5 New Year's Resolutions

These have less to do with dieting and flossing and more with promoting productivity and providing excellent service at liability insurers.

Each new year affords an opportunity for introspection about ways to improve ourselves. As Oprah Winfrey put it, “Cheers to a new year and another chance for us to get it right.” The same hopeful notion applies to organizations and industries as well as individuals, though commercial resolutions have less to do with dieting and flossing and more with promoting productivity and providing excellent service. Liability insurers gauge productivity—the effective use of resources—using detailed statistics, such as allocated loss adjustment expenses (“ALAE,” the sum of legal fees, court costs, expert witnesses, among other payments that do not go to the injured party). But a higher than desired ratio of ALAE to total payments is only a symptom. Bringing it back under control requires getting to its root causes. “Excellent service” is a more difficult goal to measure, but both goals result from practiced behaviors, repeated daily, and are not the consequences of slogans or aspirations, any more than losing ten pounds happens by joining a gym without making it a habit to actually use it. As a friendly outsider to the industry, I have observed behaviors that build value in insurance organizations. I humbly offer several suggestions for resolutions in 2017 to encourage such behaviors. Opportunities for early collaboration Sometimes the industry shoots itself in the foot. Assume a multi-unit residential development that is showing its age—cracked and settling foundations, leaking windows, dry rot, mold, you name it. A lawsuit is filed naming all the usual suspects: developer, architect, general contractor, multiple layers of subcontractors, and certificates of insurance saying every party upstream is an additional insured. Reservations of rights letters are flying like swallows to San Capistrano. Depositions begin, with a dozen law firms seated at the table, only two of which are asking or objecting to questions. Months/years later, a court-appointed special master sits everyone down and untangles the Gordian knot of coverage/indemnity obligations, and the case settles, after multiple experts are hired and reach predictably conflicting views. If we know how the eventual outcome will be reached, why not skip to the chase? Discovery need not run its all-consuming course before insurers can negotiate allocations, with or without a neutral doula. Then a small defense team can negotiate directly with the plaintiffs. See also: The Need to Educate on General Liability   Early collaboration in multi-party litigation can be a shortcut to case resolution. Resolve to actively look for such opportunities. The firm necessity of “soft” skills Insurance may be a financial product, but it is delivered by a service industry. The industry and regulatory agencies require training in the basic actuarial and risk management skills, but there are few training programs in the so-called "soft skills" such as clear, objective writing, and interacting well with the public. A well-written file note that states the objective reasons for a claims decision may never see the light of day, but when a carrier is sued for bad faith the case may turn on the jury’s reading of that little bit of prose. In 2017, resolve to emphasize the soft skills during training programs, along with the arithmetic. The “stitch in time” Most insurers and lawyers follow Abraham Lincoln’s advice: “Persuade your neighbors to compromise whenever you can. As a peacemaker the lawyer has superior opportunity of being a good man. There will still be business enough.” Yet, cases that clearly should settle within their first month or two wait until the proverbial eve of trial to resolve. Why? In my view the reason isn’t a lack of interest on either side of the case caption to settle—both sides know that there is better than a 95% chance that the case will ultimately settle—it’s a lack of information. Too often we think, wrongly, that the only way to get the information needed to settle a case is through painstaking and expensive formal discovery. As with that gym membership that lays fallow, we know where we need to be, but don’t take the steps to get there. There are “stitches in time that save nine.” They involve far less exertion than a week of depositions. Here are two that I believe insurers should require within the first month of most cases: first, meet with the insured at his/her place of business, and second, meet with opposing counsel at his/her office. Meeting face-to-face with the insured helps establish rapport. Having the meeting at the insured’s office gives counsel an opportunity to see how the insured’s files are organized and to assess whether early reconnaissance of electronic files by an e-discovery paralegal or vendor is warranted. (It may also be required by court rules.) Equally important: it shows respect. The lawyer is serving the client, not the reverse. An early, in-person meeting with opposing counsel can lead to an informal production of crucial records and agreements to postpone depositions in favor of an early mediation. Holding the meeting at the other side’s office also demonstrates confidence—Daniel in the lions’ den—and allows defense counsel a peek at how well organized and staffed the opponent is or isn’t. Thus, another suggested resolution for 2017 is to ask defense counsel during the initial discussions in a case to hold those two meetings. The telephone—more than a desk accessory The telephone is the least expensive and often the most effective discovery tool ever invented. Insurers and counsel should become reacquainted with the phone as a first means of communication, not a last resort. Emails create a written record, but not a real, free-flowing discussion. Insurers and law firms should train younger colleagues about how to build connections and obtain information by phone, and if a confirming email needs to follow the discussion a lot of phones can do that, too. See also: What to Expect on Management Liability   Recognizing individuals’ strengths Those who “get it right,” as Oprah said, use different paths and skills. While we’re busy adopting behaviors that encourage productivity and excellence and making them standard practices, it’s important to remember that people don’t come in a “standard” model. Some are wizards at settling cases, others have phenomenal case evaluation abilities; some are very analytical, others very intuitive. A final resolution for 2017 is to recognize the unique abilities that each person brings to the group’s advancement, and to put those abilities to use where they are most needed. Here’s to a productive and excellent New Year!

Louie Castoria

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Louie Castoria

Louie H. Castoria is the Director of Kaufman Dolowich & Voluck’s West Coast Professional Liability Practice Group. He represents and defends financial and professional services clients, including accountants, lawyers, insurance and real estate agents and brokers and businesses covered under “miscellaneous” professional liability policies, in venues throughout California and in the Financial Industry Regulatory Authority (FINRA). He also represents insurance companies as coverage, monitoring, and litigating counsel in coverage matters.

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