Volume 1, Number 2
|Table of Contents|
An Insurance Primer for the GP Attorney - Part I
Attorneys spend a long time in law school (and a lot of money). Law school teaches legal theory and how to think like a lawyer. But the nuts and bolts of life, business, and our client’s business is not taught. This is akin to going to baseball camp, learning how to throw, but never playing in a game. While law school does many things well, it does not teach us about our clients and their needs - specifically in this case, their insurance needs.
Just as attorneys need malpractice insurance, business clients need insurance for their needs. Insurance needs can range from a basic business owners policy (BOP, in insurance lingo) to key person insurance. The same client may need a boat policy as well as an inland marine policy. However, most attorneys do not learn about insurance, insurance needs, or how to help clients with this. By referring the client to someone else, the attorney loses out on contact with the client, a chance to add value to the attorney-client relationship and provide a service to the client to continue and expand the relationship.
Insurance is a complicated topic. One article cannot teach someone everything they need to know about insurance. This article provides a small sample of how an attorney can help the client in obtaining property-casualty insurance. Future articles will deal with other parts of the insurance process.
II. Obtaining insurance
Helping your client obtain the proper insurance is the first step in the insurance process. What to do may be complicated, but what not to do is easy. DO NOT send your client to an insurance agent or broker and assume that the broker will always do the right thing! New York Attorney General Spitzer alleges that at least two insurance brokers were involved in rigging bids so that the clients thought they were getting the best deal. However, in reality, the client was paying whatever the broker thought the client should pay. Other enforcement agencies, including California Attorney General and the SEC, are considering enforcement actions as well. While the practice may have diminished, it is naive to think that this may not still be continuing in the insurance industry. So, what can you do? There are two basic things to think about: what needs to be insured and how to get the insurance. You can either obtain the requisite knowledge or find an expert to help the insured.
First, before you can advise your client, you need to determine what needs to be insured. This is a complicated process for which Fortune 500 companies pay good momey to their risk managers. If your client does not have a risk manager, you can assist in this process by asking questions. Some of these questions include, What prior losses did the client have? What was damaged? Where might the client suffer damage in the future? However, this is not an exhaustive list. If you are an expert on your client’s business, you may be able to point out areas that need to be insured. If you are not, you need the client to point out the areas of potential claims to you. Make a list of what is important, what might be damaged, what might be stolen, etc. . . . Find out if they have vehicles for business use. Take notes - walk through the property - use your eyes. Once you have determined what might be damaged or where a loss may occur, you are in a position to try to assist in the process of the client procuring insurance.
Some attorneys may elect to use an alternative method to assist the client. If the above cannot or does not work out, you can then contact agents or brokers. (An agent usually represents one company whereas a broker may represent many companies.) If you go this direction, contact at least three, preferably five, agents or brokers, or both, and let them know that you are checking around. You should review not only the price, but also the contract. Not every insurance company will offer the same coverages or even the same types of coverages. If your client is big enough, you can even negotiate for extra coverages or additional provisions.
The next option is to get educated about insurance. There are many ways you can learn about insurance. In Sacramento, the local university, Sacramento State, offers an emphasis in insurance through the business school. Sign up and take classes. The American Institute for CPCU ( www.aicpcu.org) offers excellent programs from a basic understanding of insurance to a complex, national designation. The American Educational Institute offers programs in insurance, as does the Society for Claims Law Associates. Some of these programs focus on legal aspects of insurance. However, these programs take time and money for the student.
If you do not want to take one of these classes or teach yourself about insurance, find an expert to assist the client. There are numerous experts listed in the back of the ABA Journal every month. Call them and if they cannot help you, they probably know someone near you who can help. Find an attorney who specializes in insurance or insurance coverage disputes. An insurance adjuster-turned attorney can be a very valuable resource. If you cannot find someone through these avenues, turn to professional organizations. Both the CPCU Society ( www.cpcusociety.org) and RIMS ( www.rims.org) have searchable databases of members. (Like people in any group, you must do your homework and check out these consultants independently.) Members are held to an ethical standard similar to the standards that attorneys face. Thus, you have some assurance that the members will look out for the client.
By taking some initiative, you can help your client obtain proper insurance. This may be insurance at the best price, or a different insurance policy than the client had previously, or some combination. But you are adding value and providing the client with a service that most other attorneys have not educated themselves on. This is one more area that you can help your clients and provide greater service to them.