An Insurance Practice Group Meeting The Challenges Of A Changing Industry

Editor: Mr. Davis, would you give us an overview of the Stradley Ronon Insurance Practice Group.

Davis: Stradley's insurance practice is diverse and growing in many respects. Our attorneys provide advice to insurers and intermediaries on regulatory matters, tax issues and compliance concerns. We are often asked to provide insurance product interpretation and design advice, and we often work on government affairs initiatives for the industry. On the litigation side, we handle a large volume of disputes over different types of insurance products and transactions. We also routinely provide advice to the firm's other clients on insurance issues - both in designing their insurance and benefits programs, using insurance in transactional matters, as well as claims questions. At present we have more than 20 lawyers doing insurance-related work.

Editor: What are your responsibilities with respect to the practice?

Davis: My own practice is evenly divided between coverage litigation matters, and regulatory counseling and the provision of compliance advice to insurance companies. The latter includes a range of government affairs work as well. I enjoy helping insurers and producers resolve difficult problems, and I spend most of my time working closely with clients to help them do that.

I also oversee much of the practice's administration and business issues, such as making sure there's appropriate staffing for the many different matters we handle. One of my principal responsibilities is to connect the clients to the right lawyers. On a personal note, I manage the firm's pro bono program.

Editor: Do your insurance litigators call upon other lawyers in the firm to handle insurance litigation matters?

Davis: Yes. Stradley Ronon's litigation bench is deep, which gives us the flexibility to match the most qualified and experienced lawyer with the particular engagement. For example, the firm has considerable expertise in construction law and related litigation. If I have a case involving construction coverage or surety issues, I will call on one or more of my colleagues from those areas to assist. We also frequently collaborate with our environmental lawyers when dealing with environmental coverage issues.

Of course, our insurance practitioners also provide support to other practice groups in their matters. We provide guidance on designing risk management programs or assessing insurance and indemnification terms in transactional matters. The firm's size enables us to draw from a wide range of expertise across a number of practice areas.

Editor: Prior to joining Stradley Ronon, you served as Chief Counsel for the Pennsylvania Insurance Department. Would you share with us that experience?

Davis: Working with the people at the Pennsylvania Insurance Department was rewarding in so many ways. They are extremely dedicated and intelligent professionals who care a great deal about the responsibilities they are called upon to exercise. They taught me so much about the industry, and they also happened to be wonderful people who were fun to work with.

During my years with the Department, I gained a broader perspective on the practical business concerns facing insurers and producers in the marketplace. On the other hand, I learned a great deal about the problems faced by the regulators, who must strike a balance between regulating too much - and thereby stifling the industry and ultimately hurting consumers - and regulating with too light a hand, which encourages abuse of the system. The experience undoubtedly made me a better insurance lawyer, but also taught me to be a better communicator with regulators and a better advocate for our clients. I was Chief Counsel at a time when Pennsylvania's Insurance Commissioner was President of the National Association of Insurance Commissioners. Serving in that capacity enabled me to observe industry issues and their resolution on a national level. One obvious benefit has been in knowing the right governmental people to contact on any given issue, not only in Pennsylvania, but also in many other jurisdictions. I highly recommend to any lawyer who has the opportunity to engage in this type of public service to do so.

Editor: As you know, our publication is directed at general counsel and members of corporate legal departments. Are there particular insurance issues which we should be calling to their attention at the moment?

Davis: Aspects of risk management are among the crucial concerns of corporate counsel, but general counsel and corporate legal departments are often not involved in designing the company's insurance programs. Some enterprises rely solely on insurance professionals for such a process; others bring their lawyers into the fold but only for limited purposes. I believe that corporate counsel should be a key part of linking analyses of corporate risk - legal and otherwise - with the most appropriate ways to insure those risks. Developing an overall risk management plan for the company, and then integrating an insurance strategy into that plan, is a service I think corporate counsel are particularly well-equipped to provide.

Why is this area so important? The statistics indicate that a majority of companies are underinsured for a variety of catastrophic losses. Only 35 percent of companies have some form of business interruption insurance in place. On the liability risk side, there are all kinds of new products for every kind of business. There are also policy language changes from year to year that could significantly deplete the value of a particular liability coverage program. I think one important contribution that corporate counsel can make is analyzing and addressing these types of risk issues.

Another critical area for companies today concerns Directors and Officers (D&O) Insurance. These coverages are increasingly important in today's environment, and because they are constantly changing, buyers are often confused about what they're actually insured for. This is an area where corporate counsel can be a particularly effective resource for the company.

In addition, there are a number of new and innovative products that enable businesses to consummate deals or otherwise complete transactions. Counsel involved in moving a company on a transactional front - such as purchasing land or buildings or carrying out an M&A strategy - should be fully informed of the insurance aspects of the deal that might enable them to hit a home run for the company by using insurance products in some creative way. In this regard, developing relationships with insurance brokers and the companies they work with is important.

Insurance is an essential asset of any successful business. If the company is not involving its legal department in the insurance aspects of risk management, something needs to be done to remedy that shortcoming.

Editor: What advice do you have for in-house counsel dealing with the various risks arising from the passage of Sarbanes-Oxley?

Davis: There is no question that Sarbanes-Oxley has added to the responsibilities of corporate insiders, directors and officers, and to the exposure they face in failing to measure up to those responsibilities. Again, it is essential for in-house counsel to understand how the many different D&O coverage products work and how they can be used to interact with one another to provide effective protection.

Invariably, corporate counsel is going to be asked by senior management and by the directors about these coverages. The lawyer who does not understand how these products work is going to be in a very awkward and potentially embarrassing position. There are many resources - insurance brokers, insurance companies and outside counsel - who are happy to provide information to help counsel effectively respond to the inquiries of the executives and directors. I would encourage your readers to take every opportunity to pursue such a course.

Editor: What about the future? What are the hot issues facing the insurance industry over the next couple of years?

Davis: Insurance touches everyone's lives in so many ways and on so many levels, there are always a plethora of issues the insurance industry must grapple with. On a macro level, I would say this is a particularly active period for the industry as a whole. I think, in part, because of the public nature of the insurance issues coming in the aftermath of Hurricane Katrina, there will be particularly heightened debate about state versus federal regulation of the industry. The move to repeal the McCarran-Ferguson Act giving antitrust exemption to insurers is a major piece of the debate, and continued exploration of an Optional Federal Charter is another.

Another significant issue for the industry right now is the extension of the Terrorism Risk Insurance Act - how long it will be extended for, at what levels, and for which lines of insurance. These questions are being debated with great intensity.

Editor: What about insurance issues in this region?

Davis: For Pennsylvania, I think the biggest issues on the table involve healthcare insurance. This year has been particularly important in the healthcare realm, with Gov. Rendell's Prescription for Pennsylvania and the recent filings by two of the largest heath insurance companies in the Commonwealth, Highmark and Independence Blue Cross, to consolidate. Healthcare insurance is the major item on the agenda of the Pennsylvania Insurance Department, so both the Governor's program and the proposed consolidation are going to be significant issues for the Department to address.

Editor: Where would you like to see Stradley Ronon's Insurance Practice Group in, say, five years?

Davis: Historically, the firm's insurance practice has concentrated mostly on litigation matters, but over the last several years we have diversified more into regulatory counseling, designing underwriting guidelines and claim handling practices, and providing transactional advice for insurance companies and intermediaries. I anticipate continued growth in all of these areas, and the firm is dedicated to growing this practice area as part of its overall strategy. We see insurance services as an important component of the firm's broader growth in the financial services arena. Many firms talk about cross-marketing and developing synergies between practice groups - however, I believe it is a natural occurrence here at Stradley, as we view it not just as a bottom line or growth matter, but because we know having this type of integrated service is so important for our financial services clients especially. Over the next five years, as the services we are able to provide to our insurance, banking, investment management and mutual fund clients expand, we will remain focused on continuing to integrate those practices.

Published .