How Does Having an Insurance Broker with a Legal Department Benefit my Company?
Most clients immediately question the necessity of having an insurance broker with a legal department. After all, they say, “I have never needed this kind of service before, and I have done just fine.” One must first remember why the insurance industry even exists.
The basic premise of insurance is the protection of individuals or companies against financial loss. However, it’s not the small losses which can cripple a company. It’s the large or complex claim which has the potential to severely impact a business from a financial standpoint; in some cases completely devastating a company – causing it to shut its doors forever.
One cannot just assume the existence of an insurance policy will shield their company from being adversely affected by all claims. Insurance is only as good as the limits of the policy, and just as importantly, the language in the policy form. As you will see from the summaries of real-life examples below, sometimes you need a specialist on your side which has a thorough understanding of insurance and legal procedure. You need an intelligent partner who will fight aggressively to protect your company’s interests, and this is when we can bring in a licensed attorney who can fight for you and your company.
Examples of Legal and Consulting Services Provided to Clients by a Licensed Attorney*:
A large client in the trucking industry had a driver who was involved in an accident outside of Seymour, TX which resulted in the death of an employee of a road maintenance crew. We were contacted immediately by the client, and we flew an attorney to the closest town and had them on site within 4 hours of being notified, along with an accident reconstruction specialist. Our client’s driver had not been cited by law enforcement, however, the other workers in the road crew testified to the investigating officer that the employee who had been killed had simply been in his vehicle performing his job when our client’s tractor struck his vehicle from behind and killed him. Normally, this would be an incident that could lead to a claim which has the potential to go policy limits or beyond. Insurance carriers will not generally spend the money (or do not have the resources) to get an adjuster on site within 4-6 hours of an accident, especially when it’s in a remote area, and typically rely on the police report and a few witness statements (if available) for the bulk of its investigation. This is how many severe bodily injury claims end up paying policy limits. In this case, our attorney and investigator were able to dig deep, and in the course of the investigation they determined that the road worker who was killed was driving the lead vehicle in a road crew who had been contracted by TXDOT to remove and replace the reflectors in the center of the highway. In short, the lead vehicle was acting as an escort, or lookout vehicle for safety purposes of the road crew. The worker who was killed was a 21-year-old single male who had only been working for the company for 2 weeks. During that time he had received no job or safety training whatsoever. TXDOT regulations are in place to govern the safety of employees who work for independent road crews such as the one in this case. Department regulations dictate that a lead vehicle be no more than a set distance from the actual crew doing the removal and replacement of the reflectors. In our case, the deceased employee was more than 800 feet beyond the maximum distance allowed by TXDOT regulations. Furthermore, he was using his own pickup truck as the lead vehicle, and it was not equipped with mandatory flashing lights on top, nor did it have any other indicating marks on it. Our client’s driver had been following another 18-wheeler in a single inside lane, as all traffic had been diverted by the road crew into the inside lane. When our client’s driver passed the road crew he naturally began to merge back into the outside lane once a reasonable distance had passed beyond the road crew. Since he was following the other 18-wheeler, he did not have a clear line of vision into the outside lane, and as he began to merge into the outside lane, he struck the rear of the lead vehicle driven by the deceased. Because the road crew was part of a privately owned company, and because we were able to establish that the deceased employee was not provided with any job or safety training, was driving a vehicle without mandatory flashing lights on top, and was well beyond the maximum allowed distance as set by TXDOT, we were able to bring the road crew’s insurance carriers into the claim. We filed against the road crew’s Workers’ Compensation policy, General Liability policy, and Commercial Auto Liability policy and were able to negotiate with those insurance company adjusters and get them to take the bulk of the liability in the claim. Bottom line, we saved our client over a million dollars in potential claims which would have impacted the loss runs for years, and would have cost our client tens of thousands (maybe hundreds of thousands) of dollars in increased insurance premiums, as well as potential exposure beyond the insurance policy limits.
A client which is a large food distributor owns a $15,000,000 warehouse with $10,000,000 in average monthly inventory. In addition, the client owns and operates approximately 50 extra heavy truck/tractors, along with around 100 refrigerated semi-trailers. The client was extremely concerned about potential liability exposure. Specifically, the client was concerned that a catastrophic accident which was caused by one of his drivers could open his company up to a large loss which exceeded his insured limits and exposed his assets to seizure in the event of a judgement. We advised the client on how to set up a new entity to assume ownership of the vehicles, and another entity to employ the drivers and then exclusively lease them back to the entity which owns the vehicles. We set up the new entities, handled all paperwork filings with the state and federal government, obtained the new Federal Employee Identification Numbers for the new entities, drafted the employee lease agreement, and then helped our client transfer all vehicle assets into the new company. We then arranged proper insurance coverage over all entities with a single insurance carrier which understood the exposure, and which allowed us to write separate policies yet still apply the maximum discount based on the overall premium size. The client is extraordinarily happy with his new structure as well as his coverage, and is now adequately protected in the event of a catastrophic loss.
A larger client in the trucking industry had a driver who was involved in an accident. The driver was on a delivery and was in an industrial area in late afternoon. A motorcycle struck the rear of the trailer, instantly killing the rider on the motorcycle. There were no witnesses. We were notified immediately. Even though this appeared to be an open and shut claim, we decided to send out an attorney with an accident reconstruction specialist just so we could document our findings. A few weeks after the accident, our client was served with suit papers from an attorney which had been hired by the family of the deceased. The family of the deceased motorcyclist claimed that our client’s driver had made an improper turn which caused the accident which claimed the life of the motorcyclist. Fortunately we had our findings from the accident scene. Our experts had determined from the lack of skid marks and an impact study that the motorcycle was traveling at approximately 75-80 MPH in a zone which had a speed limit of 45 MPH. Furthermore, we determined that the motorcyclist did not have a motorcycle license, and had only owned the bike for less than 30 days. Additionally, this was the first street bike he had ever owned. All of these findings were supplied to our client’s insurance carrier, and in turn helped the insurance carrier to be able to successfully deny the claim. Without our accident reconstruction along with our other findings, the insurance company would have been forced to defend this suit, and the assured could have had defense costs of no less than $35,000.00 to $50,000.00 on his loss runs, notwithstanding any sort of settlement that the insurance company might have made in good faith.
Another SWZ client owns a very large concrete construction company in Phoenix. The client has contracts in place with many of the largest home builders in the U.S. and pours foundations for these builders in new subdivisions. One of the homeowners who had purchased a home from a large builder filed suit against the builder for cracks in the home’s foundation. The builder passed the claim onto our client since the foundation had been poured by our client. Furthermore, the builder had been listed as an Additional Insured on our client’s General Liability policy per the requirements in the contract between the parties. We reported the claim to the insurance carrier, and the insurance carrier arranged for an adjuster to interview our client and collect data. During the interview, our client advised the adjuster that they were not at fault, and that they were refusing to accept liability for the homeowner’s damages. During the course of the investigation, the insurance carrier also sent out an inspector who was an expert in soil compaction and determined that the claim was the result of a sinkhole which was forming under the house. Consequently, the insurance carrier sent our client a certified letter denying coverage due to a “Sinkhole Exclusion.” The insurance carrier also noted in the denial letter that our client had refused to accept liability because they believed that they were not at fault. Within 24 hours of receiving the first letter, our client received a second letter from the insurance carrier, also via certified mail. The second letter advised our client that in light of the fact the claim was not covered under the policy, they were under no obligation to provide a defense for our client. The insurance carrier also made a point to note that our client had refused to accept responsibility for the homeowner’s damages, and advised our client to hire its own attorney to file an answer to the suit. Additionally, the insurance carrier sent the builder a certified letter denying coverage and refusing to defend or indemnify the builder. Our client had a number of concerns at this point. The most pressing concern was the out-of-pocket defense costs which our client would have to incur to retain its own attorney to represent both its interests as well as the builder’s interests. Moreover, there was the concern that in a jury trial the plaintiff might actually prevail in his suit against the builder and our client. Juries are wildly unpredictable, so this was a real possibility. Finally, there was the concern that this matter could cost our client its contract with this particular builder. This would have been catastrophic for our client, as the contract with this particular builder represented approximately 35% of our client’s gross annual revenue. It was at this point that our legal department got involved with the claim on behalf of our client. While we didn’t necessarily disagree with the assessment of the soil expert hired by the insurance carrier, we realized that the plaintiff would have an expert who would disagree with this assessment and pin the cause of the cracking foundation on the builder or our client. This issue raised enough of a factual dispute that we knew that a court would not allow the case to be dismissed via summary judgment. Therefore, we sent a demand letter to the insurance company asking them to defend the client because there were too many factual issues which had yet to be determined. While not at first, the insurance carrier did ultimately reverse its opinion, and handled the case to its conclusion for our client. Our client did not have to spend any money out of pocket to get to the desired outcome. This had the potential to have been very costly for our client, and had we not had a legal department, our client would have been forced into finding and retaining an attorney on its own.
*Only a licensed attorney can provide legal advice or legal services. Not all agency employees are licensed attorneys, and any advice provided or legal services rendered will be provided by a licensed attorney who will consult with the client on an individual basis.