The question of whether Lloyd’s of London is still relevant in today’s insurance market is a good question for corporate policyholders to consider. On the one hand,Lloyd’s plays an important if not crucial role in the U.S. market. They are known to ensure risks that others will not touch. They are also known for using innovative policy language.
However, Lloyd’s of London is not an insurer. Rather, it is a marketplace for underwriting risks. For a typical Lloyd’s of London policy, there is no single entity insuring the risk. Rather, underwriters of various corporate and non-corporate structures take portions of the risk. Each underwriter gives its two cents on what they want to pay. If there may be no lead appointed, it is not uncommon for underwriters to disagree as to how a claim should be paid or defended. This can lead to chaos.
When this chaos is imposed on cases filed in what is known as the “rocket docket,” such as that employed in the Eastern District of Virginia, all hell breaks loose. There, cases go from filing to trial in less than 12 months. To say that defense decisions in the rocket docket need to be made quickly is an understatement. Recently, we had the opportunity to gauge Lloyd’s of London’s performance in this setting, and they did not perform admirably.
Please watch the video to learn more, or Contact us if you have any questions.
We have included a transcript of the video below:
Is Lloyd’s of London Still Relevant?
So here’s the issue. Lloyd’s is different from some of the U.S. companies and some of the international insurance companies. Lloyd’s is a marketplace, Lloyd’s of London. It’s a place underwriters go to take pieces of an insurance policy. By pieces,I mean, they’ll take a certain percentage. You might have five, you might have 10, you might have 15 different underwriters taking different percentages of the whole or 100% of the policy. So, it’s a marketplace. Underwriters go in there and they decide what they want to invest in. It’s not one single entity.
The question is, is Lloyd’s still relevant? It did serve, and it does serve, a very important purpose in insurance. They insure things that other folks won’t insure. They insure risks that others won’t touch. Some of the things we’ve seen that raise significant concerns. We had a large corporate claim. It was a technology company, got sued for an intellectual property type of infringement, and it cost a considerableamount of money to defend. We’re talking north of $5 million to defend. Not atypical. These are very, very complex claims and they take a lot of lawyers doing alot of work to defend them.
What happened was the claim was filed in the rocket docket, and rocket docket is a term that’s used for certain jurisdictions in the U.S. that go extremely fast. And the litigation just moves so quickly that even the lawyers aren’t able to keep up with it. So, what we see is this was in the Northern District of Virginia and it’s known for going so fast and not giving extensions, not doing any changes to the schedule. So, you’ll have a schedule, you keep with it, and the case goes from filing to completionin a very, very short period of time.
What we had here was we had a Lloyd’s policy. It was covered. The claim was covered. There were no issues with coverage, and Lloyd’s just simply could not respond quickly enough to deal with the deadlines that the court put before us. So, why is that? Why is Lloyd’s potentially different from other insurance companies? Well, the issue is this: When you have multiple underwriters, it first, even before it gets to the underwriters, it goes to a lawyer. The lawyer’s a coverage lawyer. He or she looks at it and decides, “oh, well, I like it or I don’t like it and I need to write up amemo and make a recommendation.”
That memo recommendation then goes over to London. There’s a conference, a meeting, with the different underwriters and they decide whether they agree with it or disagree with it. The lawyer will chime in, “Oh, yeah, here’s why I came to that conclusion,” and there’ll be a diverse group of folks sitting there saying, “Well, I agree. I disagree.” But, what happens if they can’t all agree? What if it’s a lot of money and they don’t want to pay it? Well, that’s more often the case than not. So, what you have is you have dissent among the different underwriters, and you can’t get an answer.
So, what we had in this situation was a covered claim was going forward rapidly. They were incapable of giving any consent to any of the decisions that had to be made pursuant to the court order, but the court didn’t care. Things had to go forward. There was nothing the policyholder could do, and at the end of the day, theway Lloyd’s was set up, they just simply couldn’t respond. So, the question again, is Lloyd’s still relevant today? And the answer is, it depends on the claim. If you’re in the rocket docket, you may not want to be with Lloyd’s. They may not be able to deal with your claim.