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Down to Cases- Don't ignore paperwork when lawsuit looms

An insurance agent or broker is obligated to immediately advise the insurer of a suit served upon its insured. The insured is, similarly, obligated to advise the agent or the insurer, immediately upon being served.

By Barry Zalma | Updated on December 08, 2009

An insurance agent or broker is obligated to immediately advise the insurer of a suit served upon its insured. The insured is, similarly, obligated to advise the agent or the insurer, immediately upon being served. Failure to do so can have devastating results that will expose the insured and the agent or broker to massive judgments being entered by default, where the court assumes that the defendant admits all of the allegations of the complaint.

Every insurance agent and broker who writes liability insurance has two obligations to insureds:

  1. The agent or broker must educate the insured about the importance of providing the agent, broker or insurer with notice of a suit served on the insured immediately upon receipt of service by personal delivery, fax or e-mail
  2. The agent or broker must be certain to, upon receiving a suit from an insured, immediately deliver the suit papers to the insurer with a demand that it appoint counsel to defend the insured.

Failure to do both can expose the agent or broker to litigation by the insured if, because of the delay, a default judgment is entered against the insured and the insured is denied the right to defend itself to the allegations of the complaint. For example, in Sundown Operating Co. Inc. v. Intedge Industries Inc. (No. 26700, S.C. 08/17/2009), the South Carolina Supreme Court refused to set aside a default judgment against an insured because both the insured and the agent were negligent in promptly responding to a suit.

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