Carriers Growing Weary Of Specific Counsel Requests

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Adding Firms To Policies Adds Costs To Policies

In light of the increased loss costs associated with requests to use non-panel counsel attorneys many carriers will no longer honor requests for endorsing a specific law firm to a policy as counsel unless the insured is willing to assume a hefty retention. Consider this, a duty-to-defend insurance policy was originally intended for smaller insureds without a relationship with expert employment practices and directors and officers matters. The goal of the carrier was and remains to provide the insured with an expert who can handle the specific matter tendered. The carrier also negotiates reduced rates with these attorneys which reduces the overall cost of claims. The duty-to-defend policy can really be a win-win for the carrier and the client if this relationship is valued. Whenever, an insured requests to use an existing relationship the carriers fret increasing the loss costs under the policy since they do not have a prior history of claims handled by the new firm to determine the quality and efficiency of the firm. This is especially important for the handling of employment practices claims, which can easily push defense costs beyond the usually deficient deductibles.

The Problem With Selling Duty To Defend Policies To Larger Insureds

As insureds have become more aware of the likelihood of employment practices claims, many have sought the advice of labor counsel regarding employment practices matters much earlier than the past. Moreover, with the carriers push to sell private company D&O and employment practices combo policies over the last ten years, the duty-to-defend form has become the mainstay of most, if not all, privately held or nonprofit organizations, regardless of size. The problem with this is that these insureds usually have a pre-existing labor counsel relationship prior to purchasing coverage and thus the annoying requests to add “their” firm to the policy. Adding new firms to panel counsel is both time consuming and costly to all parties involved, especially since most carriers have well qualified firms available to the insured.

Solutions To The Choice Of Counsel Issue

Therefore, we urge our agents to thoroughly explain to their insureds that:

  1. The carrier has well qualified labor counsel available;
  2. Adding a new firm is a time consuming process that may encounter great resistance from the carrier;
  3. Duty to defend policies are priced with lower deductibles and pricing, so changing firms could potentially increase the loss costs under the policy if the firm requested is not equally qualified to handle D&O or EPLI matters as the carrier’s panel counsel; and/or
  4. Their are other options.

As an alternative, many carriers will make available a non-duty to defend form for non-profit and for-profit accounts for a higher premium and/or usually a higher retention.  This means that the insured has the right to use their own choice of counsel and the carriers consent can not be unreasonably withheld.  This may be a great advantage to certain types of clients, especially those with over 100 employees.

Rest assured, that Professional Risk Solutions brokers can help you tailor coverage to your clients specific needs and we can help add to counsel where warranted.

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