TrendWatch: Insurance Recovery

Transcript

Seth Row
Partner and Insurance Recovery Practice Lead

I'm Seth Row. I'm a partner in the litigation group in the Portland office and I head up the firm's insurance recovery practice firmwide.

What should businesses know about insurance recovery and coverage disputes?

Insurance recovery means that we represent our corporate clients in disputes with insurance companies. So if our clients have a loss and the claim is denied or runs into some other kind of problem, we intervene to try to get the claim paid in full and on time. We get brought in on all kinds of different disputes from the classic casualty loss like a warehouse fire, all the way to complicated disputes over historic environmental contamination sometimes involving policies that are decades old. From that all the way to directors and officers disputes about securities litigation and really everything in between. We try to avoid litigation wherever possible, but sometimes our disputes end up in litigation and that's where having that litigation background can help.

What does smart insurance procurement really involve?

Another aspect of what we do is provide advice on insurance procurement, and oftentimes that's in connection with a corporate transaction, so the sale of a company or acquisition of a new company, which can pose its own special challenges.

What red flags signal a potential coverage dispute?

We always try to help our clients work things out with their insurance companies whenever possible. But usually when we're brought in, it's because there's some kind of a dispute. Nobody pays a lawyer to intervene when everything's going well.

How can Stoel Rives help resolve coverage disputes?

One of the key aspects of what we do when we're negotiating with an insurance company or discussing payment of a loss is trying to present the insurance company with the idea that there's some kind of a risk to them if they don't pay the claim. Sometimes it's helpful to have the insurance company perceive that there's some risk that the way that they're doing the claim, conducting the claim or investigating the claim, might expose them to liability for bad faith. Now, we deal with insurance claims across Stoel’s entire footprint, which is six [we actually have 8 states] states, but also nationally. So we have to keep up to date on state law and developments in insurance law in many states. The point of that recent article that we published on Oregon is to advise our clients that the state of Oregon's bad faith law is really dynamic and developing and that was the point of the article.

How can companies best position themselves to resolve an insurance claim?

One thing that can really help get an insurance claim resolved from our client's standpoint is if they have one person assigned to work with the insurance company. Insurance companies also frequently ask for lots of information, and sometimes they do it kind of in an iterative way where they're making multiple requests. That can get frustrating. So it's really helpful if the person that the client assigns is very patient and hopefully has some experience dealing with insurance companies.

Another thing is that some companies want to have their insurance broker be the point of contact with the insurance company. Some really careful assessment needs to be made on a sort of a case-by-case basis about whether that's the best approach. And, of course, we appreciate it when our clients call us and try to bring us in as early as possible. But we don't always assume that we need to be out in front leading the charge when we get the call. Oftentimes, we can operate in the background very effectively, providing advice to the client or the broker to try to get things resolved. There's that saying that to a hammer, everything looks like a nail. Well, we don't approach things that way. We don't assume that every case is going to go into litigation.

What trends are shaping cyber insurance today?

One thing that comes up often when we're talking with our clients about insurance procurement is cyber insurance. While the tragic wildfires in Southern California and the wildfires that we've had in Oregon and Washington and Northern California, those are top of mind for a lot of people. Concerns about cyber risk really cut across the board. The costs that can come from a cyber incident, a ransomware incident, are enormous.

How can businesses align cyber coverage with their risk exposure?

Major data breaches and losses due to ransomware events have become so common that they don't even make the news anymore. But they can have a really significant impact on the company's bottom line. In addition, we've got 50 states with 50 different sets of regulations about data privacy and data security. So we have to take into account the variations of regulations nationally, as well as international regulations on data privacy and data security. So when we're looking at cyber insurance, we need to factor those potential costs in, the cost of investigations as well as potential fines.

How is the cyber insurance market evolving?

The complexity of the risk has been matched by the insurance company with increasingly complex cyber insurance products. The premiums have also gone up considerably. So these are now substantial investments by our clients when they're purchasing cyber insurance. Exclusions as well have both become broader and more specific. For example, the war exclusion, it's an old exclusion that's been in all kinds of policies for a long time. But in the cyber context, it can pose a lot of interesting challenges. For example, if there's a hacker group that is state sponsored, but it's entirely unofficial, is an act by that hacker group a declaration of war? Does that really apply? Those are some of the kinds of challenges that we deal with. So when we're talking to our clients either about procuring cyber insurance for themselves or we're vetting the insurance that's carried by an acquisition target or even a vendor, we oftentimes have to dig deep. What are the risks? And we have to do a careful analysis oftentimes of the specific insurance product that's being offered.