Approach Broker of Record Accounts with Diligence and Caution

Securing business through a Broker of Record (BOR) arrangement may not be an everyday occurrence for most agencies, but it is common enough – and it involves risks that deserve disciplined attention. Agencies often win BORs because of superior expertise, responsiveness, or specialization … or because the client has outgrown the service capabilities of their prior agent or broker. What is sometimes overlooked, however, is that a BOR is not simply an administrative transfer – it is an assumption of agency responsibilities and can involve increased E&O exposure.

Once a BOR is in effect, this is your account, along with all of the attendant duties and risks that come with advising, placing, and servicing the account. Renewing coverage “as is” can expose the agency to significant E&O claims if inherited deficiencies are not identified and addressed promptly. 

Why “As-Is” Renewals Create E&O Risk
Some agencies mistakenly believe the bulk of the work is complete once the BOR is obtained and the policy is renewed without material changes. In reality, this approach can result in the agency unknowingly inheriting – and ultimately assuming responsibility for – the continuation of the prior agent’s errors.

Consider a common scenario: Property limits were never updated to reflect exposure growth, renovation, or inflation. The account is renewed with a nominal increase, such as 3%, without a valuation review. Following a loss, the client suffers a co-insurance adjustment because the building or contents limits no longer meet policy requirements. From the client’s perspective, you are now the responsible agent, regardless of who originally placed the coverage.

From an E&O standpoint, liability may often transfer with the BOR. Courts and insurers commonly view the accepting agency as having had the opportunity – and obligation – to review and correct deficiencies, particularly at renewal.

E&O Best Practices When Accepting a BOR

1. Establish a Formal BOR Procedure
Agencies should have a documented BOR workflow that clearly outlines:

• Required review steps
  
  
• Assigned responsibilities (producer vs. service staff)
  
  
• Target timeframes for completion
  
  
• Required documentation and signoffs

This procedure should live alongside new business and renewal workflows, be included in the agency’s procedures manual, and be accessible to all staff. Consistent handling of BORs is a key defense in E&O claims.

2. Conduct a Full Exposure and Coverage Review
A BOR should trigger a comprehensive exposure analysis – not merely a surface‑level review. This includes:

• Verifying current operations, locations, payroll, receipts, and property values
  
  
• Reviewing limits, deductibles, and key exclusions
  
  
• Confirming valuation methods (replacement cost vs. actual cash value)
  
  
• Identifying gaps between exposures and coverage

Even if an exposure analysis was conducted during the courting process, it should be revisited promptly once the BOR is effective. Carrier applications must be completed accurately, and assumptions should never be carried forward without verification.

3. Address Timing Gaps with Written Client Acknowledgment
In some cases, the BOR becomes effective before the agency has adequate time to complete a full review. When this occurs, agencies should consider using a signed client acknowledgment letter stating:

• The agency has not yet completed a full coverage and exposure review
• The agency does not assume responsibility for pre‑existing deficiencies until that review is completed
• The review will be completed within a defined timeframe

This letter should be concise, clearly written, and signed by the client. It is important to note that this is a temporary risk‑management tool – not a substitute for completing the review. Delays in follow‑up can erode its usefulness in an E&O defense. Agencies should be aware that client acknowledgment letters may not fully eliminate E&O exposure or regulatory risk, particularly where duties as agent of record are deemed to attach upon BOR effectiveness regardless of the agency’s completion of its review.

4. Confirm Official BOR Recognition with the Carrier
A signed BOR letter does not always mean the carrier has officially recognized the agency as the broker of record. Many carriers allow the prior agent a window to contest or rescind the BOR. Agencies should:

• Confirm the effective date they are recognized by the carrier
• Document confirmation from the carrier or MGA
• Understand carrier‑specific BOR and Agency of Record rules

Misunderstandings about BOR recognition can create service failures, missed endorsements, or coverage miscommunications.

5. Reset Client Expectations in Writing
BOR situations may arise from a dissatisfied client. This makes it especially important to reset expectations early. Agencies should clearly communicate:

• What services will be provided
• What information is required from the client
• What recommendations will be made versus decisions retained by the client

Follow‑up emails or renewal summaries documenting recommendations, limits discussed, and client decisions (including declinations) provide valuable E&O protection.

6. Treat the First Renewal as High-Risk
The first renewal after a BOR is one of the highest E&O risk points. Agencies should:

• Avoid automatic renewals
• Provide written coverage summaries
• Document renewal discussions and client approvals
• Obtain written confirmation of declined recommendations

Many E&O claims stemming from BORs arise 6-18 months after takeover when a loss exposes an inherited problem that was never corrected or documented.

Key Takeaways

• BORs can be valuable growth opportunities, but they demand discipline. Accepting a BOR means accepting responsibility.

Agencies that approach BORs with structured procedures, thorough reviews, clear documentation, and proactive client communication are far better positioned to defend against E&O claims. 

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E&O TIP: Memorializing Client Communications 

Historically, when a client contacted the agency with a question or made a coverage decision, the standard practice was to record that discussion in the agency file. No further action was typically taken. Today, that approach is insufficient.

• While it remains essential to document these conversations internally, it is equally important to confirm the details of the discussion directly with the client – ideally by email, letter, or another written method.
• This should include what was discussed, any action items, and a request that the client reach out to the agent if anything is unclear or inaccurate.
  
• Providing clients with written confirmation helps avoid situations where, in the event of an uninsured loss, it becomes a matter of the agency’s word versus the client’s word. You may be surprised by how a client’s recollection can differ from yours when claims arise.

The objective is to eliminate potential misunderstandings between what the client believed they communicated and what you understood.

Simply documenting the conversation in your agency management system does not resolve possible miscommunications. Confirming conversations in writing with the client helps clarify intentions and expectations.

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E&O RISK MANAGEMENT: Cyber Security Resources – and More – for You 

Zywave offers a Data Privacy & Information Security course. This course – and others covering ergonomics, fire safety, general workplace safety, workplace harassment & violence, and many other topics – is available to all policyholders.

View a list of courses in the Zywave Course Catalog below and contact our Education Department at 315-235-4700 to arrange access to these courses.

• Zywave Course Catalog
• Zywave Flyer

If you have Cybersurance endorsed to your policy, you have access to additional resources through Cyberscout. These resources include:

• Guide to develop an incident response plan
• Risk calculators
• Risk Management Training Courses
• State Breach Regulation and Notification Requirements Database

CLICK HERE for instructions on how to access these resources.