Magazine article Risk Management

A Beautiful Friendship

Magazine article Risk Management

A Beautiful Friendship

Article excerpt

Frequently, risk managers work at a distance from in-house counsel until a specific coverage dispute verges on litigation. By then, unfortunately, the company may enter litigation saddled with unfavorable facts and circumstances--most of which could have been avoided. If the risk manager and in-house counsel had a closer working relationship, the company may have been better positioned to obtain the coverage to which it was entitled.

The main challenge in fostering this relationship is that risk managers and in-house counsel approach coverage issues from different perspectives. The risk manager regularly interacts with insurers, often dealing with the same firm and contacts year after year in an attempt to find the best premiums for necessary coverage. In-house counsel typically only deal with insurers to resolve "one-off" compensation disputes over client defense costs, third party liabilities or first party damages.

Both sides must realize that that risk management's ongoing interactions with insurers can affect in-house counsel's ability to obtain coverage when a dispute arises. Maintaining a relationship of communication and mutual understanding of certain ground rules in dealing with insurers will help ensure that the company does not inadvertently undermine the insurance program it has taken so much time and effort to build.

These are the seven ground rules to follow:

1. Exercise care from the outset. Risk transfer begins the moment you or your broker contact the insurer and does not end until the insurer meets its coverage obligations in full. In other words, from the very first point of contact with insurers, you should operate as if a potential lawsuit could arise. Be careful about what you write or say regarding your understanding of the scope of the coverage. Remember, all communications are potentially discoverable in a coverage lawsuit. Make sure the broker understands that as well, and exercises similar discretion.

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2. Control your broker. Make sure that you and/or your in-house counsel continually monitor communications between your broker and the insurer, particularly after a coverage dispute arises. Depending on the jurisdiction and the circumstances, the broker may be considered your company's agent, and therefore the company could be bound to any statements or agreements made by the broker. …

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