Texas Lawyer Roundtable Series on Insurance

Texas Lawyers on Captive InsuranceFrom politics, to the economy, to global warming. All of these issues in some way affect insurance law. If you want a spirited debate in Texas, all you have to do is get people talking about insurance. That’s what Texas Lawyer’s business department did when it hosted an insurance law roundtable in Dallas. What follows is the discussion, edited for length and style.

MIKE ANDROVETT, moderator, attorney, and owner of Androvett Legal Media & Marketing, Dallas: I’ve asked each of our panel members to not only identify themselves and tell you a little bit about where they work, but also the nature of their work and their particular point of view on insurance law and the insurance industry. So Brent, would you mind starting out by introducing yourself to the folks here.

R. BRENT COOPER, shareholder, Cooper & Scully, P.C., Dallas: Primarily I handle insurance coverage and bad faith work — more from the insured side than from the policyholder side. I also have a very large appellate practice, particularly in the Texas Supreme Court where at any given time we will have five or ten cases awaiting decisions. My practice includes litigation with a concentration on insurance coverage and bad faith as well as appellate practice.

STEWART A. FELDMAN, general counsel, Capstone Associated Services, Ltd., Houston: We offer an alternative to the hazards of relying on the conventional insurance markets. Houston-based Capstone is one of the largest operators of captive insurance arrangements — that is, alternative risk planning —in the United States. We operate more than CAPTIVE_FORMATIONS insurance companies for the benefit of middle market companies. Capstone offers an alternative solution to the myriad of problems associated with working with conventional carriers, many of which only arise when a claim is made.

THOMAS WINSLOW, broker, Insurance Network of America, a professional services group, Dallas: I’m an insurance broker who specializes in providing comprehensive insurance for law firms. I’m thrilled to be here among such a distinguished panel. In fact, I’m the only one on the panel that doesn’t have a bar card, even though it’s not uncommon for me to be in a room full of lawyers.

All my family, grandfather, cousins, uncles, everybody are lawyers. I have a fierce independent streak, which is what led me down a different path than going to law school. However, as independent as I like to think I am, my path didn’t lead me very far from my beginnings. While I was attending UT, I worked for a plaintiff’s lawyer in Austin, Broadus Spivey. Some of you may know him as the former State Bar president and a noteworthy legal malpractice attorney.

While working for him, I became familiar with legal malpractice and the issues that lawyers have to deal with, in terms of the challenges of being involved in lawsuits and in terms of their own liability malpractice suits while working with Mr. Spivey,

I realized that few people actually really understood legal professional liability insurance. We even relied on a group of experts and individuals who knew about it. In the process, I became a little bit of an expert myself. My mentor now, Gary Beck, for whom I work now, really taught me the trade. He worked for 20 years for Aon and Willis representing big law firms, 500 lawyers and more, and provided them professional liability insurance.

About 24 months ago we started up this group and that’s all we do. We provide insurance for lawyers. Small firms and medium size firms really need big firm-type representation in today’s world. Your legal administrators work very hard, and sometimes they feel they’re required to use certain brokers. Maybe it’s a client, or a brother-in-law, or somebody like that, and oftentimes you end up dealing with four or five brokers for all the different types of coverage you need.

That’s a recipe for disaster, and it requires the legal administrator to be an insurance expert, to see those gaps.

There’s not one person with a 50,000-foot view taking a look at everything and watching everything for you. We provide a single-source solution for law firms and all their insurance needs, and we have lawyers in our group. And we act as your advocate in the event of a claim. I’m very pleased to be here today.

JENNIFER MARTIN, partner, Schell Cooley LLP, Addison: We are a litigation firm and can handle a broad variety of litigation matters. My practice is primarily commercial litigation. I do all kinds of business torts, and I do a lot of insurance bad faith work. One of the things that I hope we can talk about some today that are the kinds of topics that matter to you.

Not just the case law that’s coming out of Supreme Court, but what we’re seeing in the individual cases we are handling, the problems that in-house counsel face every day in determining whether they’re going to be surprised and all of a sudden not have coverage for something and be explaining to their boss how that came. So I do encourage you guys to get up to the microphone and ask some questions so we can be sure we talk about what matters to you.

MICHAEL W. HUDDLESTON, partner, Shannon, Gracey, Ratliff & Miller,  LLP Dallas: I am blessed to be able to work with a number of very experienced coverage lawyers. We’ve got at least nine insurance lawyers with in excess of 20 years of experience each. We don’t get around that fast, but at least we can talk shop. The work that I do is both first party work and third party.

Like Brent — in fact, I was with Brent for many years — I do a lot of appellate work as well on a pretty general set of topics. Pretty much whatever is available that has been lost for a fairly significant amount of money. My representation in the insurance area is mixed. I represent a lot of corporate and professional policy-holders. The policies of the day seem to be D&O, a lot of commercial first property — some with and threats of arbitration abroad.

So it’s a very varied practice and very fun. I do a lot of bad faith work as well as risk management work, which, quite frankly, has become a pretty big part of the practice, mainly through the experience of working on the negotiation and drafting of indemnity and insurance provisions in leases and other contracts with some of our real estate and transactional attorneys.

ANDROVETT: Panel, you’ve given life to one of my early claims this morning and that is that this is a very diverse panel. And so I’m interested some views from 80,000 feet. We will spend most of our time down there on the ground with you, but to start out with, just maybe some macro questions. For most people insurance is one of those things you never think about and you hope you never need and you only really think about it when you need it, and I’m sure that’s part of your experience in your work.

But that sort of implies a greater truth, which is at various intersections in all of our lives insurance intrudes or becomes an important part. And so things that happen on a large scale in society or in our economy ripple through the insurance industry and through insurance law affecting all of us.

So my question is: Over the last couple of years we’ve seen insurance companies get into trouble. Maybe the paradigm example would be AIG. Short answers to the long question, the difficulties in the insurance industry nationally, have they translated into different practices or a different culture there on the ground where you all operate?

COOPER: see an impact from what’s happening on a national basis is going to be in our jury attitudes. If you remember in the ‘30s there were a ton of movies where there were bank robbers like Bonnie and Clyde, and they were very popular. And they became folk heroes to the public. And the reason they were becoming folk heroes to the public was because most Americans in the late ‘20s and early ‘30s lost a lot of their money to the banks. And so anybody that goes in there and does something to the banks was a hero to the public, and Hollywood encapsulated that in a lot of the movies that they were making.

We’re seeing right now the same effect with respect to the financial industry. There is, I dare say, hardly anybody in the United States that has gone untouched by what has happened in the last 12 months.

And consciously, unconsciously, or whatever — we are seeing that in the attitudes of our jurors and to a lesser extent we’re seeing it translate into attitudes in our trial judges and our appellate judges that they have touted not just necessarily insurance companies, but to everybody that’s involved in the financial industry.

A lot of insurance companies, banks, and people in the financial industry did nothing wrong, but got caught up in the wrongdoings of others. However, that’s not going to make a difference. They’re going to be painted with the same broad brush that the people who perhaps were primarily responsible for the mess that we find ourselves in.

So, first off, we’re going to see the attitudes reflected in juries and their opinions. Second, we’re seeing the attitudes translated also into our appellate judges and even our Supreme Court. You look in the last probably four to five years, there’s a definite trend in the opinions. There has been an expansion in the remedies that are available to policyholders. There has been less favorable treatment of insurance companies. In fact, it’s been just the opposite. If you add up in the Supreme Court what’s happening, typically it’s going to be the insurance companies who have lost. And so we’re seeing part of that overall public attitude translate to our appellate courts as well.

If you recall, in 2003 there was this huge publicity campaign for Proposition 12. There was about $9 million spent by the TTLA and about $12 to $15 million spent by the insurance industry, hospital industry, medical industry to promote the fact that juries were running away. They were giving away too much money. That phenomenon that we saw in 2003-2005 was that jurors were very conservative because they had been conditioned by all the publicity. That has worn off.

Whatever impact from the media blitz that occurred in Proposition 12 is now gone, and you’re sort of dealing with blank slates with your juror’s minds now, and we’re seeing it. We’re seeing that translate into many very large verdicts. Dallas used to be a bastion of conservatism as far as judges, juries, and everything else. And we’re seeing the same thing happened in 2006 Dallas election — all the Republican judges got voted out.

In 2008 it happened in Houston. And we’re seeing some very large verdicts now that are coming out against people that you would normally think they would be sympathetic to. Case in point, in February of this year, a physician saved the life of some man literally, but there were some adverse consequences. The jury hit him for $17 million, and that was here in Dallas County, so it is a different world.

And for people who are thinking that the world in the 2000 to 2003 is the world we’re living in today, it is not. The attitudes are different, and the rules that you’re playing with are totally different.

This article was published by Texas Lawyer. You can download a pdf copy of the article on Captive Insurance and the Law.


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