When it comes to legal costs, errors & omissions claims are comparatively small. Most are under $50,000 and many are under $25,000. Costs from auto liability claims, on the other hand, can reach several million dollars.
Agents and their brokers should have sufficient commercial auto coverage in case of accidents and related lawsuits, says John L. Mondics, president of Mondics Insurance Group, a Texas REALTORS® risk management partner. Here’s why.
As an agent, you aren’t automatically covered
While Texas requires drivers to carry auto liability insurance, that insurance may only cover your personal, off-the-clock driving (including commuting) and may not help with an on-the-job accident. Mondics recommends that agents tell their insurance providers that they use their personal vehicles for business. Business use can be added to some personal policies.
This matters because of a recent shift in what plaintiffs’ attorneys are pursuing in Texas. Law firms have expanded their focus from semitrucks to equipment vehicles to any vehicle being used for business, Mondics says. If an agent is sued following an accident that happened while the agent was working, the plaintiff’s attorney will likely try to bring the broker and others into the suit.
Brokers face exposure
Brokers may face liability when employees or independent contractors drive as part of their jobs. Brokers can purchase hired and non-owned auto insurance to cover some of this exposure. Typical policies cost roughly $200 to $300 additional per year and offer additional coverage for defense costs and damages, Mondics says.
Brokers may also consider requiring agents to carry higher limits than the statutory minimum. “A half million or a million dollars of coverage does not cost that much more,” he says.
Brokers can also manage risk by requiring annual proof of insurance from employees and independent contractors, according to the Insurance Information Institute. That way, brokers can know if an insurance policy is changed, cancelled, or not renewed.
One way to obtain proof of insurance is if agents name brokers as an additional interest on the policy. This informs the broker when changes in coverage are made to the policy. Brokers may also be able to be added to an agent’s policy as an additional insured, which provides the broker additional coverage.
Brokers can also ask employees and agents to provide copies of their motor vehicle report or to sign authorization forms, which allows the brokerage to pull driving records from the Texas Department of Public Safety.
Brokers should determine what they consider an acceptable number of accidents and tickets for their employees and independent contractors. Knowing an agent’s acceptable driving history reduces the risk of being surprised about that history by a plaintiff’s attorney.
Defending yourself in a lawsuit is expensive, Mondics warns. Agents and brokers may have to pay out-of-pocket for any damages not covered by insurance. A properly structured auto liability program is only one component of a well-managed insurance program.