February 22, 2023 by David Gambrill
A broker’s best defence against an errors and omissions (E&O) lawsuit can be summed up in three words — document, document, document.
“You need to be able to prove you did [something],” broker E&O specialist Hugh Fardy, said in a Live With CU panel on LinkedIn last week. Fardy is senior vice president of professional liability, Ontario region, at Gallagher.
“When you tell somebody, ‘This is what we did,’ and they say, ‘Oh? Prove it,’ if you don’t have it written down, it didn’t happen,” Fardy said. “That’s what they’ll tell you in a courtroom. If it’s not well-documented, it never happened. And we need to do that.”
Danish Yusuf, CEO and founder of Zensurance, said all interactions with clients should be recorded to protect the broker against an E&O claim. “Record all transactions, phone calls, email, text messages, and don’t have those meetings outside of that environment. And if it is in person, then make sure it’s documented.”
Not only must the client’s file be well-documented, but the notes in the file must be detailed, or else they won’t help the broker defend against an E&O claim, said Fardy.
“They need to have value,” he said of a brokers’ notes. “That’s where we’re seeing some of our biggest issues today in defending [E&O cases]. The notes and files are not doing the job. They’re not well-made. They’re too generic. They don’t stand up to scrutiny from the other side [in a lawsuit]. I think we all need to get away from the pitfalls of abbreviations, short forms, acronyms and skipping every third word so it all fits on one line.
“I’ve had lawyers telling me recently they have [broker] notes that look like Grade 9 text message notes. I’m seeing smiley faces, and ‘LOL.’ We have notes in a file [that] just aren’t worth anything. I think we need to recognize that…what’s there [in the client file] needs to have value, not just be there.”
Yusuf said he sends a thorough summary email to the client as a way to document what the client agreed to, and also what they did not agree to. “Write everything down, not only for your own purposes, but just for the client’s purpose, so they can look at it and confirm that everything’s right,” he said.
“Follow up. Let’s say you send an email confirming XYZ. Make sure clients acknowledge it saying, ‘Yes, I accept.’ Or if they decline a certain coverage, put it in writing and have them acknowledge it, “Yes, I declined that coverage.’
“And then finally, make clear what’s covered, what’s not covered, what’s available, what’s not available. This whole [question of whether] there’s a supplement, a deductible, an exclusion — make it absolutely abundantly clear to your clients [in the email].”
Yusuf said technology and automation can help brokers document the client’s file. As far as the type of technology used, that’s up to the individual brokerage, said Josée Trottier-Turcotte, underwriting specialist and vice-president at Victor Canada. Whatever tech you use in the process, she said, some basic concepts apply across the board.
“I think it’s tough to say, ‘Here’s the one technology every broker needs to use,’” she said. “It’s tailored to your brokerage. You have to find the right tools to apply those concepts in your own brokerage, like documenting, following up, having a process, [requiring people to follow] a process. Those are the concepts you need to apply. Whatever tool you use, whatever automation you use, it’s the brokerage’s and the broker’s responsibility for advising the client.”
During the LinkedIn Live stream last Wednesday, one audience member asked panellists what do if a client didn’t want to talk to the broker on the phone, but preferred email instead.
Email may actually be better for the broker to help document the client file, Fardy pointed out.
“I do less and less on the phone all the time, and more and more by email,” he said. “My email, if it’s well done, is my note — I just have to attach it to the file. I try to encourage people to use email to respond to me, and I’ll try and trick them into it if necessary. I think email is a valuable tool if it’s used properly.
“Can it replace all phone calls? Probably not. But if it’s a well-written email, and clients want to connect with you by email, if you can instigate a response from them — a confirmation from them, or a reaction from them — you’re getting written communication from your client that is invaluable in your file.”
Another attendee asked if all recorded phone conversations with clients should be turned into written transcriptions for the purpose of documenting the file. Yusuf counselled not to rely too heavily on phone recordings, for a variety of reasons.
“We should not be making notes or doing our processes with the thought that, “Oh well, I don’t need to be really [detailed] here because it’s recorded,” he said. “Relying on the recording might mean you haven’t reflected on the discussion. Document it in an email and sent it back to your client so that they can then confirm that you’ve accurately captured what their intention was. I think that final email summarizing everything is another very helpful step.”
He also noted phone call recordings are inefficient, particularly if you are handing off the file to another broker. “It’s very inefficient, if people are working on your file for you, to go and listen to a 40-minute phone call for 10 seconds worth of information, so they can service the client properly….You still have to make good notes in a file so that people can work with that file and not go chasing a phone call every time they need to do something.”
When all is said and done, documentation will not help brokers if they lose track of their purpose, Fardy cautioned.
Ultimately, the broker’s job is to advise clients about their options. It’s not to make the choice for them about markets, coverage or price. Documentation of brokers losing track of their purpose could hinder brokers more than help them in a E&O claim.
“Call recording works both ways: it’ll prove you wrong just as often as it proves you right,” Fardy said. “So, if you need to double-check, make notes in a file. Having other people have access to [the file notes] and being able to read what’s going on is always a bit of a double-check.”
Feature photo courtesy of iStock.com/gorodenkoff