This question was posted to our Ask an Expert Service, a members' only benefit of the Big "I" national which is staffed by more than 50 volunteer industry experts:

Here's the situation (and it seems to be a common one): An insured is under scrutiny by media and news outlets for what the reporters are alleging is improper employee terminations.  The news is readily available. If the insured's agent sees that news, is there any duty on the agent's part to report the potential claim to the insurer?

Put another way, if an agent has knowledge of a potential claim (or of a claim) through a third-party source, like Facebook or a news article, does that agent have a duty or responsibility to encourage or report a claim to the Insurer?

Big "I" VU Faculty Responses:

At this point, it is only hearsay evidence. Contact the insured if you are concerned to inquire whether you need to file a claim.

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You must discuss with the FIRST NAMED INSURED as they are the only legal representative with standing in terms of the policy. Then make a note in your file that this potential incident has been discussed along with any notes from that conversation.

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I believe the primary duty of the agent in a situation such as you describe it to advise the insured (in writing) that reporting a potential claim is a prerequisite to possibly accessing coverage. They can do this through their agent (who can then communicate with the carrier and initiate insured-insurer contact), or directly with the insurer.

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It's the insured's duty to report the claim to the carrier promptly.  However, you are aware of a possible situation that could give rise to a claim.  I would talk to your insured and advise that it would be good idea to report the incident.  That gives the carrier time to start assembling the claim file. 

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Your question is solely a legal question which requires the considered response of competent legal counsel. The existence of a duty, as well as the scope of a duty, is a matter of law. I would suggest to properly answer your question – does an agent have a duty – is a question for the right attorney.

That said, in most states insurance producers are viewed in terms of a standard of care – i.e. what a reasonable insurance producer do in the same or similar circumstances. As a best practice, is there any reason you would not reach out to your customer and inquire about submitting a potential claim?

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Your obligation to the carrier is to report all losses and/or claims to the carrier per the terms of your agency contract. It is also your obligation to the client to report all losses he or she reports to you to the carrier.  In the situation your report, there is neither a loss nor a claim.  You are under no obligation under that circumstance.  If your contract with the carrier had language that you needed to report any KNOWN POSSIBLE SITUATION THAT COULD RESULT IN A LOSS OR A CLAIM, it is unlikely you would have signed it. It is also not at all likely that any agency-carrier contracts have such language.  You have enough work to do without worrying about this.

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Facts, events, situations or circumstances that may lead to a claim are required to be reported.  Don't gamble on not reporting. 

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Ask your E&O insurer what your legal duties are to the agency client -- and to the insurers that might defend a claim - presumably EPLI.

Are you an appointed agent of the insurers or is it a brokered deal to an insurer directly or through a wholesaler? What do your agency and brokerage contracts state as to your duties to insurers, wholesalers and to clients?

It would be a good faith service to your client to contact the client and inquire if there is a potential claim to be filed.  You could remind the client that EPLI policies have strict reporting provisions - that might not be known to the client and its lawyers.  While that could be good for the client, your agency E&O lawyers might advise otherwise not wanting you to create a special relationship.  Check with your E&O lawyers.

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Claim knowledge activates claim reporting to insurer and insured. In court, an agent's knowledge is deemed insurer knowledge.

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As the agent for an insurer, they are presumed to know what you know. Read what their policy says with regard to claims reporting. Many policies require reporting by the insured if there MIGHT be a claim...for example, most agent E&O policies.

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I find this an interesting dilemma.  The question could also be asked if this now part of on-going “field underwriting" a risk due to the level of access to information we have today?  Does our duty to field underwrite end at the time of application?  And what if you see behavior contrary to the application submitted, like this news story or a client does AIRBNB or does ridesharing, but hasn't disclosed and you find out through social media?

I'm not sure if this rises to the level of a 3rd party claim, but social media and media in general is going to change the way we continue to evaluate risk and language will change to accommodate the new platforms of communication and exposure.

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Pretty simple - knowledge of an agent is considered knowledge of the principal (insurer).