E&O Insurance: What to do When Trouble Strikes

by Cheryl Rosen October 10, 2014

This is the second in a two-part series on E&O insurance

Navigating through the complex world of errors and omissions (E&O) insurance—what it is and how it works—is difficult enough but just as challenging for travel agents is knowing exactly how to handle potential claims.

Step one is for agents to put their insurance company on notice that a claim is likely, said Maureen Kaye, senior vice president of Aon Affinity Berkely Travel, a provider of insurance benefits and services to the travel industry.

The let the insurer know if there is a demand of any kind; an informal demand such as an email from the customer, an attorney letter or a lawsuit, said Kaye.

Kaye also urges agents to hold onto their paperwork.

A claim examiner will contact the agent to collect more information and documentation. The examiner will then evaluate the claim based on your policy limit and deductible.

Protect yourself
Rod Gould of Framingham, Mass.-based Rubin, Hay & Gould, suggested agents protect themselves by having clients sign a release limiting the agency’s liability. These should be kept current and updated every year based on recent legal decisions.

“Make sure you and your employees know what you are doing,” he added. “If your clients are retirees, discourage them from going to Cancun during spring break.”

No laughing matter
Some lawsuits seem just plain silly, unless you’re on the receiving end.

There’s the case of the agent who was sued by an 80-year-old man. The agent promised him he would meet the love of his life on a singles cruise; he sued when the cruise failed to deliver.

“He filed a claim for complete reimbursement of the cruise,” Kaye said. Berkely Travel paid the attorney fees for the agency, “but we did not have to pay out the claim,” she said.

The case is a good example of the kind of frivolous lawsuit that makes an E&O/general liability insurance policy important for small agencies, Kaye added.

The fine print
As with all things related to insurance, the devil is in the details.

Houston-based travel industry attorney Rose A. Hache, CTIE, said agents need to give their policies a careful reading.

That’s especially true if they rely on a policy from a hosting agency or franchise company.

Read the policy carefully and think about the limits of coverage, she said, adding that these agents should also consider whether to augment that coverage with a policy of their own.

Middle-of-the-night worries
“Travel company owners should think about what kinds of issues have come up that they worry about at 2 a.m. and whether it’s appropriate to expect your E&O provider to provide coverage,” Haché said.

If an agent forgets to make the air reservations for a cruise, then suddenly realizes it a week before when prices are sky-high, is that an error that would be covered?

Hache said one insurance provider covered such a claim and another one denied it.

And what if you just simply misquote a price? Hache has seen a policy where an addendum says that is not covered.

Think it through
Whether paying for E&O insurance is worth the investment or not is a question only a travel agency or an individual agent can answer.

Agents need to consider whether their business could survive a lawsuit—and whether their software can catch most common errors.

Liberty Mutual believes, “Even small agencies should definitely carry it,” said a source for the company which recently got out of the business of selling E&O to travel agencies.

“For a few hundred dollars, it allows you to sleep at night,” the source said.

Haché’s view? “What is worthwhile is spending the time to think about it.”

Agents might also want to look beyond their regular providers and ask their local general liability policy company if it can provide an E&O policy. Then compare the offerings.