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Selected Articles
 Presidents
Institute – A Holistic Approach to Risk Management
Mr. Sutrich
and Mr. Morin were speakers at the Council of Independent Colleges 2011
Presidents Institute in Palm Springs, California. The Presidents Institute is an annual
event that attracts in excess of 300 college presidents from around the
United States. Mr. Sutrich and Mr. Morin were accompanied on the podium by
Stephen Bahls, the President of Augustana College in Illinois, who recounted the
approach his institution has taken to some of the challenges they have
faced. The session, entitled A Holistic Approach to Risk Management: What
Presidents Need to Know, attracted a large audience. The presentation and subsequent Q&A
session were well received, given an understanding on the part of the
presidents that they often are the de facto “Chief Risk Officer” and as
such, they need to be aware of enterprise wide risk management and key
insurance issues. A few perennial and several emerging risk issues that can
lead to significant liability exposure if not appropriately addressed were
discussed.
The
Hartford Decides to End Their
Encounter With ARI
Like the outcome in Where There’s
Smoke, There’s Coverage, The Story of Insurance, Lawyers, and a
Policyholder Freedom Fighter, thanks to Hartford Fire
Insurance Company, the entire industry has now lost a claim handling
technique and a legal strategy which has historically given insurers the
upper hand in their claims handling practices. Thanks to ARI and its capable counsel, insurers
must rethink their modus operandi of removing a state action to federal
court, a forum where the odds statistically favor the insurance
industry. As a result, until the
Supreme Judicial Court of Massachusetts rules otherwise, Massachusetts
policyholders can, as a matter of law, strategically split their
declaratory judgment action from their extra-contractual bad faith claim.
Rather than explaining their
actions, The Hartford, on the eve of their scheduled deposition in the Bad
Faith (93A) matter, presented an offer that allowed ARI to monetize its
investment. We believe the result
only buttresses what our client-partners already know about ARI and what
Hartford Fire Insurance Company found out – being treated like a
policyholder claimant is not pleasant but with ARI on your team, there is
upside in risk.
This case is yet another example
of ARI’s commitment to make sure insurers live up to their
responsibilities.
Leveling the Playing
Field:
Structural
Analysis of Corporate Insurance Purchases
It may seem counterintuitive, but insurance is not
a service industry; rather, it is an industry of financial product
manufacturers. One can easily draw
an analogy that insurers are the industry’s “Manufacturers” and the agents
and brokers are “Intermediaries” or distribution channels for the
Manufacturers. A structural analysis of the corporate
insurance purchase reveals a common theme where the Insurance Buyer
must purchase insurance products with incomplete or biased information and
with insufficient time to make good decisions. For instance, do you feel that the
materials and information the Manufacturer (insurer) or Intermediaries
(agent/broker) provide are designed to make you a savvy and well-informed
insurance buyer? Also, ask yourself,
why can’t the agent/broker/insurer provide renewal terms 30 days in advance (rather than a couple days
before expiration), given that your renewal occurs on the same day
every year? If they truly represent
your best interests, why then are they so unenthusiastic about your
decision to seek independent information and counsel in navigating the
system and leveling the playing field?
Where There’s
Smoke, There’s Coverage
The Story of
Insurance, Lawyers, and a Policyholder Freedom Fighter
These results, not unlike those we
achieve every day for our client-partners, have now become an issue not
just for this insurer, but for the entire Property & Casualty insurance
industry. The real enormity, as the
ARI decision points out, is not the judgment itself (Superior
Court decisions are not binding precedent), but
rather the drafting ambiguity in the ISO-based policy, the stark reality of
which will be unavoidable in every jurisdiction that it’s issued. Now just think, the next time fine particulate matter or “smoke”
(asbestos, lead paint dust, silica, Beijing dust storms, well you get the
point) damages your property, you won’t have to go down the long, arduous
path of bringing a suit against a negligent third party(s), but rather,
just fill out a Proof of Loss and simply ask your property insurer to
pay. If your insurer gives you their
usual blather, just point to the “smoke” ambiguity (“smoke” appears in the
Covered Cause of Loss as well as in the exclusionary Pollution definition)
in the ISO-based policy along with our Massachusetts Superior Court
decision and your jurisdiction’s consumer protection and/or punitive damage
statutes.
Is This What You
Envisioned When You Purchased the Policy?
In
the area of execution, it has been our experience that one of the greatest
risks a successful organization faces is relying on business partners who
lack common sense and the ability to ‘get it done’, who instead rely on
their brand, pedigree and capital (yours) for “success”. Unfortunately for
corporate insurance buyers, the insurance industry is not so good at execution. Or is it?
Is it a lack of execution ability
that is the main issue, or rather is it the strategic use of opacity and
thinly-veiled conflicts of interest which allows the industry to
take advantage of the policyholder whenever it sees fit? The following real-world, policyholder –
carrier interaction illustrates yet another reason to raise the issue of
conflicts in the insurance industry.
Reactions Magazine’s Rising Stars
We are pleased to announce that ARI’s
President, John Paul Sutrich, was identified by Reactions Magazine as a rising star
and leader in the global insurance services space. Reactions,
the financial magazine for the global insurance market, spent four months
canvassing the globe in an effort to identify the brightest talent around
the world (page 21). While the
majority of those selected represent insurers and brokers, Mr. Sutrich was one of only two rising stars from the
consulting/advisory services space.
We appreciate Reactions’
recognition of John Paul as an industry leader (page 31), particularly
given the reality that ARI is not a broker or (re)-insurer, but rather
uniquely focused on providing unconflicted
counsel and strategic “risk adjusted” advice to corporate buyers in the
global insurance marketplace.
The Viability of
D&O Insurance in Foreign Jurisdictions:
The Korean
Experience
Are you an Officer or Director of an
overseas entity, even if it’s just a subsidiary of your parent
company? Has your parent company
indemnified the Directors, Officers and Managers of your foreign
subsidiaries? Even if so, do you
know how the laws of this foreign jurisdiction impact corporate
indemnification and the viability of coverage provided by your Directors’
and Officers’ (D&O) liability policy?
We offer this brief as a baseline for
the discussion of the issues surrounding corporate indemnification of
Korean Directors, Officers and Managers and the financing of that
indemnification vis-à-vis insurance.
The “Korean Experience” should provide you with insights into how
the laws and norms of foreign jurisdictions may affect your coverage and
therefore your exposure, corporately and potentially personally as well.
Can’t Stomach Your
Annual Insurance Presentation?
Imagine What We
Hear Every Day
Each January we reflect on the past
year’s client-partner successes. As
with everything we do, levity is a fundamental ingredient in our ability to
continually drive client-partner outcomes.
As part of our annual exercise, we record the most preposterous
statements or “fluffers”, as they’re known, that
we hear from the insurance industry through our engagements. You would assume, with the new level of
scrutiny (Spitzer factor) the industry is facing, that coming up with this
year’s Fluffer List would be a challenge. Quite the opposite is true and actually
2004 offered so many “best in class” fluffers, it
was the first year we could not all agree on the single best whopper.
Debunking D&O
Insurance Myths:
Separating
Coverage Reality from Marketing Hype
Regardless of whether your approach to
operational risk is top-down or bottom-up, the financing of your
organization’s Directors’ and Officers’ Liability (D&O) exposure is
likely addressed through a traditional approach such as insurance. As anyone who has had the responsibility
to procure their organization’s D&O insurance can attest, it is one of
the most complex and costly insurance products sold.
With corporate governance on everyone’s
radar, there is an increase in demand for D&O liability risk financing
options. And as all commodity
markets respond to increased demand, the “Sellers” (“Intermediaries” and
“Manufacturers”) are coming out of the woodwork. With this and the abundance of
misinformation floating throughout the market both here and abroad, we felt
compelled to offer some basic buyer transparency.
Insurance Renewal
Got You Down?
Maybe it’s time for
a Captive Insurer?
It’s like a knee jerk reaction – the
insurance market changes direction and everyone’s running for the
alternative risk market at once.
Being your own insurer may not be the panacea you envisioned. Like when your plumber tells you this
will be his last house call, because starting next week he’s going to be a
full time day trader – in 1999 he was a genius, in 2002 he’s bankrupt!
So before you trade in your
conventional insurance program for an alternative approach, we suggest you
take more than a moment to assess the landscape. One thing is for sure, no business
alternative produces risk-free money.
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