by John Darer CLU ChFC CSSC RSP
This post is a follow up to my July 4, 2010 post Structured Settlement Planning Errors and Omissions Coverage. In that post I discussed the high rates that structured settlement consultants must pay for insurance coverage and related my discovery of a cost effective alternative offered by the Financial Services Risk Purchasing Group (through Calsurance) to members of the credentials only Society of Financial Service Professionals ("SFSP"). Membership in the SFSP enabled this author to buy supplemental E&O at 1/6th the cost of the structured settlement specific E&O.
I still find it hard to believe that someone who is properly credentialed, placing an insurance product, that often requires court approval and a review by at least 4 pairs of eyes is more risky than the potential for claims over suitability risk associated with financial planning for seniors?
With this in mind I have been able to gain a better understanding of the insurance coverage offered to SFSP members for structured settlements. More specifically I have been able to understand why the policy wording is necessary and why some underwriters are so skittish about structured settlements that policy wordings have gotten fine granular.
Apparently there is less concern with activities or planning related to the actual placement of annuity or insurance products. It is the fear of "collateral damage". In some cases the structured settlement professional has more insurance coverage than the lawyer. Apparently some wily legal eagles have found a way to bring them in as a deep pocket. In the recent past this author and others have observed sales literature distributed to plaintiff lawyers by some industry members which suggests that somehow the lawyers are covered under the agent's errors and omissions policy.
The following is an excerpt of my August 2009 post on the subject, included as part of a general discussion of certain over the top marketing practices by settlement consultants to plaintiff lawyers.
"Marketing Claim"If (Name of Firm) is involved you will be covered under our $10,000,000 Errors and Omissions Policy"
- This author has reason to believe that the policy in question is a single limit policy insuring 42 offices and the claims they may have.
- An insurance policy covers its named insureds and coverage is subject to the policy terms and the interpretation thereof.
- The statement about coverage is outrageous because it makes the intentional or unintentional misrepresentation that an entirely new class of insureds (plaintiffs and plaintiffs attorneys) is covered by the policy by virtue of simply doing business with this firm".
THIS PRACTICE IN WHATEVER FORM IT STILL EXISTS MUST STOP IMMEDIATELY. Not only is this practice grossly misleading but it may have collectively cost members of the industry hundreds of thousands of dollars in additional insurance premiums.