How to Determine if a Broker has Adequate E&O Insurance

Confirming whether a broker has Errors & Omissions insurance that covers them for selling your MEWA plans is good risk management. This way, the MEWA is not drawn into claims based on the broker’s actions, and will not be the only one with an insurance policy that may cover the claim.

The next question is: How does the MEWA confirm that the broker’s coverage is adequate, without creating a huge administrative burden?

The easiest way is to ask the broker for their Certificate of Insurance, which clearly states that the coverage extends to their activities of selling MEWAs.

The potential downside to this method is that the person issuing the certificate could make a mistake, which means you are relying on that Certificate to protect you. However, most insurance agencies who issue atypical certificates like this would likely confirm (in writing) with the insurance company that the coverage exists. Therefore, in most cases, this is the most effective standard operating procedure and limits the admin burden.

If you want to be even more cautious, you can ask for a complete copy of the broker’s Errors & Omissions policy and review the exclusion page.

If the policy is a PDF, hit CTRL F and enter keywords such as: MEWAs, Multiple Employer Welfare Arrangements, Association Health Plans, Association, Trusts, Stop Loss, and Self-Insured. If any of those words are present under the exclusions, review them very carefully. You might ask why Stop Loss is a keyword. If the broker misrepresents information on the MEWA’s stop loss and causes a tort, and if stop loss is not covered, this claim may be denied.

If the keyword search does not present any issues, then read the entire policy. Again, pay very close attention to the exclusions page.

Other notes: Ask for the Certificate of Insurance and/or policy at each renewal. Also, do not assume if ABC Insurance company covers Agent X for selling MEWAs, that the same insurer extends the coverage to other insurance brokers who also have ABC. This type of coverage must be crafted via endorsement and is not in the body of the policy.