After handling insurance coverage claims for years, a distinct pattern has emerged: sometimes the insurance agent gets "caught in the middle" of a dispute between the policy holder and the insured. Often, agents are named in a lawsuit for reasons other than fault. To help prevent this from happening or assisting the agent if it does happen, agents should consider the following.

Purchase Errors & Omissions Coverage

The ancient Chinese proverb, "the shoemaker's children go barefoot" often applies to insurance agents. But, it's important to consider purchasing an errors and omissions (E&O) policy for yourself. Although I've never seen any verifiable statistics, the general understanding in the industry is that one in seven insurance agents will be sued sometime in their careers, and the average settlement of those lawsuits is approximately $16,000.

All E&O policies are not the same. Unlike the heavily-regulated homeowners or automobile policies, professionals have a greater ability to negotiate the terms of their coverage. For example, plaintiffs often allege intentional acts or violations of consumer protection statutes against a professional that would ordinarily preclude coverage. But, insurers can provide an endorsement that requires the insurer to cover the defense costs in the case up to and until a jury finds the intentional or deceptive act. Because most cases settle, the insurer would be responsible for the entire case.

Finally, consider lowering your E&O deductible. If your deductible is $15,000, you may end up having to pay for most, if not all, of the costs to defend and settle your case.

Communicate Regularly with Your Clients

As Malcolm Gladwell explains in his bestselling book, "Blink," a doctor's chances of being sued for malpractice is directly related to their bedside manner. As a general concept, clients are much less likely to sue someone that they like. In addition, lawyers are taught in ethics classes that you must return clients' phone calls the same day you receive the call; the number one complaint to the State Bar Grievance Committee is a failure to communicate.

The same can be said of any professional, including insurance agents. If your clients feel like their agent cares about them – which includes promptly answering calls – especially in the case of an emergency, that client will be much less likely to allow their lawyer to sue.

Set Up Strict Policies and Procedures

This need to communicate leads me to my last consideration: set up strict policies and procedures that everyone in your office follows. These policies and procedures should cover communication (i.e., call every client back the same day of the call), and documentation of communication. It should also cover how you handle your clients' money.

First, strict policies and procedures assist you in running your business. For example, you would want to have a place to document any incoming phone calls, and what follow-up advice was given. This allows you to pay careful attention to requests that clients make. For example, if a client requests windstorm coverage, you will want to make sure you've addressed that request. In the case of tracking money, your careful accounting will allow you to send the accurate premium, on time, on behalf a client.

Finally, in the unfortunate event that you become "caught in the middle" between an insured and the insurance company, you want the paper trail to support what you say. In my experience in trying cases to juries, it is clear to me that juries like documentation of the testimony. And, it only makes sense.

At the end of the trial, the jurors get to take back the paper evidence presented to them, but have to rely on their memory of what was said by witnesses. They're therefore very dependent on the paper in the case.

Hire Experienced Counsel to Defend You

Finally, if you find yourself as a defendant in a lawsuit, hire someone who's represented agents in the past. You want someone experienced to protect and guide you through a lawsuit.

Kubiak, a commercial litigator, has handled numerous insurance coverage cases, including cases where agents are parties to the case. After a decade of working in 1,000+ lawyer offices, she has recently formed her own boutique firm, Kubiak & Carter PLLC.