Virtual Assistants: E&O Concerns and Risk Management Tips 

Insurance agencies are using virtual assistants more and more. These services can be advantageous, but there are coverage and risk management concerns, too. In this article we will discuss both traditional virtual assistants and artificial intelligence (AI) virtual assistants.

 WHAT IS VIRTUAL ASSISTANT?

Also referred to as a third-party resource, outside resource, or back-office support, a virtual assistant service is an organization an agency contracts with to perform services that typically slow agencies down, such as:

• Checking policies, comparing expiring to renewal forms and edition dates, and alerting agency personnel to changes
• Issuing Certificates of Insurances (COIs)
• Policy processing
• Data entry
• New Business support
• Sending auto responders

Having a virtual assistant allows agency personnel to focus more on selling, improving the customer experience, eliminating backlogs, and growing the agency. Depending on the scope and services the agency contracts for, the provider may assign several individuals to work on that business. These individuals may only perform services for your agency or may work with a number of agencies. This could be adjusted as contracted services change or the agency grows. Virtual assistants do not typically have direct contact with agency customers as agency personnel continue to be the public face of the agency.

COVERAGE CONCERNS

Does the Utica National Agents’ Errors & Omissions Policy cover virtual assistants? If the agency is named in a claim otherwise covered by the E&O policy, Utica National may provide defense to the agency and, if the agency is found liable, indemnification.*

The vendor for the virtual employee would not have coverage under the policy. Whether the coverage would extend to the employee of the vendor would depend on the contract in place with the vendor and how state laws define these employees. Typically, a claim will be brought against the agency rather than the vendor or a specific employee of the vendor.

*The facts of a claim determine the application of coverage and any exclusions. This response does not alter, modify, or change any of the terms, conditions, or exclusions of the Utica Mutual E&O Policy. Utica Mutual Insurance Company reserves all rights and does not waive any rights contained in the E&O Policy.

Does the E&O carrier have recourse against the virtual assistant if it was determined that their error resulted in the E&O claim? It’s possible. Make sure the virtual assistant maintains its own E&O coverage. However, the recourse and recovery would depend on the terms of the contract in place between the agency and the virtual assistant, including any limitation of liability.

RISK MANAGEMENT TIPS FOR TRADITIONAL VIRTUAL ASSISTANTS

If you are considering using virtual assistants, you should protect yourself by:

• Obtaining references and following up on them. Reputation is important.
• Having your attorneys review the contract.
• Requiring the virtual assistants to carry their own E&O and provide you with proof coverage is in place.
• Checking their work regularly to ensure they are meeting your expectations.
• Contacting your E&O carrier. Advise them of the vendor you are using, what services they are performing, and the staff equivalency for those services. Not all E&O policies are the same – so there may be conditions or exclusions for claims arising from wrongful acts caused by the virtual assistants.
  

ARTIFICIAL INTELLIGENCE (AI) VIRTUAL ASSISTANTS

What is an AI virtual assistant?
An AI virtual assistant is a software program that uses natural language processing, machine learning, and automation technology to perform tasks and provide support typically handled by human employees. This software can sometimes be embedded in hardware and integrated with multiple systems.

How does this differ from a traditional chat bot?
While a non-AI-driven chat bot will typically follow a script, an AI virtual assistant can understand context, learn from interactions, and offer personalized responses.

What are some of the ways that AI virtual assistants are being used?

• Customer Support – available 24/7 to handle customer queries about basic policy and billing information
• Lead generation
• Renewals – sending notifications and reminders, helping clients navigate the renewal process, identifying cross-selling opportunities, and suggesting them to clients
• Employee support – providing quick access to information such as guidelines and compliance information

RISK MANAGEMENT FOR AI VIRTUAL ASSISTANTS

• Privacy and Security – Given an AI assistant’s access to sensitive customer information, data breaches and privacy violations are a concern. Users should have robust encryption and multi-layered cybersecurity. It should be reviewed for adherence to ever-evolving privacy regulations regularly. Access to data should be restricted to only what is necessary for the tasks being undertaken.
• Data Quality – AI tools are only as good as the data they learn from. How accurate and complete is the data the tool is pulling from? Data clean-up may be necessary. Also keep in mind that models are trained on historical data and should be audited to avoid bias.
• Disclosure – Clients should be aware that they are interacting with an AI assistant and have the option to work with a human agent.
• Authority – Avoid allowing AI to make final decisions. AI assistants are ideal for support roles, but final decision-making should be done by a human after review of the AI output.
• Training – Staff should be trained on how the AI assistant operates, how to supervise it, and the potential flaws in data that can occur.
• Compliance – AI assistants should adhere to state and federal regulations. Keep informed of any AI-specific legislation that could impact your use of an AI assistant.

DON'T LET THIS HAPPEN TO YOU

An agency entered a service contract with a virtual assistant service. One of the tasks performed by the service on behalf of the insured agency involved the creation and distribution of Certificates of Insurance (COIs) for the agency’s customers. The claim against the agency involved an alleged error on a COI issued by the virtual assistant.

The COI indicated that an underlying Commercial General Liability (CGL) Policy was written with Products Completed Operations Coverage. This was not the case and the carrier denied coverage for an underlying claim since the policy was not written to afford coverage for this exposure. The client filed suit against the agency for issuing a defective COI. A subsequent third-party action was pursued on behalf of the agency against the virtual assistant service. The E&O and underlying claims were resolved for $165,000.

LESSON: When using a virtual assistant, be aware that their errors may result in an E&O claim against your agency. 

E&O Tip: Using a Homeowners Disclaimer on Proposals and Renewal Correspondence

When writing Homeowners policies that include terms that change as the property ages, it’s suggested to use a disclaimer on proposals and renewal correspondence. This will bring to the client’s attention that they should review their terms as the home ages. It is not recommended to point out specific policy provisions as this can be problematic if some are noted and others are not. The following is sample disclaimer language: 

Keep in mind that the age and condition of your home can affect how your coverage applies in the event of a loss. Older homes may be subject to special limitations or may be covered on an actual cash value basis rather than replacement cost. Additionally, as your home continues to age, coverage terms or eligibility may change over time. It is important to regularly review your policy and consult with your insurance representative to ensure your coverage keeps pace with the condition and needs of your property. 

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RISK MANAGEMENT RESOURCES: Claim Examples

Our E&O Risk Management website includes a section titled Lessons Learned that lists many examples of claims that our team has handled over the years. Each includes a summary of the claim details and a lesson to be taken from the incident. Real-life claim examples are a great training tool for your staff.

Example:

Commercial Liability – In this claim, the agency moved a policy covering the bottling operations of their client from one carrier to another. The replacement policy contained a Designated Premises endorsement limiting General Liability exposure to the insured premises; this endorsement was not on the previous policy. During an outing sponsored by the client, an employee was severely injured by another employee on a jet ski. The new carrier denied the claim based on the Designated Premises endorsement. The injured employee then sued the agency’s client, securing a verdict for $622,000. The client then sued the agent for the amount of the judgment, plus interest and defense costs, claiming they were not informed of the change in coverage. The agent admits he did not inform his client of the change. In the defense of the insured, counsel argued that a statutory Stop-Gap Employer's Liability endorsement would have applied to the loss and provided coverage and after the trial court disagreed, the matter was appealed to the State Court of Appeals. The Court of Appeals affirmed the lower Court’s decision, stating that the designated premises endorsement also applied to the Stop-Gap endorsement, meaning there was no coverage available for the loss. The matter was settled for $1,000,000 against the agent.

Lesson: An appropriate lesson to learn from this E&O claim is that when switching coverage from one carrier to another, evaluate the differences and bring these differences to the attention of the client, asking them to acknowledge that the differences were explained.

Reminder: The E&O Risk Management website can be accessed through our online Customer Care Center.

CLICK HERE for instructions on how to sign up for and access 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.