Managing partner Brian Friel continues his series The Ten Biggest Mistakes Made By Corporate Insurance Policyholders is the common mistake of relying too much on the advice of insurance brokers during claims denials.
We have a great deal of respect for insurance brokers. But, they should not be put in the difficult position of offering legal advice on claims. Although Insurance broker expertise is extremely valuable to policyholders when settling claims. To maximize the value of claims, is important to understand two things about insurance brokers. First insurance brokers are not lawyers. Insurance brokers know how insurance professionals treat claims, but they cannot offer the most important thing that policyholders need to know about claims, namely, how courts interpret insurance policies. Second, the important relationships insurance brokers have with insurance carriers can often be leveraged. An integrated approach, involving legal claims analysis and broker knowledge of insurance claims professionals affords the best results. Watch the video to learn more about how these important points can be used by corporate policyholders to maximize the value of insurance claims.
For a transcript of the video, please see below
Another common mistake made by most corporate policyholders is relying too heavily on your insurance broker with respect to your insurance claim. Let me just be clear, insurance brokers play a critical role in the insurance industry. Most if not all companies cannot buy insurance on their own directly. They need to go through an insurance broker acting as the middle man between a company, a policyholder, and the insurance market. A critical role, and the insurance broker not just acts as a facilitator or middle man, they bring expertise in terms of the insurance market, what type of products are out there, the pricing of those products, different lines of insurance, different ways to insure risks. Some are very traditional, some can be sort of alternative risk transfer mechanisms. They have lots of resources that companies can and should take advantage of.
What insurance brokers aren’t as good at is getting involved in the claimed advocacy piece, where the coverage has been placed by your broker, you have insurance, claim comes in, the broker assists with your notice of claim to insurance companies, which is fine, and you get back either a denial of coverage or a semi-denial dressed up as a reservation of rights, but they’re not paying you and they’re raising all sorts of reasons why they don’t think they need to pay you, although they call it a reservation of rights. Brokers want to get involved in this industry for a number of reasons, however there are problems with this. First, insurance brokers are not lawyers. They may have lawyers on their staff, but they cannot act as lawyers. Under almost every jurisdiction in the United States, they would be barred to practice law with an insurance agency. They can’t advocate for you like a lawyer would. That’s problem number one.
Problem number two is insurance brokers have dual allegiances. Yes, they represent corporate policyholders. Yes, they provide invaluable services with respect to placement of insurance and risk transfer, but insurance brokers also have another master besides the corporate policyholder. It’s the insurance market itself, insurance companies, the underwriters. Ultimately, brokers get paid by the insurance companies, not directly by the corporate policyholders. Insurance brokers have relationships, again it could be very helpful, but they have deep relationships with the insurance industry. These are not relationships that they want to necessarily jeopardize because of a single claim. They don’t want to be too aggressive. They advocate on your behalf where they may have to forfeit or ruin a relationship that they or their agency has built up, or had built up over the years.
You have to understand the corporate policyholder that brokers have dual allegiances. What does that mean? It means a couple things. One, brokers are not zealously advocating your claim, providing their undivided loyalty and attention to you. In contrast, lawyers like Miller Friel and other lawyers who work in this area, our only client, our only allegiance, professionally and ethically is the corporate policyholder. We owe no allegiance to the insurance industry. We are here to represent your interests and your interests alone. Our only duty is to you. Brokers cannot say that. They cannot do that. That’s not how they operate. Necessarily as a result, they cannot advocate as aggressively, as zealously as lawyers can. What that means to you is, your claim is going to be discounted at the end of the day.