Randy Render, of Render Insurance, shared with me over lunch the other day a cautionary tale I now share with all of my clients managing rental properties, and all of my friends and associates.
A widow found herself managing a rental property after her husband's death. Unfortunately, she lost the tenant in the property, and did not seek a replacement. As a result, the property sat vacant. One night, thieves broke into the now vacant home, and removed all of the copper plumbing causing extensive damage. The loss was substantial. The widow now faced a substantial cost to repair the property, as well as the continued loss of income. She frantically called her insurance company to make a claim upon the insurance policy she had purchased when the property was occupied by tenants.
Unfortunately, she learned that her policy excluded damage for vandalism to vacant properties. Because the widow did not timely notify her insurance agent or carrier of her inability to replace the tenants, insurance that could have protected her against loss was never considered or obtained. Her financial position in the property went from bad to worse, and now the liability of this one property threatened her overall financial condition.
Sadly, your insurance professional is rendered impotent to protect you and your assets if you do not keep him or her apprised of changes in your situation. The scenario faced by this widow and her family, of a loss that threatens financial security, is becoming all too common. In the widow's case, he had purchased insurance online. Although she believed that she was saving money by taking advantage of a convenient discount, it is apparent that she did not understand her insurance policy, its limitations and exclusions, and her responsibilities to notify the insurance carrier of changes in the status of the property. Moreover, because she purchased insurance online, she did not have a local agent who might have taken an interest in her situation at the time of her husband's death, and who might have counseled her regarding the proper management of her risk. The result, for this widow, was an enormous, and entirely avoidable loss.
The cautionary tale suggests something more, however, than just a warning to landlords, or a warning to people who purchase insurance on-line. Fundamentally, the tale warns of the consequences following the demise of the trusted adviser/consumer relationship. There developed over years a "way of doing things," which while not perfect, protected people through close relationships with trusted advisers. There was a time when most people had an insurance agent, a local banker, an attorney, a doctor, and an investment adviser, with whom they consulted. These professionals took a personal interest in their clients/patients and their circumstances. These professionals often worked together closely to protect their clients, who invariably became acquaintances, and often friends. These professionals sold "products," true, but more importantly, these professionals gave advice and counsel.
In this day of computer and electronic generated solutions, it is apparent that the relationship of trusted adviser/ consumer is threatened, and the consumer is often left "holding the bag." Convenience and cost savings are often occasioned by the loss of a personal relationship with a trusted adviser. While these inexpensive alternatives are always marketed as providing specific solutions, and individual attention, the harsh reality is that it is the "individual" making potentially uninformed choices that causes these solutions to be characterized as customized and specific. Of course, the consumer feels empowered, because the consumer is in the driver's seat, so to speak, and is seemingly able to select from various alternatives to meet his or her needs. But the inherent limitations of a layperson consumer, being by definition a person not trained or licensed to fully understand a particular field, begs the question: since it likely that a consumer will make uninformed and incorrect choices, and accordingly receive less than the consumer otherwise could have obtained with the aid of competent counsel, isn't the mere offer of a convenient and inexpensive online solution misleading at best, and shockingly cynical at worst? Is it possible that that the companies that push these online and self-help services rely upon the lack of sophistication of their consumers to pay for financial and legal products and services which the companies know will be of no use to the consumer, the consequences for which the companies will bear little or no liability? When a professional makes a
I recall the the opportunities I have had to review estate planning documents prepared by on-line services, or prepared from forms sold directly to consumers. In many of these cases, I had to admit to the client the documents were very professionally drafted, and quite appropriate....for some other person! In every case, the person seeking a self-help solution knew they needed "something," but had no idea how to communicate the needs. Moreover, they had no idea what solutions might be available. Perhaps the online service could have drafted a solution, if the client knew what questions to ask, or what solution to demand. That is the challenge of professional advice and counsel; it is not that advisers don't have answers to your questions, it is often that you do not know what questions to ask. If you don't know you have a need, how can you ask that it be met? If you do not know what the best solution to a problem is, how can you ask for it? Competent counsel involves first educating oneself regarding the client's specific circumstances and objectives, and requires time.
In several instances the documents were shockingly deficient. These computer generated packages often do not include terms and provisions common in documents prepared by lawyers to avoid foreseeable problems, and in at least one instance, omitted provisions necessary to accomplish what was the intended purpose for the document. These documents often contain vague, ambiguous, and confusing provisions, particularly where they are drafted nationally, with little regard to specific state practices.
Even if these documents are well-crafted, however, consumers are left with little understanding of the products and services they purchase online. In each document I have reviewed, for example, there existed provisions and terms the client did not understand. The client had no idea that choices were made for him or her, and the choices were never explained or discussed. In many instances, the client could be better served by choices made with the client's circumstances, goals and objectives in mind.
Even were a client to have some understanding of the meaning of every provision, these products and services, unaccompanied by advice and counsel, are often worthless if not properly implemented. In the case of one client, although they purchased online a revocable trust and pour-over-will, they understood that the pour-over will "funded" their trust. When he learned that he was correct, that the pour-over will funded his trust, but that in funding the trust with the pour-over will, he had not avoided probate of his assets, he was noticeably shaken. He had, in effect, purchased a car, but never learned how to drive. To make matters worse, because the online service gave confusing instructions regarding execution of the documents, the documents were not property executed. He purchased a car he could not, drive, because he was not given the correct key. In response to his protest of, "why didn't they tell me," I could only point to a Terms of Service page that stated clearly that the site was not giving legal advice.
There is little question that simple solutions to problems are often the most elegant In selecting among solutions convenience is a factor to be considered. But these maxims favoring simplicity and convenience should not be twisted to suggest that professional knowledge, insight, and experience, and competent counsel are irrelevant. Advice and counsel are not so easily sacrificed to the cheapest and least expensive solution available. Real problems and risks require real solutions, and professionals are trained to identify and assess these risks, and to obtain the best solutions for specific individuals, given specific goals, objectives, and circumstances. Consumers should demand more than a computer-driven, check-the-box level of service, even if it is accompanied by a slick and enjoyable advertising campaign. I know my clients deserve better.
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