But so far that does not seem to be the case, said Curt Pearsall, vice president for Utica Mutual Insurance Company, one of the leading writers of insurance agency professional liability coverage.

Mr. Pearsall said that he has seen only three such claims in recent weeks--and they are all from outside the Gulf region.

"The issue many times in these situations--and it varies by state--is the responsibility of the agent," Mr. Pearsall said. In some states, agents are viewed as order-takers, while other states see them as obliged to provide advice at higher levels.

"I'm not sure how some of these things are going to play out with the flood versus wind and whatever," he said.

The insurance broker compensation scandal--now over a year old--has also shone a spotlight on the duties of the agent, with some lawmakers trying to legislate a fiduciary relationship that many in the industry believe is fraught with legal peril.

Writing in a prior edition of the NU (Nov. 1, 2004, page 21), New York-based attorney Peter Biging said the pendulum started to swing even before Eliot Spitzer became an insurance household name.

"The judiciary's perception of agents and brokers is more and more of people and organizations with specialized knowledge and skills that are retained and relied upon for their specialized skills," Mr. Biging wrote.

Offering those specialized skills will come to naught if you can't prove what you did months or years from the transaction, experts say.

Sabrena Sally, GE Insurance Solutions underwriting leader for the agents professional liability business unit, said standards for documenting advice vary by agency, but her company does not set down any fixed rules before underwriting a risk.

A great deal of insurance agency coverage is purchased through either the Independent Agents and Brokers of America, which has endorsed and sells the GE product through its 50 state affiliates, or the Professional Insurance Agents state associations, some of which offer the Utica product.

Since agency professional liability remains a relatively small line, not too many total statistics are available.

Ms. Sally said that her company sold about $180 million in premium last year.

Mr. Pearsall said that Utica sold over $70 million in agency E&O with 11,000 policies, and estimates his company's market share at 25 percent.

Selling insurance to insurance professionals can sometimes lead to "interesting" situations, he said. "But basically an insurance professional, when buying insurance, tries to do the same things they recommend--[to] strike a balance between the coverage you need and the value you can get from various carriers."

But Mr. Pearsall said the process can have some pitfalls.

"I don't deny that agents sometimes do a better job of buying coverage for their clients than they do themselves," he said.

For example, they may try and skimp on coverage with certain programs and end up with a greater risk for themselves, just like any insurance buyer.

"Some say, 'My staff has been with me for 20 years and we don't make any mistakes,'" Mr. Pearsall said. "But I point out that you don't have to make a mistake to get sued. You just need a client that is unhappy."

Both Mr. Pearsall and Ms. Sally report that claims frequency has either leveled off or gone down slightly in recent years.

"I think there is a much greater focus on agencies doing the right things in terms of loss control, and I have to give them credit," he said.

Severity figures remain harder to pinpoint, but Mr. Pearsall said that Utica has taken such steps as avoiding the agencies that consist primarily of medical malpractice or trucking risks to avoid the big payout days. "They don't have many claims, but when they do they are pretty large," he said.

Personal auto agents remain the most frequent target of claims, simply due to the great number of policies, he said.

Some claims can result from purely administrative error within the agency, such as failure to add a driver to a policy, while others may result from insureds feeling they did not get the best advice.

"A lot of times it will become a documentation issue where the insured was offered a certain coverage and said, 'I can't afford it,' or 'I really don't need that much.'" Mr. Pearsall reported.

Without proper documentation, if a claim goes to court, it becomes a "he said, she said" issue with the person making the better witness having a good chance of prevailing.

One figure Mr. Pearsall is proud to report is that in the past six months, Utica has closed out 89 percent of its claims for no payment. "That shows not only that there are a lot of frivolous claims made against agents, but also that we will fight for our agents and we won't just roll over and pay any claim," he said.

While 89 percent might represent a relatively high figure, "usually it is in the high 70s or low 80s. So it is not unusually high," he said.

The high figure can also be attributed to the fact that if the agent made a mistake, the liability can be imputed back to the carrier, since it is ultimately responsible for the acts of its agents, he said.

Agents also face claims from carriers if they believe they have overstepped their binding guidelines, Mr. Pearsall said. But these claims represent less than 20 percent of those filed.

Ms. Sally said that agents are concerned today with the changing regulatory environment in many states. "Tort law is a problem in some states in that you can do everything right as an insurance agency and still not prevail in an E&O case," she said.

Like all professional liability lines, agency E&O saw sharp price hikes earlier in the decade that are only now starting to level off.

Wayne Bernstein, managing director of Los Angeles-based Executive Perils, said that a number of carriers exited the market at the time due to rising losses of which no one factor could be attributed specifically to the risk of insuring insurance agencies.

"It got so that agents who normally would go for $5 million limits tried to get by with $2 million," he said.

Worth Noting!

Utica Mutual closed 89 percent of its agents E&O claims without payment this year, according to VP Curt Pearsall, who noted that the insurer fights frivolous claims brought against covered agents.

"You don't have to make a mistake to get sued. You just need a client that is unhappy."

Curt Pearsall, VP, Utica Mutual