In a nutshell
Insurance is the practice of hedging against financial risk; the practice and its fallout require a lot of legal work. Insurance and reinsurance (even insurers are vulnerable to financial risk and they transfer part of their risk on to reinsurers) are practiced by a significant number of specialist law firms and general commercial outfits across the USA. Insurance can be split into many sub-specialties (see below), and firms may offer all or some of these services.
The regulation of insurance companies is split between the state and federal level: though most is done among states, which are responsible for investigating practices and regulating insurance rates, the National Association of Insurance Commissioners (made up of the chief regulators of 50 states) provides oversight across the industry at state level. Among its main responsibilities is to protect consumers and ensure uniform financial reporting. The Dodd-Frank Act also established the Federal Insurance Office (FIO), an organization within the US Treasury Department which analyzes risk or issues in the insurance market that could have any serious ramifications for the wider industry and US economy.
It's possible to insure pretty much anything against almost any eventuality. Put differently, insurance is taken out to cover risks including human error, accidents and natural disasters. The most common types of insurance that lawyers deal with are: insurance against the destruction of tangible assets (e.g. property); insurance against the loss of intangible assets (e.g. revenue streams); and insurance against mistakes made by professionals. Insurance lawyers work on cases related to property damage, product liability, fraud, insolvency, directors' and officers' liabilities (D&O), aviation, business interruption, mortgage losses, political events, technology, energy, environment, construction, finance... the list goes on. Disputes arise between the insured policyholder and the insurer; between the insured plus the insurer and another party; or between the insurer and the reinsurer.
Some lawyers specialize in the transactional aspects of the insurance industry, advising on tax, regulations, restructurings, drafting insurance policies, and M&A activity between insurance companies.
What lawyers do
Insurance litigation attorneys handle many different types of insurance-based claims and can be either prosecutors or defense attorneys. Some of the main areas include:
Commercial insurance disputes
- Work on claims related to things as varied as properties damaged by flood or fires, oil rigs destroyed by hurricanes, or gold mines nationalized by socialist governments.
- Work on disputes between insurers and the insured over insurance payouts and what insurance coverage consists of, or act for the insurer and the insured together in litigation with a third party.
- Assess coverage and the insurer's liability.
- Interview witnesses to find out how events occurred.
- Value the claim and build up the case for what the client feels is an adequate settlement.
- Attend court or mediations/arbitrations in order to come to a settlement.
Products liability disputes
- Assess insurance implications across a range of cases involving everything from defective pharmaceutical products to food and beverage contaminations.
- Broadly similar to the work of a general transactional lawyer. There are extra rules and regulations governing insurance transactions which lawyers need to take into account.
Professional indemnity/errors and omissions
- Represent professionals accused of malpractice and their insurers. The professions most often affected include engineers, architects, surveyors, accountants, brokers, financial advisers and solicitors as well as doctors, dentists, surgeons, etc.
- Investigate a claim, assess its authenticity and look into the coverage of a given insurance policy to determine an insurer's degree of liability.
- Take advice from experts on professional conduct.
- Draft letters in response to claims.
- Prepare documents for court or out-of-court settlements.
- Attend pretrial hearings, case management conferences and trials if a case goes to court.
- Attend joint-settlement meetings, arbitrations or mediations in out-of-court cases.
Realities of the job
- Insurance is a complex and technical area, and insurance policies are not the lightest reading material you'll ever come across.
- Insurance lawyers are known for their precise and fastidious working style. Insurance policies are grounded heavily in contract law so excellent attention to detail and verbal reasoning skills are vital.
- Insurance cuts across virtually every aspect of life and legal practice so insurance attorneys can find themselves working frequently with other departments and practice groups.
- Lawyers may also find themselves working across or specializing in certain sectors including the energy, pharmaceutical, environmental and corporate sectors.
- Good organizational skills are crucial, because lawyers are often dealing with a host of claims at various different stages. There are often daily deadlines and clients need to be kept constantly informed.
- Lawyers have to pay special attention to potentially fraudulent claims or parts of claims.
- Insurance cases range from huge international disputes to small local squabbles. Associates might run a small case themselves, but only work on a component of a large high-value dispute.
- Many firms regularly act for both insurance companies and insured policyholders. There is a trend toward firms specializing in either policyholder or insurer work.
- Under the heading of coronavirus there is almost too much to say on the impact on the insurance market. In brief, commercial and personal claims and reinsurance will be contentious topics for several years to come.
- A survey by consumer credit reporting agency, TransUnion, for example, indicates widespread concern by consumers around being able to pay for auto and life insurance. While Deloitte’s forecast for 2021 notes ongoing policy disputes as they pertain to infectious diseases.
- One likely area of work will be around insurers and companies’ liability as it pertains to employment matters, in particular health and safety. Several class-action suits may be brought against companies for their handling of the pandemic in the next few years, bringing with it a host of insurance and reinsurance issues.
- From the organizational to the personal, Accenture predicts growth in the health and wellness services, providing a competitive advantage to those that seize the opportunity quickly.
- Nationwide lockdowns have meant that insurance is increasingly relying on digital platforms to deliver products to customers. This brings a host of challenges, including vulnerabilities to cyberattacks and regulatory compliance issues.
- As the world moved increasingly online during the pandemic, the risk of cyberattacks also rose. New risks to insure against are surfacing all the time and cyber-insurance is likely to be a big industry, alongside the regulatory matters it raises.
- Technology is affecting the way that insurance is bought and sold. Digital servicing has increased the demand by customers for immediate servicing of their needs, with young people in particular expecting instantaneous communication from insurers when they're making a claim.
- New technologies such as autonomous vehicles also present novel terrain for insurers, as questions will arise over whether liability lies with the driver or manufacturer.
- In 2019, Google won a landmark ruling in a dispute against a French privacy regulator when the EU’s top court mandated that the firm does not have to apply the ‘right to be forgotten’ globally, as is set out in GDPR. The ruling relaxes pressure on insurers operating in the US market.
- The increasing frequency of natural disasters caused by climate change poses a potentially enormous challenge for insurers in the future as they often lead to huge losses. For example, estimates by insurance firm Swiss Re put the insurance losses from Hurricanes Harvey, Irma and Maria at $92 billion, equivalent to 0.5% of the United States' GDP. On top of that, Accenture predicts that insurers will come under increasing pressure to demonstrate their sustainability. The firm also predicts that some firms may cut ties with traditional energy producers as a result.