Insurance Assurance

Here are some tips to help law firm management address this difficult situation. These tips apply to all three of the broad categories of law firm insurance products ' professional liability, property/casualty and health insurance ' but especially to professional liability because of recent events.

1. Select the right broker. First and foremost, use an experienced, qualified insurance broker who knows the legal profession. Choose wisely because the broker has a critically important impact on your law firm's ability to achieve its risk management objectives.

   Unless your current broker's competence and qualifications are excellent, seek competitive bids for this extremely important responsibility. Don't rely on someone whose primary qualification is being a personal friend or neighbor of a partner! Insist upon references from comparably sized law firms to ensure the broker knows the legal marketplace and its unique requirements.

   One reason your broker needs current expertise specifically with insuring law firms is to ensure that all operating risks have been identified and adequately covered with an insurance product (or otherwise protected against via an appropriate risk management strategy). The market has changed dramatically, and insurance coverage limits from even a few years ago may not be adequate today. Some policies, notably for health care insurance, may need to be restructured to respond to current market conditions. Also, new coverages such as catastrophic information loss may need to be added. All these changes need to be accurately budgeted.

   Rather than screening multiple insurance carriers directly, many firms find it advantageous to retain an independent agent or broker who has access to a variety of carriers and can suggest the right one(s) for each firm's unique situation. Independent agents also are more likely to be experienced in obtaining unusual coverages such as kidnap and ransom insurance.

2. Identify risks. Whether you are renewing with your current carrier or inviting new carriers to bid, have a comprehensive risk analysis prepared to identify all significant risks of loss. This is an important step that in the past may have been overlooked without significant consequences. In today's dynamic insurance marketplace it is essential to conduct a thorough risk assessment.
3. Reduce exposure. A comprehensive risk management strategy should do more than just shift all risk to insurance carriers by purchasing insurance products; it should strive to minimize risk wherever practical. Even after identifying the risks you must insure for, you should set about reducing those risks.

   For example, with regard to malpractice insurance, begin by reviewing your practice management procedures. Conduct a thorough audit of your internal quality control procedures. Assess the adequacy of your client acceptance policies and procedures to screen out potentially high-risk clients. Strengthen docketing and calendaring procedures to avoid missing deadlines. You may want to have a consultant perform an analysis of your business processes in each of these areas to identify potential weaknesses. Develop standardized policies surrounding high-risk areas of law.

4. Consider consolidating. Having identified high-quality insurance companies, consider consolidating coverages with fewer carriers. Consolidating should eliminate problems with overlapping coverage or, worse, gaps in coverage; it should also make you more attractive to prospective carriers, entitle you to multi-line premium discounts, and improve your negotiating leverage.
5. Decide whether to invite competitive bids. If you already have an excellent insurance company and competitive premiums, the best strategy today is to build on that relationship. This is not the time to seek the cheapest insurance premiums from a new company. Competitively bidding your insurance coverage too often may scare away the best companies, which look for long-term business relationships. Instead, stick with your current high-quality carrier(s) and focus your attention on improving other operating areas of your firm.

   On the other hand, do seek competitive bids if your existing carrier's financial strength is cause for concern, or if you have reason to believe your premiums may be seriously inflated.

6. Develop detailed insurance specifications and shop wisely. If you do open your renewal to competitive bids, insist that your broker provide an apples-to-apples comparison of coverage and premiums. This is another area where your broker's experience is required. Comparing bids with different coverage provisions, definitions, exclusions and deductibles is extremely time-consuming and can be perplexing. It is best to avoid this situation entirely by clearly defining your requirements in the Request for Bid. Be specific in outlining key terms of each insurance product.
7. Select only high-quality carriers. Establish as one of your top selection criteria the quality of the carrier(s) selected. You get what you pay for, and getting a 'good deal' in this market may be the wrong deal, especially for liability insurance.

   Prepare, or preferably have your broker prepare, a well-researched assessment of the quality of each carrier. While service and other factors contribute importantly to carrier quality, the core factor is financial strength: you want to be certain your carrier will be there in the unfortunate event of a substantial loss.