“Do you have specimen wording that we can provide to our insureds to implement as a company policy requiring their employees to provide certain limits of liability on their personal auto policy when the company provides non-owned auto liability? What limits should they require?”
From a legal liability perspective, our suggestion is to not do this. Your E&O carrier would likely appreciate that too.
1. You're talking about producing a document that might represent a legal contract/agreement between employer and employee. Only an attorney or at least a qualified human resources expert should produce such a form. There may be labor laws involved. It's simply not the proper function of an insurance agent and quite possibly might not be covered by your E&O policy.
2. Agents should NEVER recommend policy limits for anyone. That is the insured's responsibility, whether you're talking about property values or liability exposures. If you recommend certain limits and a claim exceeds those limits, you can expect to be sued for the difference. If you recommend a $1M auto liability CSL and there is a claim for $10M, does your agency carry an E&O policy limit of at least $9M?
It is suggested that the agency not offer to provide this type of service and, if asked to do so, simply advise that you lack the qualifications, experience, and/or legal standing to assist. Because agents are often a customer's trusted adviser, they are frequently asked to do things beyond their expertise or outside the normal responsibilities of an insurance agent and it is admittedly tough to "just say no."
Here is a comparable question our "Ask an Expert" service received from an agency CSR:
“Is there a reference I can go to in order to find sample wording for a hold harmless agreement? This is for one of our customers, a roofing contractor, to use with his subs. Thanks.”
And another question from an agency CSR:
“One of our commercial customers leases his personal vehicles to his company to use in business. Do you have or know where we can get a sample lease agreement to give him for this situation?”
This is clearly a “lawyer” job and even well-crafted agreements are often found to be invalid, unenforceable, and/or otherwise problematic. Does the agency’s E&O policy cover her if she or the agency is sued? I’m not sure this is a typical agent function (I know it shouldn’t be), even though there may be a lot of agents doing this type of thing.
I know a consultant who was in an agency and observed a CSR reviewing a cabin rental agreement for an elderly lady. The review had nothing to do with insurance…the lady just wanted the CSR to tell her if it was a good deal, were there any potential problems, and she should sign it. That's a tribute to her confidence in the CSR but it's, again, not a function the agent should probably be engaged in for an insured.
Still another example was where a condo association property manager asked the agency to find out about statutes relating to fire sprinkler requirements in high rise buildings. The association should be asking this question of a fire protection expert, not an insurance agent. More important, the agent shouldn’t be doing this research and advising insureds about fire protection equipment and ordinance or building code compliance.
While it's possible that some of these activities could fall within the reasonable professional services typically offered by insurance agents, some of them (for example, legal advice and contract drafting) clearly would not. As a result, the agency jeopardizes its E&O coverage by engaging in nontraditional services.
Last Updated: May 2014