coverage, or declined the risk, the agency may be accused of submitting bad information.

How agencies can reduce this risk

Require client review and signatures on applications, especially at renewal. Confirm material changes in writing. Do not let staff guess on behalf of insureds. Use agency management system notes to record who provided each key piece of information and when. Accuracy is not glamorous, but neither is explaining a misrepresentation dispute to a claims adjuster.

4. Failure to Recommend Adequate Limits or Coverage Type

Another major E&O driver in 2020 involved allegations that the agency failed to recommend adequate limits, values, or coverage types. This problem is especially common when clients buy based on premium rather than exposure. The cheapest policy can look terrific until the loss arrives wearing steel-toed boots.

Commercial property values are a common example. If a building is insured for too little, the client may face coinsurance penalties or a large uncovered gap. In liability lines, inadequate limits may become a problem when a serious auto accident, workplace injury, product claim, professional liability claim, or umbrella-triggering event exceeds the primary policy. On the personal side, homeowners may discover that jewelry, water backup, service line, home business, ordinance or law, or umbrella coverage was missing or too limited.

The agency does not always have a duty to guarantee perfect limits. However, agencies increase their defense position when they offer options, explain trade-offs, and document the client’s decision. A client can choose less coverage. The agency should not let the file make it look like no better option was ever discussed.

How agencies can reduce this risk

Offer at least one higher-limit or broader-coverage option when appropriate. Use exposure questionnaires. Document coverage rejections. Encourage professional valuations for property. For umbrella, cyber, employment practices liability, flood, and other commonly overlooked lines, create a repeatable offer-and-rejection workflow.

5. Renewal, Application, Policy Change, and Communication Breakdowns

Many E&O claims are not caused by one dramatic mistake. They are caused by a small workflow failure that quietly grows teeth. In 2020, renewal errors increased while some new business errors declined. That makes sense: agencies were handling disrupted operations, remote staffing, unusual client changes, payment issues, underwriting restrictions, and carrier appetite shifts.

Renewals are dangerous because everyone thinks they know what is happening. The client assumes the agency is reviewing everything. The agency assumes the client will report changes. The carrier assumes the application is current. Meanwhile, the building got renovated, vehicles were added, payroll changed, a new service was launched, or a subcontractor exposure appeared. Assumption is not a workflow; it is a tiny liability gremlin wearing a necktie.

Policy changes create similar risk. A client requests a vehicle deletion, location addition, endorsement, mortgagee update, named insured change, or certificate. If the request is not processed correctly and confirmed, the agency may face an E&O allegation after a loss. Communication of insurer requirements is equally important. If the carrier requires repairs, signed forms, payment, inspections, photos, or additional underwriting details, the client must know clearly and promptly.

How agencies can reduce this risk

Use suspense dates for every pending item. Confirm client requests in writing. Review policies after issuance. Compare the issued policy to the quote and application. Track carrier subjectivities. Build a renewal timeline that begins early enough to identify changes, remarket carefully, and avoid panic binding at the last minute.

Commercial Lines vs. Personal Lines: Different Risks, Same Lesson

Commercial E&O claims often involve recommendations, coverage types, limits, claims handling, renewals, and applications. Personal lines claims often involve applications, policy changes, renewals, issuance errors, and failure to duplicate prior coverage. The details vary, but the underlying lesson is consistent: agencies need disciplined processes, careful communication, and proof of what happened.

For commercial clients, the agency should understand operations, contracts, locations, autos, employees, professional services, cyber exposure, property values, business income needs, and additional insured requirements. For personal lines clients, the agency should verify household drivers, property characteristics, valuables, home business exposures, rental exposures, umbrella needs, and major life changes.

Why Documentation Is the Agency’s Best Friend

Documentation will not prevent every E&O claim, but it can dramatically improve the agency’s ability to defend one. The best documentation is timely, specific, and boring. It records what the client requested, what the agency recommended, what the carrier offered, what the client accepted, what the client rejected, and what remains pending.

Bad documentation says, “Talked to Bob. All good.” Good documentation says, “Spoke with Bob at 2:15 p.m. regarding renewal. Offered $2 million umbrella, cyber liability, and water backup endorsement. Bob declined umbrella and cyber due to budget; accepted water backup. Sent rejection confirmation by email.” One note is a shrug. The other is a shield.

Practical Prevention Checklist for Agencies

• Use written coverage checklists for commercial and personal lines accounts.
• Document all declined coverages, limits, and endorsements.
• Require signed applications and renewal confirmations whenever possible.
• Use suspense dates for every pending task, endorsement, subjectivity, and renewal.
• Never promise coverage before the carrier confirms it.
• Send claim notices promptly and to every potentially responsive carrier.
• Review issued policies against quotes, applications, and client instructions.
• Train staff to avoid vague language such as “full coverage” or “covered for everything.”
• Audit certificates of insurance for accuracy and avoid changing policy terms by certificate.
• Keep renewal conversations proactive, not reactive.

Experience-Based Lessons From Agency E&O Claim Prevention

After reviewing common agency E&O patterns, one practical truth becomes obvious: E&O prevention is not one grand heroic act. It is a collection of small habits repeated until they become agency culture. The agencies that defend claims well are not always the biggest, flashiest, or most technologically advanced. They are the agencies that can answer basic questions with confidence: Who asked for the coverage? What was offered? What was declined? When was it bound? What did the policy actually say? Who followed up?

A useful experience from agency operations is that most preventable E&O problems begin with a soft spot in communication. A producer may have a great conversation with a client, but if that conversation never makes it into the agency management system, the file is weak. An account manager may send a quote, but if the quote does not clearly identify exclusions, subjectivities, or optional coverages, the client may later remember the proposal differently. A CSR may process a change, but if no confirmation goes back to the customer, the agency may not catch an error until the loss occurs.

Another lesson is that clients often reject coverage for perfectly understandable reasons. They may have budget pressure, competing priorities, or a sincere belief that “it won’t happen to me.” That is their choice. The agency’s job is not to force every customer to buy every endorsement. The agency’s job is to make sure the client had a meaningful opportunity to consider the option and that the file shows the decision. A documented rejection is not rude; it is respectful. It says, “We discussed this seriously enough to write it down.”

Renewals deserve special attention because they are deceptively familiar. The longer an account stays with an agency, the easier it is to coast. But long-term clients change. They add vehicles, hire employees, remodel buildings, sign new contracts, launch side businesses, store equipment off-site, rent property, buy drones, collect expensive jewelry, or start using personal vehicles for business. A renewal review should not be a ceremonial invoice delivery. It should be a structured conversation about what changed, what stayed the same, and what coverage should be reconsidered.

Technology helps, but it does not replace judgment. Automated reminders, e-signatures, workflows, templates, and management system notes are excellent tools. Still, someone must ask the right questions. Someone must notice that a contractor now performs roofing work. Someone must catch that a homeowners client started renting the basement. Someone must recognize that a business income limit copied from three years ago no longer makes sense. The best E&O defense combines automation with curiosity.

Finally, agency leaders should treat E&O prevention as a service quality issue, not just a legal defense issue. Good E&O habits produce better client experiences. Clients appreciate clear explanations, organized renewals, documented options, and prompt follow-up. In that sense, reducing E&O risk is not separate from growing the agency. It is part of building trust. And in insurance, trust is still the most valuable coverage an agency can offerright after the one that is actually bound.

Conclusion

The top causes of agency E&O claims in 2020 were not shocking, but they were instructive. Coverage not procured, failure to explain policy provisions, inaccurate carrier information, inadequate coverage recommendations, and workflow communication breakdowns all point to the same solution: disciplined agency procedures.

Insurance agencies cannot eliminate every claim. Clients may misunderstand. Carriers may deny coverage. Markets may change. Losses may be larger than anyone expected. But agencies can greatly improve their position by asking better questions, documenting answers, offering broader options, confirming decisions, reviewing policies, and following up before small issues become expensive disputes.

The year 2020 was unusual, but the E&O lesson is timeless: do the basics well, do them consistently, and write them down. Your future selfand possibly your E&O carrierwill thank you.