Wednesday, May 11, 2011

(Really) Stupid Client Tricks (P&C Edition)

In general, insurance is a one-sided contract: that is, the bulk of responsibilities (underwriting, paying claims, etc) rests with the carrier; the insured is tasked with paying premiums and not filing fraudulent claims.

Oh, and not interfering with the carrier's ability to effectively adjudicate those claims.

So, for example, it's considered bad form (and a breach of the insurance contract) for the insured to pro-actively undermine the carrier's right to mitigate (lessen) the potential cost and scope of a claim. Which is where the rocket-surgeons who run the Vienna Presbyterian Church in Virginia not only fall down, they actively trip themselves and their insurer:

"When officials at Vienna Presbyterian Church decided to acknowledge the church's failures in handling reports of sexual abuse by a youth ministries director ... it wasn't the church's lapses in responding to the abuse a half-decade ago that bothered the insurer — it was the church's plan to admit those lapses and apologize to the victims."

It's understandable that the church's directors would feel compelled to make amends, but in this case, it's not their money with which they're playing: it's the insurer's (and that insurer's other policyholders, who don't get a say in how VPC handles its errant employees). In short, be compassionate on your own nickel.

I'm fortunate to have access to two recognized experts in this particular field. Bill M (whom we've met before) is an independent agent who does a lot of work with small businesses. Teresa S is the Commercial Lines Manager for the agency in which I toil. Both of them agreed with my basic take on the issues, and added their own perspectives.

Bill sent me a copy of a typical "Minister's E&O" (Errors and Omissions) policy, which included "Duties in the Event of an Act, Error or Omission." He helpfully highlighted the clause specifying the insured's responsibility to "(a)ssist us, upon our request, in the enforcement of any right against any person or organizations which may be liable to the insured because of an act, error or omission."

To put it another way, a doctor can't go on the local news bragging about how many sponges he's left inside patients as a prank and then expect his malpractice insurer to back him up.

Teresa pointed out something else that VPC's elders seem to have missed: it's not just their congregants who were at risk (and who may have cause of action), but their guests. How many of these young women invited a friend to meet the "cool young minister?" And by "meet" I mean, well, there's the problem.

Both noted that since no lawsuits have been filed (yet), the carrier can't really do much of anything except continue to insist that the church's leadership shut up, and continue documenting their refusal to do so. Once those lawsuits start flying, though, watch for the carrier to try it's best to deny coverage.

I'll be on the sidelines, rooting them on.
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