What should an agent or broker do when that claim or suit arrives?

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Step 1. Notify your insurer

The first step, of course, is to notify your liability insurer, or the designated person in your organization to deal with claims. You are not alone. You have people in your corner who have dealt with more E&O claims in their careers than any attorney ever will.

Step 2. Don't speak with anyone

You should communicate only with your liability carrier and its representatives, those in your firm whose managerial or risk control positions give them a need to know, and the counsel who will be representing you. Your communications with others outside this risk management circle, with very few and limited exceptions, are not privileged — you and they can be forced to testify about what was said.

Step 3. Work with the defense team

Your job is to work with your insurance and legal team to prepare for the case. It will take time, perhaps a lot of time, to gather all the documents, communications and electronic information that you'll be asked to provide, to help construct an accurate chronology of events.

Early in every case, I like to meet with clients where they work, preferably in a conference room. That way they can focus on our discussion without distractions, and be out of others' earshot, but they still have easy access to their electronic and paper records. It's time well spent and can put the case on a path toward an early exit.

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Settlements aren't bad

Even when the facts strongly point to the conclusion that the agent or broker committed no error, it's important to remain open to settlement or other alternative dispute resolution opportunities.

I enjoy telling a client that he or she has been vindicated, but the road to vindication is costly and the outcome uncertain. "All's well that ends well," as they say, but often "All's well that ends soon."

Independent agents and brokers are members of an honorable profession, aiding people and businesses in mitigating their risks and losses before they occur. By meeting the standards of their craft, exercising their independent judgment, and keeping accurate, contemporaneous records of what they've recommended and why they'll have less need to meet someone like me on a professional basis.

Louie Castoria ([email protected]) is a partner in the national law firm of Kaufman Dolowich & Voluck LLP, and co-chairs the firm's Professional Liability Practice Group and its San Francisco office.