What you are about to read is every agent’s nightmare: You need to spend at least 50% more time with your applications to avoid common application blunders. What? Aren’t insurance applications already time consuming enough? You want me to spend more time? Even customers are annoyed by them. What’s the point?
Well, mistakes in an application can get you sued like James R. He did what most agents do…prior to his meeting with the client, to save time, he filled out the application and checked boxes he thought appropriate. The client looked it over, signed it and the deal was done.
A few months later, a claim under the new policy uncovered previous actions against the insured not disclosed in the application. The insurer sued to rescind the policy and the insured filed a cross-complaint against the agent for breach of contract and negligence in preparing the application.
The breach of contract was based on allegations that the agent agreed to assist the insured in completing the application. Quickly checking boxes, not spending time to detail previous claims or just assuming there were none was a big mistake by James. Negligence was also alleged because James failed to explain key terms in the application.
So, even though the insured read the application and signed it, the court allowed the lawsuit to proceed under the theory that the agent had a general duty to check the right boxes, relay accurate information in the application and explain key terms…all are part of an agent’s obligation in helping an insured obtain insurance. In this case, if James only spent a few more minutes to review and discuss the application and its terms with his client, it could have resulted in an application that reflects the insured’s true underwriting profile; thus avoiding a time-consuming and costly legal battle.