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Practicing Insurance Law

Insurance Law has three areas of focus: insurance coverage, insurance defense litigation, and insurance compliance. Insurance coverage actions generally involve an insurer and the insured. The insured is seeking to recover under a policy of insurance, and the central legal question is whether the insured’s policy covers the loss or liability. Insurance coverage actions can involve complex issues, including disputes between insurers related to matters such as primary/excess coverage or reinsurance. Insurance coverage cases tend to focus on the language of the policy and the case law analyzing the policy language. In the aftermath of Hurricane Katrina, flood exclusions and related provisions in homeowners and commercial policies have been challenged vigorously in the courts. Thousands of claims have been tried and remain to be tried in individual and class action suits. Federal as well as state courts, chiefly in Mississippi and Louisiana, have and are issuing rulings. Tens of billions of dollars are at stake in these direct challenges to the flood—or water damage—exclusions in Katrina-related litigation.
Insurance compliance involves the 50-state regulation of the business of insurance, from rates to advertising/solicitation to licensing of adjusters. Insurance companies must get into compliance and stay in compliance in order to avoid regulator investigations and ultimately, penalties for non-compliance. Insurance compliance is primarily handled by compliance staff within insurance companies, but often companies have outside counsel handle responses to investigations by state regulators. Insurers use actuarial models based on past events to develop products, decide where to sell them, at what price, assess risk, lobby for regulatory change, etc. Climate change, also known as “global warming,” is forcing a paradigm shift in this business model. Both the insurance industry and federal and state governments are attempting to address this crisis.
Insurance defense refers to situations where an insurer hires counsel to defend its insured against an action brought by a third party—typically an action alleging that the insured has caused the third party to suffer bodily injury or property damage. The parties to the action are typically the insured and the third-party claimant. The legal issues revolve around whether the insured defendant is liable to a third party, and if so, for how much. Insurance defense cases tend to focus on the facts of a particular incident or occurrence. In insurance defense litigation, in-house counsel will create a set of guidelines for outside counsel to follow as a means of managing the expenditures incurred during litigation. However, given the tripartite relationship unique to insurance litigation, litigation guidelines continue to create much debate among insurers and defense law firms.
Insurance litigation covers such areas as construction defects, reinsurance, catastrophic loss, bad faith, disability, insurance fraud, and more. Insurance-related assignments for new associates include locating and adapting standardized policy language, reviewing documents, researching and analyzing cases interpreting policy language, and analyzing state regulations governing the business of insurance. In an insurance defense firm, a new attorney would participate in litigation by draft pleadings, motions, and written discovery.
Insurance coverage as an area of focus is primarily practiced in large and medium-sized law firms. The practice groups within large law firms generally include attorneys that provide coverage opinions for insurance companies, while smaller firms often represent corporate policyholders. Insurance coverage cases can be large scale, with multimillion dollar claims that take years to litigate. Carriers are generally willing to pay a much higher hourly rate for these types of cases, because, as a general rule, the work is more sophisticated and more likely to result in binding case law that will apply to future claims.
Insurance defense is primarily a focus of medium and small law firms. Medium-sized firms are often captive counsel for a list of insurance company clients. Because insurance defense work tends to be high volume, insurance carriers often assign a lot of cases to a particular firm but pay a fairly low hourly rate. Small law and solo firms focus on insurance defense as well, often representing smaller regional or local insurance companies. Insurance defense firms do insurance coverage analysis as part of the process of preparing the insurance company or policyholder defense case.
Insurance Companies have legal departments with attorneys that analyze coverage issues. These employees of the company often conduct the initial review when an adjuster forwards a claim that is not squarely addressed by an insurance policy. If the claim is complex, if the legal issues are particularly complex, or when the claim is going to litigation, the case will be sent on to outside counsel to address. Insurance companies also maintain legal staff to manage litigation and to handle insurance compliance issues.
Typical tasks performed by an attorney practicing insurance law might include the following:
Insurance Coverage:
  • Find missing policies
  • Evaluate policyholder liability
  • Assist in pursuit of additional insured rights under other policies
  • Advocate insurer’s (or corporate policyholder’s) position in settlement negotiations
  • Defend bad faith suits seeking contractual and extra-contractual damages
  • Investigate claims for large catastrophe losses
  • Prepare coverage opinions with coverage analysis based on case law interpretation
  • Draft policies and endorsements and revise policy language
Insurance Defense:
  • Assess attributes of case
  • Determine any coverage issues
  • Pursue standard litigation strategy—how did accident or event occur; what was proximate cause of injuries, what is monetary value of injuries and/or damage
  • Attempt to do work at best quality but lowest cost to retain status as preferred firm
  • Attempt to show insured not liable or settle quickly
Insurance Compliance:
  • Review regulator report/investigation
  • Investigate operations within insurance company to determine specific facts around non-compliance
  • Find conflicting regulations and authorizing statutes to show insurer was attempting to comply
  • Review National Association of Insurance Commissioners (NAIC) model laws to determine if insurer was attempting to follow those if rules unclear within states
  • Draft detailed response to inquiry with cites to insurance regulations, codes, bulletins, NAIC materials, etc.