Agent's financial responsibility for premium after audit?

[satx1718]

I have a customer who started a sports bar, first year's audit showed them short and they got a bill for $14,000 additional premium. I worked out an arrangement for the insured to pay off the balance in 4 payments. Now I received a statement showing the balance due from my agency. I expect the client to pay the balance but how liable am I for the balance?

[ProCoverageGuy]

In most cases it's the insured that is responsible for the audit - it's their coverage, premium and contract. However, you need to look at your agreement with the carrier - and in fact it would be a good idea for you to look at your agreements with all your carriers that perform audits.

If for some reason your agency is responsible for the audit you need to be pro-active and contact the carrier to work something out. AND you need to revise that condition in your agreement or find other carriers that don't have such a provision.

[satx1718]

Yes, I agree. This has definitely been an eye-opener. The client is paying the audit premium, thank goodness but I've learned a valuable lesson. All brokerage houses are not created equal. Stay away from Emerald Surplus!

[E-Bit]

Normally you have 30 or 45 days to collect the audit premiums. If you do not return the audit as uncollectable before the deadline date you become responsible for it. It is an industry standard.
_________________
Insuredly Yours,
E-Bit, ARM AFSB
Florida

[David Trout]

If the audit is a direct bill the agent has no financial responsibility, other than if audit is sent to collections, you likely lose commission. On Agency bill, most agent contracts allow 45 days for agent to collect, then can turn back w/o financial responsibility. As a collection agency mostly for carriers, I pursue many agents for audit prems. not turned back in time. However, I likewise represent thousands of agents to help them collect on those very same audits, if they didn't turn them back in time.