Burand’s Agency E&O Blog: Tip #54

Fees & Agency’s Standard of Care. An agency’s Standard of Care requirement has many moving parts and variables. Simple answers generally do not exist because the applicable standard is case and fact specific.

However, a key to making the agency’s Standard of Care adversely simple is to charge fees. When an agency charges fees in many, and probably the vast majority of jurisdictions, it elevates its Standard of Care requirements considerably.

Many sales consultants recommending fee based sales and service are inadequately aware of how fees greatly increase an agency’s Standard of Care E&O exposures. Most agency owners and producers I meet seem unaware too. If fees are part of your agency’s business model, make sure the agency is then meeting its elevated Standard of Care. A key to meeting this higher standard likely involves new procedures and much tighter monitoring of whether these procedures are being followed. Another factor is whether different standards apply for clients that do not pay fees and whether the agency’s advertising is adequately specific differentiating these two classes of clients. Standard of Care measures are complex. The agency might benefit from a careful review of how fees change their exposures.