Part three of our Five Things You Need To Know About Property Insurance series is: Insurance Company Accountants Need to be Questioned. Insurance company accountants are unique in the accounting industry. Far from objective reporters of the numbers, they function as highly competent advocates for insurance companies. Unlike most accountants, insurance company accountants are not bound by typical cost accounting or public accounting standards. Although they have certain typical tools they routinely use to minimize claims, they can literally make up and use any approach they want to improperly diminish claim value. To learn more watch the video.
Part two of our Five Things You Need To Know About Property Insurance series is: presentation of the claim is everything. Property insurance policies contain numerous options for coverage. For each of these options, or coverage grants, different financial parameters attach. When corporations are faced with a complicated property insurance claim, the easiest thing to do is to provide all of the relevant claim information to the insurance carrier, and let them decide whether any given cost is covered under the policy. This can be a recipe for disaster. To learn more, watch the video.
Today, we start a new series, Five Things You Need To Know About Property Insurance. In the first installment, we address why making a large property insurance claim is akin to unsuspectingly stepping into a minefield. Property insurance claims are filled with potential pitfalls that can cripple a policyholder’s chances of recovery. Yet, many of these pitfalls go unrecognized.
Watch the video to learn more, and please check back in in the following weeks to see the continuation of this series.
In our last “Five Things You Need To Know About General Liability Insurance” episode, we address one of the most onerous traps that an insurance company can set for a policyholder – the consent to settle trap. Many a policyholder has fallen into this trap. The unfortunate thing for policyholders is that this classic setup oftentimes works, and policyholders are unsuspectingly forfeiting coverage.
The problem is also widely prevalent. The consent to settle trap is raised in most every piece of litigation that is being defended by an insurance company. Whenever there is mediation or talk of settlement, policyholders should expect that this trap will be set.
Recognizing the trap is only the first step. Once the trap is recognized, certain strategies need be applied to achieve full coverage. To learn more, please watch the video.
Nothing in insurance is perhaps more frustrating to policyholders than being “nickeled and dimed” by an insurance carrier on defense of a covered claim. Today we continue our Five Things You Need To Know About General Liability Insurance series with our fourth installment, where we address common strategies that insurance carriers employ to improperly limit what they will pay for the defense of covered claims. When an insurance carrier agrees to defend a claim, policyholders rightly expect that the insurer will pay one hundred percent of that defense. The reasons for this are well justified. The duty to defend is like an on or off switch. If the switch is on, the insurer has an obligation to defend, and they must pay for the entirety of the defense. If, conversely, the switch is off, the insurance carrier has no obligations whatsoever.
Insurance carriers employ a number of tactics to try and avoid paying the full defense bill incurred by policyholders.
A common tactic that insurance carriers employ is to try and limit hourly rates paid to attorneys. Insurers pay their general liability defense lawyers at pre-negotiated rates, which, depending on the specialty, tend to be far below market rates paid by policyholders. Law firms that handle general liability defense work, in turn, set up their associate pay structures to profitably handle the large volumes of work delivered to them by the insurance carrier. These practices can deliver excellent services for a slip and fall case, and their rates may be reasonable for that kind of work. When the underlying claim is either complex, or high dollar, a defense cost issue may arise.
The way this comes about is the insurance carrier says, “$800 is an unreasonable hourly rate, as we only pay our defense lawyers $250 an hour.” For many specialties, $800 per hour is reasonable, and this tactic, if left unchecked, can result in a substantial undeserved discount for the insurer.
Another tactic is for the insurance carrier to say, “well, your policy covers two out of the ten counts against you, so we are going to pay one fifth of the total bill.” Again, if permitted by the policyholder, this represents a huge savings to the insurance carrier.
In most instances, these tactics are improper and avoidable. If the policyholder has the right to select counsel due to a conflict of interest, the “unreasonable fees” argument is invalid. Similarly, the “we’ll pay twenty percent” of the defense argument is illegal in most jurisdictions.
Insurance companies are great at controlling costs, but their desire to pay less oftentimes puts policyholders at risk. This is why common law bad faith was created by the courts, and why virtually every jurisdiction has insurance claims practices statutes regulating insurance company conduct.
Please watch the video to see some of the strategies that we use to effectively counter these and other insurance company defense limiting tactics.
In part three of our series “Five Things You Need To Know About General Liability Insurance” we address whether a policyholder, or the insurance carrier, has the right to select defense counsel. With high dollar claims, this can be a critical issue for policyholders.
The initial question policyholders should ask, is whether the underlying litigation is important enough to justify hiring defense counsel of a policyholder’s own choosing. Although litigation may be annoying, it is not always significant. Insurers typically do a great job at defending low-dollar slip and fall cases,. With these kinds of bodily injury claims, there is generally no reason to quibble with an insurer’s selection of defense counsel. Insurers have large numbers of lawyers on call to defend these cases, and, using an insurance company appointed lawyer to defend these kinds of claims may be the best option.
Cases we become involved in as insurance coverage counsel fall into a different category, namely, high-dollar complex litigations that have the ability to significantly impact the company. If a case alleges considerable damages, or centers on complicated legal specialties, a general purpose insurance defense litigator appointed by the insurance carrier may not be the best choice. For these kinds of claims, policyholders should carefully analyze whether they have the right to select counsel.
Here, there is a major divide between insurance industry custom and practice, and what the law provides. Insurers seldom offer a policyholder the right to select counsel. Yet, the law oftentimes mandates that the insurer accept a policyholder’s selection of counsel. Most jurisdictions permit the policyholder to select counsel when there is a conflict between the policyholder and the insurer. Unless the insurer unqualifiedly defends the policyholder, which is exceedingly rare, there is likely a conflict. The most common example of this is the typical reservation of rights letter, the kind that insurers send on most every claim they encounter. As a general rule, these letters state that the insurer will defend, up and until defense counsel finds evidence indicating that coverage need not be provided. There in lies the conflict. The insurer is paying defense counsel, and defense counsel is beholden to the insurance carrier for future business. Defense counsel knows that, if they find evidence supporting an insurance carrier’s position for denial of coverage, that the insurance carrier would want them to divulge that information to them. This is a classic conflict of interest that the law has long since recognized, and this conflict is the very reason that policyholders should be permitted to select defense counsel for the vast majority of claims.
If you have any questions, please feel free to contact us.
Today in our series “Five Things You Need To Know About General Liability Insurance” we discuss the complexities of providing proper notice under general liability insurance policies. If you have been following our blog, you know that providing proper notice, under any kind of insurance policy, can be complicated. Yet, providing proper notice is one of the most important things a policyholder can do. If done properly, it can result in coverage. If done improperly, it can lead to an unnecessary denial of coverage.
Most corporate policyholders are sensitized to the complexities of notice with claims made policies. Claims made notice is one of the most difficult tasks that policyholders face. Depending on the claim, the same may hold true for general liability insurance policies as well.
The takeaway from today’s discussion is that in house counsel should approach notice with a great deal of care. With general liability insurance policies, more often than not, a number of policy years are implicated. Determining just how many years may be implicated requires a careful analysis of the policy and the allegations of the underlying claim. Being told that notice was given may not answer the more important question of whether notice was given under all of the relevant insurance policies.
If the claim has allegations of bodily injury, property damage, advertising injury, or personal injury that extend back a number of years in time, multiple general liability insurance policies are triggered. Insurance brokers may provide notice only under the current policy year, which may or may not be one of the years for which coverage is triggered. When possible, all policies for which coverage is triggered should be identified in the initial notice letter.
This, however, is much more than an academic issue. With general liability insurance policies, older policies are oftentimes the most valuable. This is the case because newer policies often contain exclusions that may or may not be valid. But the older policies typically do not. Over time, insurance carriers attempt to exclude costly claims. We saw this with mold, asbestos, and, most recently, certain kinds of intellectual property claims under advertising injury coverage. Newer policies may exclude coverage, but the older policies may pick up the claim.
If you have any questions about general liability insurance coverage, or about notice in general, please contact us. We would be happy to help.
In today’s post we start a new “Five Things You Need to Know” series on general liability or GL insurance. General liability insurance is not oftentimes given much thought, and for sometimes, that is for good reason. It covers a variety of nuisance claims, such as slip and fall cases, and even insurance professionals these days generally don’t get that excited about GL insurance.
General Liability Insurance Covers a Lot More Than You Might Think.
The lack of excitement about GL insurance, however, is rapidly changing on the backs of recent judicial decisions finding coverage for things that were always covered, but that were often missed or ignored. The reason for this is that these old insurance policies cover much more than most people think. For example, GL policies can cover such things as:
copyright claims;
IP claims;
business torts;
unfair business practices claims; and
many other kinds of business to business claims
Bodily Injury and Property Damage coverage under GL policies has historically been given a great deal of attention for such things as environmental and asbestos claims. What is often overlooked, however, is the third prong of coverage — coverage for Advertising and Personal Injury claims. This is where a slew of recent court decisions found coverage for cyber liability claims, at the same time other courts were holding that massively hyped cyber policies did not even cover, you got it, cyber-claims.
We hope that you enjoy today’s video. If you have any questions, please check back for the rest of the series, or call us to discuss your particular case.
A well placed phone call from an adverse insurance company to a law firm managing partner is often the best way for an insurance company to dispose of an otherwise valid insurance claim. Here is the scenario. A prestigious large law firm is representing a policyholder in defense of a lawsuit. As is the case with many large high-end corporate law firms, that law firm is also approved panel counsel for various insurance carriers. An insurance coverage issue arises, and the policyholder asks if someone at the prestigious large firm can look at the insurance issue. The law firm’s response is, certainly. The law firm gives some advice, the claim is large, and things become adversarial with the insurance carrier. That is when the insurance company places a phone call to the law firm managing partner saying that their relationship is no longer working.
The call often goes like this:
John (at Insurance Company): Hey Bill, this is John at XYZ insurance company. I just wanted to call you personally to explain a big problem we are having with your firm. I think the end result is that our relationship together cannot continue.
Bill (Law Firm Managing Partner): What’s wrong John. We have been working with you for years. I can’t fix the problem if I do not know what it is. Can you tell me what is going on?
John: Yes. I guess so. This is quite uncomfortable for me, because we have been working with you for so long. Last year, I think we paid your firm $10 million, the year before that $14 million, and the year before that $9 million. The problem I have is that we just done feel like you are with us anymore.
Bill: Of course we are, there must be some misunderstanding.
John: I’m not sure, I just found out that your firm is pushing a claim against us. We think the claim is total nonsense. But your firm is pursuing it, and that is making folks here quite uncomfortable.
Bill: I see. We are a big firm. Things like this can happen. Please don’t hold that against us. The important thing is that we fix this problem. Let me look into it and get back to you. I am sure that we can remedy any problem that you may have. Just give me a few days to set things straight internally.
John: Thanks Bill. I was really worried about making this call. We have been working together for so long, and I did not want to let this one little thing destroy our relationship. I feel better now.
Bill: Great. I will call you in a few days to let you know that we have this situation under control.
The question for the law firm is whether they want to lose a reliable revenue stream of approximately $10 million per year just to push an insurance claim. The answer is likely not.
Because law firms do not want to be put in this kind of situation, most have procedures in place so that lawyers at their firms do not pursue insurance claims. But, there are still many law firms who sit on panel counsel and advise policyholders on coverage issues. The old adage, “there is no conflict so long as the client is paying the bills” may be more valid than anyone would like to admit.
The question policyholders should ask is whether or not they want to hire a lawyer to advocate for them when that lawyer has his or her hands tied behind his or her back. Before forming Miller Friel as a boutique insurance recovery law firm, we were insurance-recovery partners at one of those prestigious large law firms. We know first-hand why, with respect to insurance recovery law, the boutique law firm model is ideally suited for delivery of both zealous advocacy and have seen first-hand that, in this area of law, zealous advocacy leads to better results.
What insurance carriers have recently done to prevent large law firms from pursuing insurance coverage claims against them is perhaps one of the most brilliant strategic legal moves ever orchestrated. And, it is also one of insurance law’s dirtiest little secrets. The end result is that virtually none of the large prestigious laws firm practicing in the United States can effectively pursue claims against insurance carriers. In today’s video post, Mark Miller examines some of the factors that policyholders should be aware of before they seek insurance claims advice from defense counsel.
One of the least publicized ways that insurance carriers control the legal market is through their relationship with defense panel counsel. Virtually every large prestigious law firm is now on panel counsel for at least one major insurance carrier. The reason for this is that a large portion of corporate defense work is paid by insurance carriers. Insurance companies pay large law firms tens or even hundreds of millions of dollars to defend claims under their policies. Naturally, corporate litigators want their fair share of this work, and to get it, their law firm needs the blessing of the insurance carriers that control and pay for that work. Insurance carriers, likewise, need to trust panel counsel that serves them. It is only natural for insurance companies to regulate panel counsel firms.
In the good old days, insurance companies understood that panel counsel law firms might need to sue them, occasionally, so they permitted panel counsel to pursue certain kinds of claims against them. Those days, however, are long gone. A number of years ago, insurance carriers rightfully realized that if they could either eliminate large law firms from suing them, or control how those firms pursued claims against them, they might gain a strategic advantage with respect to insurance claims. What large law firms had years ago was the old adage, “don’t bite the hand that feeds you.” They pursued claims against insurance carriers, but were careful not to pursue those claims vigorously, or else they risked losing insurance company defense work.
Insurers have changed that old adage now to, “if you try to bite us, we will vigorously bite back.” Now, panel counsel may attempt to handle claims behind the scenes, but, they are keenly aware that they are in a difficult situation. Large law firms may still advise policyholders on corporate insurance claims, but they function now only as advisors. When policyholders ask defense panel counsel firms for insurance claims advice, they are entering into a match where the opposing team controls the players for both sides. It may be interesting to watch, and it may look like things are going well, but it is not a fair fight. Moreover, the relationship seldom permits effective negotiation and settlement of claims. This kind of situation ends well only if the corporate policyholder is willing to settle for far less than they are entitled.
In this video, the first of a two part series, we address these and other issues that corporate policyholders face when defense counsel are asked to investigate an insurance claim. Watch the video to learn all about it.
