Is Your Document Retention Policy Well Thought Out?

by Rusty Keighron, Field Sales Account Executive, Agency Markets, Vertafore on March 15, 2010 · 5 comments

I’ll never forget the first time an agency asked me about adding document management to their agency system. It was in the mid 1980’s and I was helping an agent in West Georgia. He had just installed a new 60 MB hard drive in his agency management system. He was excited about his new disk space and we talked about how to put it to good use. What if we used that extra space to store electronic images of agency documents? He had just started faxing, so we discussed faxing agency documents to himself and saving them on the disk as electronic files! Good idea, but then we did the math. A 66 page scanned personal lines policy with standard endorsements would have taken up nearly 5% of the available storage space. Since his drive was a $1,000 device, it would have cost nearly $50 just to store one document. We compromised for the time being, faxing (scanning) and storing the most critical and often-used documents. Fast forward to the 21st Century, where terabyte drives are commonplace. That same block of storage to save the 66 page policy in electronic form would now cost well under a penny!

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This is indeed wonderful technology that allows agencies to easily, centrally store all agency documents. I often talk to agents about becoming paperless and, when we discuss how long they want to store records, they answer “Everything, forever!” If or when they run out of space, they’ll just keep adding more disks because of the low cost of disk space. While this can be done, is it the right decision? Viewed another way, if you had a warehouse with unlimited physical storage, would you keep every paper document forever?
When I discuss this with agents, sometimes I hear that they were able to find an obscure old piece of information that helped an insured or carrier out of a bind, but rarely is there an indication that finding some long lost document was the key to avoiding a huge judgment or winning a case! Most agencies purge their paper files at some point. While document management systems can store nearly unlimited archives of customer files forever, it is not a good practice.

I recommend that agencies consider implementing Document Retention policies. I’m not an attorney or an E&O expert, but I have had extensive discussions with those who are and encourage you to seek their advice. Consider the following in light of the E-Discovery Rules as amended in December 2006 and the court procedures for civil suits (the Federal Rules of Civil Procedure).

  • Common sense will tell you that the longer you hold a piece of information, the less likely it will be worth keeping for your benefit. Retaining more information means that there is more to look through to find what a particular document contains. Although it’s relatively smaller, there is still a cost associated with storing, backing up, and the time to search longer histories than are practically needed.
  • Events of the last few years have proven that, no matter how careful you are, someone can call your actions into question and force you to document and prove the history of a transaction; often this is done formally in the discovery process. Requested information must be turned over within 120 days after a complaint has been served.
  • In today’s paperless world, discovery will likely include ALL agency records, especially electronic ones that are easier to browse. One judge has commented that it is beyond doubt that the computerized data is discoverable if relevant!
  • Any agency records (like emails, spreadsheets, images, or documents), must be produced either in their original form or in usable form like a searchable file when required to do so. If you feel that it is cost-prohibitive to produce this information, you have to prove it.
  • If you have retained information in multiple forms (like a paper and an electronic copy of a document) you may be required to produce all forms in which it was retained. As long as the electronic copy is the same as the original at the time of scan, there is no legal benefit I can think of for you to keep a paper copy.

Here are six basic requirements that I believe agencies should include when reviewing their document management plans in light of these requirements:

  1. Ensure that the scanning and indexing of documents is done CONSISTENTLY and ideally as a by-product of your agency’s regular process for handling records in your agency management system. Customize your document management system to consistently name, route, prioritize, and secure documents by rules set by management.
  2. Make certain that your document management system allows you to prove that something was done on a particular date and time, and that the transaction has not been altered – in a way that will hold up in court! Last week, I sat with a state’s Department Of Insurance auditor and heard how a dishonest employee had been able to edit an agency’s electronically stored bank records to cover their tracks.
  3. Confirm that your document management system allows you to store ALL types of electronic files (not just scanned documents) and that they can be reproduced in their original form. For example, a stored email must include all the attachments as originally sent to the agency.
  4. Your agency must have a written document management plan. Consult with your agency’s legal counselor and/or your E&O carrier about what these guidelines should be. This is for your protection both from record requests outside of your agency’s best practice guidelines for storage, and also to show that a particular client’s records aren’t arbitrarily destroyed because you suspect they may file legal action (this actually happened to one of my customers).
  5. Follow the document management plan by ensuring that documents that are a certain date or older are automatically removed from the system or flagged for review and deletion. If your document management system does not allow you to purge your files, there is continued liability as they are discoverable if they exist.
  6. Make certain that your document management system has the ability to “freeze” documents that may be under legal review so that they are NOT destroyed in the normal course of events.

Other sources of information:

Legal Information Institute, Cornell University Law School, Federal Rules of Civil Procedure (FRCP) http://www.law.cornell.edu/rules/frcp/Rule26.htm

Chris Burand, “Are Your Record Retention Guidelines Complete?” American Agent and Broker, July 2008
http://www.agentandbroker.com/Issues/2008/7/Pages/For-the-Manager–Are-your-record-retention-guidelines-complete-.aspx?k=chris+burand

United States Department of Labor, Office of Federal Contract Compliance (OFCCP)
www.dol.gov/ofccp

Steve Anderson, “New E-Discovery Rules Take Effect” The Anderson Agency Report, May 2007
www.andersonagencyreport.com

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