A homeowner in Connecticut is facing a dog bite claim that will not be covered by insurance after his agent allegedly failed to disclose the dog on his Homeowners Insurance application. Antonio Laires, who is being sued over an incident in which his dog reportedly bit a woman on her face, claims he did not realize that his pet was left off his insurance application because his agent completed it for him, Insurance Journal reported on July 12.
“It really reinforces how important it is to know your policy — know what is covered and what is not,” said Danielle Alessandrini, Associate Vice President, Underwriting Director, Personal Insurance, Burns & Wilcox, Detroit/Farmington Hills, Michigan. “On the agent’s side, they also need to be having those conversations with the homeowner about whether they have a dog and going over those coverages. All parties should know what their policy covers.”
It really reinforces how important it is to know your policy — know what is covered and what is not.
In addition to the costs the homeowner may incur, the insurance agent responsible for the apparent mistake could also have a legal battle ahead. If an agent is sued over an alleged error, their Errors & Omissions Insurance, also known as Professional Liability Insurance, could respond.
“They could definitely be sued, and that is something that could be a potential E&O Insurance claim for that agent,” said Josh Rivera, Broker, Professional Liability, Burns & Wilcox, Orlando, Florida. “This all could have been avoided if the agent would have gone over the application with the insured and made sure that all of the responses were correct.”
Homeowners should check for insurance exclusions
The American Veterinary Medical Association reports that over 4.5 million individuals suffer dog bites each year in the U.S., with 1 in 5 victims requiring medical attention. In Canada, more than 500,000 dog bites have been reported annually in recent years, according to the Canadian Animal Health Institute. Although the most recent data available indicates that dog bite claims were on the decline as of 2022, average claim costs were up 32%, contributing to a total of $1.3 billion in dog bite claim costs last year.
This all could have been avoided if the agent would have gone over the application with the insured and made sure that all of the responses were correct.
“Dog bite claims can be very expensive, depending on the injury suffered,” Alessandrini said, adding that the court process “could be very lengthy” when homeowners are sued over dog bite incidents.
While legal defense, settlements and other costs related to dog bite claims are often covered under an individual’s Homeowners Insurance — as well as any Personal Umbrella Insurance policy they may carry for additional liability limits — some insurance carriers may have restrictions on coverage for pets or specific dog breeds. A carrier may have no restrictions, while others may exclude dogs altogether or offer a smaller animal liability supplement for homeowners with dog breeds like pit bulls or German shepherds.
“You might only get $10,000 of coverage for that dog in the event of a claim, but the claim could cost $1 million after court costs,” Alessandrini explained. “We have also seen cases where a claim is denied because the carrier had an animal exclusion and the agent did not disclose that and the insured did not realize it was excluded. It really comes down to knowing what your policy covers.”
If a Homeowners Insurance claim is denied because of an animal exclusion that the property owner claims they were unaware of, their options for recourse may be limited. “If the wording was in the insuring form stating that it is not covered, it would not be covered,” she said. “Typically that is when we see cases like this go to court, and in the end, it may not have the outcome that the insured is looking for.”
If the wording was in the insuring form stating that it is not covered, it would not be covered. Typically that is when we see cases like this go to court, and in the end, it may not have the outcome that the insured is looking for.
This is why “you really have to know your policy and what is covered,” Alessandrini said. “Homeowners will often get their renewal, look at it then and then put it away for a year,” she said. “They should be reading the policy and asking questions. They cannot claim that they did not understand it. If you are signing something, you should be aware of what is in it.”
Insurance agents at risk for lawsuits
In the recent Connecticut dog bite case, the judge did not weigh in on any potential liability the insurance agent could have for the policy application misrepresentation, Insurance Journal reported. According to Rivera, the situation underscores the importance of reviewing all application details with clients and maintaining E&O Insurance.
“The service they are offering is being the insured’s representative as their agent. If they are filling out the application for the insured, they should have gone over the application with them to make sure all of the responses were correct,” he said. “Unfortunately, sometimes corners are cut when you are busy, and that can lead to mistakes like this.”
Failing to make sure that applications are filled out correctly and accurately was one of the most common causes of lawsuits against insurance agents as of 2014, Insurance Business reported at the time, and the problem appears to continue today. Other situations in which insurance agents could be held liable include misrepresenting coverage, failing to disclose material information on insurance coverage, not obtaining a specific coverage that was requested, or misrepresenting oneself as an expert, Advocate Magazine reported in 2018.
“You definitely need to have controls in place to protect yourself,” Rivera said. “As an agent, it is your job to know which questions are vital to get coverage or where a carrier may look at it and not want to provide coverage — dogs, pools, trampolines, for example — and it is the agent’s job to make sure those specific responses are answered correctly.”
Rushing through an application or taking responses over the phone could leave room for errors, he said, which can open agents up to a greater risk of lawsuits. When an insurance agent faces a lawsuit over an alleged error, their E&O Insurance will generally begin picking up legal defense costs immediately. This is especially important amid increasing legal costs, including a 5.5% average law firm rate increase at the start of 2023, according to Legal Dive.
“The policy provides defense in the event that the agent does get sued,” Rivera explained. “The defense costs can rack up very quickly. It can get costly very, very quickly as far as legal fees go.”
Social inflation is also contributing to greater liability insurance losses, Reuters reported late last year. Given the risk of lawsuits for anyone performing professional services, E&O Insurance coverage is a critical protection, he said, and many companies will not work with agents who do not carry the coverage.
The [E&O Insurance] policy provides defense in the event that the agent does get sued. The defense costs can rack up very quickly.
“The policy specifically covers the services they are offering and being paid for — for an insurance agent, that is placing insurance for their clients,” he said. “It is definitely something that every insurance agent should carry, and they should make sure their limits are substantial enough for the amount of business they do each year.”
For example, a business bringing in $10 million annually will not be sufficiently covered by a standard $1 million E&O Insurance policy. “The more money they make, the higher their exposure is,” Rivera said.
Other legal risks facing insurance agents relate to the sensitive data they may obtain about clients. If that information was accessed in a cyberattack, Cyber & Privacy Liability Insurance could help pay for data breach response, notification, forensics and more, Rivera said. “They have all of this very important personal information and have to send it out electronically, so it is a good idea to have cyber coverage in case there is some sort of breach,” he said. “It is something every insurance agent should definitely have.”
Keep agent updated on any changes
Due to an increase in liability claims, the market for E&O Insurance is hardening and many professionals are seeing rate increases at renewal, Rivera pointed out. In addition to reviewing their insurance policies, insurance agents can also protect themselves by “crossing their T’s and dotting their I’s,” he suggested. “It is all about making sure that nothing is assumed. When they are working with an insured, they should make sure that all of the information that comes in is correct so that the policy can be written and rated correctly — not just to get that policy placed.”
Homeowners should follow the same advice, providing their insurance agent with complete and accurate information, Alessandrini said. Beyond the risk of an uninsured loss, homeowners should know that they could also face difficulty obtaining insurance in the future after a serious claim like a dog bite or while still engaged in a legal dispute over a claim.
“You may not be able to get liability coverage, especially if you have open litigation for a liability claim or if you still own the dog that bit,” she said. “Some carriers will not write the liability altogether. There could be times where you may not get that liability insurance or be able to get a Personal Umbrella Insurance policy because of it. It can broaden into a much bigger deal.”
Dog bite claims are not the only risk homeowners should consider when purchasing or renewing their Homeowners Insurance policy. They should also know that any change at the property — from adding a dog to the family to installing a pool or building a shed — could have implications on their insurance coverage. When making these decisions, “I really think that a lot of homeowners do not even think about their insurance,” Alessandrini said.
“Those things can affect your insurance. You want to make sure you have the proper coverage,” she said, adding that any paperwork filled out by an insurance agent should still be carefully reviewed. “It is on the agent to make sure they are talking to the insured about any changes, but you also have to what you are signing. Before signing anything, I would review it just to make sure it was answered appropriately.”