What Your Senior Management Does Not Know About Risk
Management (But Should)
RIMS Annual Conference
April 30, 2014
Mark J. Plumer, Esq., Partner
Chair, Insurance Practice Group
Orrick, Herrington & Sutcliffe LLP
Barry Mitchell, Manager
Risk Security & Global Loss Control
Teck Resources Limited
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Legal Notice
This presentation is for informational purposes only,
and is not offered as legal advice. No attendee
should act or refrain from acting on the basis of any
matter contained herein without seeking appropriate
legal or other professional advice on the particular
facts and circumstances at issue. The views
expressed herein are the authors’ own and do not
necessarily represent the views of their respective
firms, attorneys and/or clients.
Recording of this session via any media type is strictly prohibited.
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Introduction
•
General Counsel and Risk Managers view the world differently
•
General Counsel focus most intently on insurance when there is a claim
•
General Counsel often assume at the outset of a major claim that if
relevant insurance was purchased, it covers the claim
•
General Counsel often do not fully understand either the hurdles that
need to be overcome before an insurer will acknowledge an obligation
to pay or the intricacies of performing an insurance claim to secure
coverage
•
At the very best companies, Risk Managers and General Counsel
communicate effectively on a variety of issues focused on claims and
potential claims, including communicating on these types of issues
before major claims arise
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How Insurance Fits Into Your Company’s Organizational Structure
(Or Should Fit)
•
•
Define the proper scope of your Company’s risk management
function

Limited to the purchase of insurance

Or, management of corporate risk
Evaluate the most sensible organizational location for the risk
management department

•
Less than 15 percent of risk managers report to the general
counsel or law department
Ensure an open channel of communication between the risk
management and legal functions, no matter what structure you
employ
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Explain the Structural Contours of Your Company’s Insurance Program
•
Explain that corporate insurance programs vary widely

Companies may buy from the “best” insurers, others from the least
expensive

Companies may retain substantial risk, others very little

Companies may rely upon domestic insurers, others foreign

Companies may operate through captives and the reinsurance market,
others do not

Even among companies that share similar structural profiles, the quality
of the insurance contracts purchased can vary dramatically especially
regarding non-standard products
Make Sure Your General Counsel Understands Your Structure.
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Explain What Insurance Is (And Is Not) Being Purchased
•
•
Types of insurance being purchased and reasons therefor

Required (workers compensation)

Optional (general liability, property, crime, fiduciary)
Types of insurance not being purchased and reasons therefor

Cyber

Business Interruption

Employment

Pollution Legal Liability

Political Risk
A Useful Exercise To Avoid Surprises Is To Identify With The General Counsel The Risks
Most Worrisome To Your Company And Then To Evaluate What Your Current Insurance
Does/Does Not Actually Cover.
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Explain The Claims Process
Settle
(Informal)
Confidentiality
&
Standstill
Agreement
Preparation of
Settlement
Evaluation
Principal-toPrincipal
Negotiations
Sum Certain $$
in return for
release and indemnity
(includes value for
future claims)
Return to original
status quo
Impasse
Right to
Claim Upon
Insurance
Litigation
Loss/Claims/
Potential
Claims
(Formal)
Tender
of
Claim
Reservation/
Denial
of
Claim
Win
Insurer
Investigation/
Cooperation
Litigation
Insurer
Defenses
Historic
Costs
+
Declaratory
Judgment
Lose
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Get Involved In Crisis Planning
(With the General Counsel)
•
Is insurance part of your emergency response plan(s)?

Does it incorporate giving notice of the claim?

Does it incorporate observing policy conditions that may limit or eliminate
coverage?

»
“Claims control” clauses
»
“Consent to settle” clauses
Does it incorporate how you will track your “loss” internally in a fashion that
allows for maximum insurance recovery?
If You Are Not Involved On The Front-End, You Likely Will Not Play A Major Role On
The Claims/Crisis Back-End.
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Get Involved in Crisis Management
(With the General Counsel)
•
After a loss, is there a process in place to quickly determine:

What types of policies may respond to a loss?

The categories of insurers that must be notified

Unique requirements of your specific policies (i.e., batching clauses)

Specific timing requirements

Whether the Company may control its defense

Whether and what settlements may be made without advance insurer
consent, or what protocol is necessary to get consent.
Take Into Account That Coverage is Getting More Complex, With More Manuscripted
Wordings And Additional Exclusions.
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Get Involved in Crisis Planning
(With the General Counsel)
•
Insurance policies often contain time requirements

Notice provisions

Proof of loss provisions

Suit limitation provisions

Waiting periods

Arcane timing provisions
»
Repair/replace deadlines
•
Insurers may be willing to extend these deadlines, or at least certain of them
•
But courts may uphold forfeitures of coverage if policy wording makes these
provisions a condition precedent, and a policyholder fails to comply
Keep Your Eye On The Clock: Insurers Sometimes Agree To Toll One Notice Limitation While
Others Continue To Run.
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Focus The General Counsel On Dispute-Related Provisions
•
Explain that some of your Company’s policies may contain terms that
substantively impact the adversarial claims process in the event of a
dispute with your insurers

Arbitration provisions

Choice of law provisions

Provisions that abrogate contra proferentum

Structural issues
»
Differing requirements in differing layers of coverage
Your Focusing The General Counsel On Such Provisions Can Help To Avoid
Surprises.
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Confirm The General Counsel’s Understanding of Key
Recurring Insurance Issues
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Recurring Insurance Legal Issues
•
Duty to Defend Issues
•
Trigger of Coverage
•
Number of claims/occurrences
•
Application Issues
•
Claim notification issues
•
Cooperating and partnering requirements
•
Consent to Settle
•
Suit limitation provisions
Create A Bridge To The General Counsel To Keep Abreast Of Key Legal
Developments.
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Discuss The Proper Management of Thorny Insurance Issues
•
D&O Structure (including coordination of bylaws and D&O
policies)
•
Insurance for Projects (including master service agreement
requirements)
•

Vendor Endorsements

OCIPS
Mergers and Acquisitions

Structure of transactions may affect insurance rights
•
Insurer Insolvencies
•
Looming Liabilities, by industry
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Work Together on Litigation
•
Do not let Risk Management be boxed out of the process

Be proactive about Risk Management’s role
•
Risk Management understands the policies, the insurers, and
the insurers’ mindset better than the Legal Department
•
Be proactive about opportunities for settlement
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Be Proactive
•
Provide regular (at least annual) detailed briefings to the
General Counsel
•
Confirm that there is a pipeline to assure Risk Management is
apprised of all claims and potential claims
•
Have someone from the Law Department appointed as the
bridge to Risk Management
•
Work with General Counsel to conduct bi-annual audits of key
policies using outside coverage counsel
•
Ask outside counsel to provide free training for risk
management and law personnel on topics of interest
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Tools and Techniques for Communicating with In-House Lawyers
•
Clear written and oral communication
•
Follow-up and pro-active
•
Examples of issues, i.e., other companies/benchmark
•
Think analytically – like a lawyer
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Lessons Learned
What Works
A deeper understanding of the company and its goals
Being proactive
Facilitating relationships and solutions
Internal networking
Trusting in all the people to collaboratively solve the issues
Excellent communication skills
Effective team
What
Doesn’t Work
Not understanding the company and its goals
Cop approach
Negative attitude “can’t do that”
Waiting for work to come to you (reactive)
Lack of trust
Poor communication skills
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Questions
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Thank You
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