Investigator & Process Server Insurance Primer
- February 10, 2009
- by H. Eric Vennes
- Business Tips
Editor’s Note: The following contribution was made by Eric Vennes, an insurance account executive and former owner of a process serving company. Mr. Vennes remains active in the process serving industry as Executive Director of the Washington State Process Server Association.
Q: DO I REALLY NEED INSURANCE?
Now some of you are laughing at the simplicity of the question and some are saying, “no, really . . . why do I need it”? Both are valid reactions. Those with the question tell me that they control all of their work, utilize no sub-contractors or employees and perform all work themselves. They are in complete control of any liability issues at all times while performing their investigations or serving papers. Even those with the greatest experience in the world can make mistakes and this is where your insurance purchase will help protect your business, your home, your assets, your family and simply put, everything that you’ve worked so hard to accomplish and love. Here are some examples that you “could” be liable for, but may not have thought of.
1. While serving documents, you hit the brakes hard to avoid rear-ending the car in front of you. In the process, the stack of documents on your front seat goes sailing to the floor and in your haste to pick them up; you don’t notice that a file meant for Mike “The Meat” Mitchell accidentally slips itself under the paper clip securing the documents meant for Betty Lou Bouchard, which is successfully served. When the attorney calls to check on service, two days after the statue has run, you find no evidence of effected service “Meat”. As the papers were in your possession as the statute ran, you will be on the hook for any financial damages claimed by the Plaintiff.
2. When typing your findings report regarding the witness interview you took for trial. You mistakenly type the word “didn’t” instead of “did” when describing what Mrs. Johnson saw the Plaintiff find in her take out chili. Since she was the key witness and actually saw quite clearly the item in question, you may now be on the hook for any monetary damages not received, as the incorrect report that lost her the case was a result of your error.
3. As you leave the Defendant’s property upon properly serving the documents, you leave the front gate ajar. “Fluffy” runs into the street, whereby an oncoming car swerves to miss the furry four-legged pet and ends up running his/her car into a tree, leaving all occupants with life long injuries.
4. The court document you are to file with the Supreme Court has a judge mandated deadline of 4:30 pm on the day in question. You arrive at 4:35 pm due to an unforeseen traffic problem. Your client must now prepare multiple documents to the court and appear in person to explain the situation. Who will be paying the attorney’s bill at $250.00 per hour? Again . . . you will be.
In all of these cases, had you had the proper insurance coverage, your cost would be no more than your stated deductible, instead of defense and judgment costs.
Q: HOW DO I KNOW THAT I HAVE THE CORRECT COVERAGE
Based upon an “application and interview” your agent has a legal responsibility to put coverage in place that will protect your actions. An insurance agent should be likened to your Attorney, CPA, and/or other advisors you use to successfully maintain and/or grow your business. I had a case come up recently whereby a trusted agent had no idea what a PI/Process Server even did, as such, a policy was purchased by the insured that didn’t cover the insured’s daily Professional actions. Ask questions and know what you are buying. Interview potential Agencies that you are considering to write your insurance. Do they truly know what it is that you do and how you should be covered? Are they simply trying to sell you a policy? Shop around and utilize the best fit for your business. As in all purchases, sometimes price is not the only thing to consider.
Q: I AM BONDED . . . I DON’T NEED INSURANCE
A bond protects the public, suppliers and tax liens. If you breach a contract, fail to perform services which you have been paid for, and/or fail to pay an account which services were obtained, the bond could be liened. When the bond company pays out damages, this value must be paid back to the bonding company. In addition, there are no defense costs paid out by a bond. Hiring an attorney to defend a suit will cost well beyond the deductible and premium of an insurance policy in most cases. Plus, you will still be obligated to pay back the bonding company. An insurance policy has a limit of coverage which will be available for defense and damages. You pay your premium and deductible and the insurance company pays up to the limit of coverage. This limit is typically $1,000,000 for an occurrence. The damages paid out by the insurance company will not be required to be paid back. Dependent upon the claim and how it’s handled, without insurance just one claim may jeopardize all you have worked for.
Q: WHAT IS THE DIFFERENCE BETWEEN CLAIMS MADE AND OCCURRENCE BASED
A Claims-Made form provides coverage for damages that occur after the beginning date on your policy and before its expiration date. These claims must be brought to the attention of the insurance company during your policy period.
Example: Your policy expires on December 31, 2005 and the renewal rate is going up 25%. You shop around and find a better priced policy from another carrier and switch. On January 2nd, you find that a claim is arising out of an action that took place on August 1, 2005. Will you be covered? NO, as you did not notify your insurance company during your policy period, therefore, it will not be considered and you will have no protection, unless of course you made provisions for just such a scenario when you switched carriers.
An Occurrence form covers damages from occurrences during the policy period, even if those claims arise outside of the policy period. In the above example, you would have been covered, as long as you presented the claim to your insurance company in a reasonable time after learning of it. You could be with Brand Z now, if you had Brand X when the occurrence for the claim occurred, Brand X would cover you, regardless of when the claim is brought to your attention.
Claims-Made policies are easy to get into and tough to get out of. They are less expensive at face value, providing an attractive financial consideration, BUT when, (and I reiterate “when”, as you will not have this policy for life), you wish to get out of it, the real expense starts.
Example: A Claims Made policy costs you $1,000. You keep it for five years and sell your business. Total cost for the insurance is $5,000. An Occurrence policy costs you $1,050. In the same scenario you have spent $5,250. Now that you have sold your business and are no longer in need of the insurance, with Claims-Made, you have some choices. Do you run the risk of a claim arising down the road with no protection? Potential cost “unlimited”. Do you buy another policy year to protect you against possible claims? This will cost you another $1,000, bringing your total insurance expense to $6,000, or $750 more than if you had originally purchased the Occurrence product. In this scenario, what looked appealing on the front side, actually ended up costing you 15% more?
If you are currently in a Claims-Made product, here are some things to consider. Know your exit plan. Will you be retiring next year? In five years? In ten? How will your coverage affect that decision and process? Consider the associated costs with maintaining your current Claims-Made policy. At what point will the premium grow to that of an Occurrence based product. What will it cost you now to obtain the coverage you need v. down the road. Not just financially, but in stress and lost sleep. There is nothing worse than knowing about a potential claim without absolute certainty of your coverage.
Have you shopped and compared prices? It is very possible that there is an Occurrence based product out there that is less expensive than you are currently paying. If that is the case, then consider switching immediately, calculating the savings into buying a “tail policy”. As a business owner of 15 years, I’ve always thought “Insurance is expensive enough, why would I want to pay more?”
H. Eric Vennes has worked in the process service industry since 1986, owning a mid-size company for 15 of those years. After selling in 2004, Mr. Vennes obtained his Agent’s License and now works with InsuranceTek, Inc. as an Account Executive and Small Business Specialist. InsuranceTek, Inc. has helped over 1,400 Process Service, PI and Security firms through their AIASS program. He can be reached at 888-505-1555 or at [email protected].