It isn't only the actions of a practitioner that determine his or her liability under errors and omissions coverage for ethical breaches; the customer's viewpoint is frequently considered. Customer expectations often affect agents' liability as long as those expectations are reasonable.
The agent's failure to obtain agreed-upon coverage is one of the areas that often results in liability. Consider the following example: a customer signed an application for flood insurance, and the agent sent it to the insurance company along with the first premium. At the time that the application was forwarded, the agent assured the applicant that he had coverage. The insurance company subsequently rejected the application, but the agent failed to notify the applicant. The result was that the applicant's claim for a flood-related loss was upheld. The agent was held liable for it, rather than the insurance company.
The agent's failure to maintain proper coverage is another area in which agent liability is often based on the client's reasonable expectations. Consider another example: although the insurance contract did not require it, an insurance company mailed a renewal notice to the insured as his contract was ending. The insured claimed he did not receive the notice, and the coverage lapsed. Unfortunately, the customer suffered what would have been a covered loss if the coverage had been in force. The court reasoned, in holding for the customer, that since the agent had told the customer he would receive a premium notice, the insurance company was liable. Clearly, what agents say that their customers rely on may be central to their liability.