Best Practices for Working with the E&S Market

Agencies must often use the Excess and Surplus (E&S) Lines market to meet clients’ varied needs. Whether the market is hard, soft, or somewhere in between, E&S entertains varied exposures and plays a vital role in insuring high property values as well as risks wanting extremely high liability limits.

Using the E&S marketplace presents some significant challenges and issues that can raise the potential for an increase in the agency’s E&O exposure. It is vital to develop the appropriate processes to handle challenges when they arise.

Understanding Coverage Requests
Being fully knowledgeable about the coverage you are requesting when working in the E&S market is essential. This market is frequently used for non-traditional or problematic risks and often employs non-standard forms to provide coverage. Do not rely solely on the carrier or wholesaler to fill any gaps in your understanding – your know-how is crucial.

Application and Proposal Follow-Up
After submitting an application, follow up to confirm that it was received and that a proposal will be provided by a specific date. This allows you and your client enough time to review the terms. As the proposal date approaches, periodic follow-up is recommended to verify that the proposal is on track to be delivered as promised.

Comparing Submission and Proposal
Once you receive the proposal, carefully compare it to the coverage you requested in your original submission. It is common for the E&S market to omit certain coverage elements. As the retail agent, you are responsible for ensuring that the coverage delivered matches what the client requested.

Reviewing Specimen Forms and Endorsements
Obtain specimen forms from the E&S market, which is known for issuing unique policy forms that can significantly alter coverage. Review these forms thoroughly, including any endorsements. Pay close attention to endorsement titles, as they may reduce coverage even if not specifically labeled as exclusions.

Binding Coverage
Do not advise your client that coverage is bound until you have received confirmation from the wholesaler or carrier. Retail agents typically do not have the authority to bind coverage on behalf of the wholesaler or carrier.

Binding Procedures and Timing
Establish procedures to ensure coverage is bound at or before the policy’s expiration date. If coverage is bound after the expiration date, the E&S market may refuse to backdate the coverage, potentially leaving your client exposed.

Renewal Review Process
Review renewals early to determine if there will be any significant differences in coverage in the renewal proposal. Unlike the admitted market, where carriers are required to provide conditional renewal notices if coverage will be reduced, the E&S carrier/wholesaler is not held to this requirement and is not obligated to inform you of changes.

Final Policy Check
Carefully review the E&S policy to confirm that the coverage provided matches what was ordered. This final check helps ensure that you and your client receive the expected protection.

The E&S marketplace plays a vital role in the industry and has different procedures than standard markets. Develop the appropriate procedures because these differences present many significant issues and challenges. Following these procedures can play a key role in reducing the chance of problems developing.

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E&O Tip: The Importance of Documenting Verbal Communications

Thorough documentation is critical to defending against errors and omissions (E&O) claims. Verbal communications – whether over the phone or in person – are often inadequately recorded, resulting in potential disputes about what was said.

It is advisable to confirm verbal discussions with written correspondence to the client, outlining the topics covered and any required actions, and recommending they contact their agent should any aspect be unclear or incorrect. This practice can help prevent misunderstandings and serves as valuable protection in the event of a claim. 

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RISK MANAGEMENT RESOURCES: Use the Self-Assessment Tool

What is it? It’s an agency risk assessment available to E&O policyholders with the Utica National companies and is included with the policy.

How does it work? Answer a series of questions and then receive an overview of your agency with feedback on whether your current processes and procedures help protect you from E&O claims. Recommendations are provided so you can make improvements when your current processes and procedures are insufficient. Some of the topics included are producer procedures, premium handling, record management, and system/procedural issues.

How do you access it? Sign in to our online Customer Care Center and then click Risk Management on the left side to access the Risk Management website. Choose Try Our Self-Assessment Tool on the homepage.

Please see our self-assessment flyer for additional details, including how to sign up for Customer Care.

Ready to Help

Are you looking for risk management guidance on a particular topic? Reach out to Tabitha DeGirolano of our E&O team for help at tabitha.degirolano@uticanational.com.

This information and any attachments or links are provided solely as an insurance risk management tool. They are derived from information believed to be accurate. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues.