In today's blog post, Mark Miller addresses another issue pertaining to the role of insurance broker claims advocates, namely a misperception that some brokers have about the best way to maximize insurance claim value. Here, Mark addresses a recent visit with a prominent insurance broker seeking referrals from Miller Friel. During that visit, the brokers proudly touted marketing materials about everything they had to offer. One of the ways this broker thought they were creating value, was by preventing lawyers from providing advice regarding the scope of insurance coverage. This prompted us to think about some of the most successful insurance recoveries we have had for corporate clients and how best to use insurance brokers in the process.
Does a Divided Approach Make Sense?
On one hand, what the broker is saying makes some sense. This broker was really touting its ability to help policyholders settle claims as insurance broker claims advocates. Helping policyholders settle insurance claims is an important function of brokers. Brokers know the right people at the insurance companies, and in many instances, they help settle claims. It only makes sense to leverage contacts.
On the other hand, what this broker is saying is completely foolish. Brokers know a lot of things. They know what insurance companies have paid on claims in the past. Brokers know how insurance companies handle claims. And, oftentimes, brokers know what insurance companies might be willing to pay. But, all of this has nothing to do with what is covered under the insurance policies. Insurance policy coverage is purely a legal issue that has nothing to do with insurance company custom and practice, or what an insurance company is happy to pay to settle a claim. Insurance coverage is controlled by the law, and despite what insurance brokers do, most don't practice law all that well.
The Role of Insurance Broker Claims Advocates and Lawyers
So, what is an insurance broker claims advocate and what is their role? Lawyers use the word advocate quite seriously, recognizing their obligation to zealously advocate. Insurance brokers use the word more as a marketing phrase, to illustrate that they are helpful in the process of settling claims. What insurance broker claims advocates do is more akin to a lobbyist than an advocate. Insurance broker claims advocates work with insurance companies to see if they can find common ground on a claim. They leverage their contacts to get meetings with insurers. Like a lobbyist, they provide access and contacts. They don't, however, advocate for coverage in the way that insurance coverage lawyers are bound to do for their clients.
In working with insurance brokers to settle some of the largest insurance claims in the country, we have found that there is a better way. Brokers and lawyers are a team, not advocates against one another. Each has a different but equally important function. Lawyers determine what is covered based on the law and develop strategies to pressure the insurance carrier to pay. This may include submission of legal analysis to the insurer to help them reverse their position on coverage, or it may include other dispute resolution mechanisms. Brokers keep communications open with the insurer, and search for common ground. Together, the whole is much greater than the sum of its parts.
Please watch the video to learn more, or Contact us if you have any questions.
We have included the transcript below:
The Role of An Insurance Broker: To Keep Lawyers from Giving Advice?
I'm going to talk to you today about something very interesting that happened to us the other day, and I'm going to title this "The Role of an Insurance Broker: To Keep Lawyers from Giving Advice". Probably wondering, "Well, what does he mean by that?" Brokers come by and meet with us, and the other day, some brokers wanted to talk to us. Big brokerage firm. I'm not going to mention the name. Comes into our conference room and says, "Hey, we want to chat with you guys about some common interests we have." We're like, "Oh, that's great. Let's talk."
They show us their pitch material, and here it is right here. I'm just going to explain to you what it says because I don't want to identify anyone in particular, but this brokerage firm says, "Insurance solutions in arbitration and litigation," and then they have in the center of the circle, they have something called "Proactive Role of the Broker". Then there's a bunch of things they do. Most of them are pretty cool. We get it. There are good things brokers can do, which we fully support. But there's one that struck us in particular, and there's this little dotted line that goes down to this circle, and inside the circle, and this is a role of a broker, a proactive broker, is to keep lawyers at arm's length from giving insurance advice.
We're looking at that thinking, "Well, wonder why a broker would think that's important, and, furthermore, maybe if it is important, why would a client of a broker think that's important?" We started to think about this, and the question is, or the thought is, what is happening here, where's the disconnect? At a minimum, why are some brokers thinking that lawyers are not helpful in the process, and, perhaps, why might some clients view it as a positive? At least, the brokers think it might be a positive to stop lawyers from giving insurance advice.
What we came up with is some misconceptions. First, how should the process work with the broker and a lawyer? It should be a collaborative process. Brokers and lawyers do two completely different things. The one thing that brokers do that lawyers can't do and don't do is they understand the players, they understand the people, they talk to the underwriters, they talk to the insurers. So they know who they are and they know what, generally, what they're probably willing to do. That's intelligence that lawyers don't have. But what lawyers do that brokers don't do is lawyers can understand the law. Our thought is, working together, which is what we do with most brokers... we have many, many brokers we work with. And the process is very collegial. You work together. The lawyers understand the law. The brokers understand the people, and you work together and you get a great settlement. We think there's just a little bit of a misunderstanding with this broker about how to effectively use lawyers.
A second thing I think that's inherent, and this is a misperception as to what drives value within a claim. By that, I mean, when you have a claim that's a legitimate claim, the question is, do you want to pursue that claim and maximize the value, or do you want to just put in a minimal amount of effort and get a number and go away. That may be okay if it's a small claim, if it's a $500,000 claim and you're, "Well, I got $400, that's okay. I'll go away," but if you're talking a $50 million dollar claim, and you've got a $20 million dollar offer to settle, there's a big delta between $20 and $30 or $40 million dollars, which is where the claim value probably or maybe should be and whatever is being offered. The larger the claim gets, the more important we think it gets to bring in a law firm to help you maximize that coverage.
What are the best practices in working with an insurance broker? First of all, you have to work together, and you got to work together to maximize the value of a claim. Who does what well? The brokers can work the insurance community, the underwriters. And the lawyers can work the law. The lawyers put together the legal picture, and the brokers take that legal picture to the underwriters and get the best possible settlement. The reason why this works over just having a broker say, "Hey, how you doing? Hey, let's settle this claim," which is just without the lawyer's involvement, is that most of the underwriters in insurance companies fall back on something called custom and practice, and custom and practice is just, "This is the way we do it. You all know that's the way we do it. You're a broker. You know that's the way we do it." And it comes across as being completely inflexible, and brokers don't have a lot of ability to push back on that because that may, in fact, be the industry custom and practice.
The problem is the industry custom and practice is set up to pay less money on a claim. It doesn't mean that that's the right thing to do. It doesn't mean that's the legal thing to do. It just means that's the way it's done in the industry. The broker, if the broker needs to push back on something like that, they can't do it on their own. They need someone to be the bad guy, someone to step up and say, "Look, this is the way it is. This is the way the law is," someone to take the fall. It's like, "Hey, it's not me. It's these lawyers. The lawyers are the ones that are saying it, and, by the way, what do you think of their point?" What it does is it shields the broker from having to burn their bridges with their relationship, and it opens the door for them to point at someone else, but to bring in the good arguments that they can't otherwise make.
You work together with a broker. Both sides deliver what they got, and you get a much better result.
Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.