BulletProofBlog the blog on crisis communications

In this regular feature, Bulletproof interviews top plaintiffs' attorneys for their perspective on the crises likely to affect businesses in the near future. Today we talk to Michael Childress, a founding partner of Childress Duffy Goldblatt, a national plaintiff’s trial firm with offices in Chicago and Florida. Mr. Childress’ experience cuts across a wide range of plaintiff’s issues. He has thirty years experience representing corporate and private insureds in bad faith and first-party property damages claims against insurers.

Typical first-party property cases involve suits against property damage insurers by public companies  or high-net worth individuals facing significant losses  due to extreme weather-related causes such as hurricanes, hail, and tornadoes; explosions and/or fires at business  facilities; and buildings damaged by water.

To keep clients out of trials, some of the firm’s lawyers are also involved in a separate consulting business, Risk Assessment and Transfer International, which assists corporate clients with advance recognition of holes in insurance coverage, and identifies ways to reduce or eliminate the risks by negotiating better policy language or alternative approaches to coping with a risk. The business also employs ancillary professionals who assist clients by preparing and preserving pre-loss information needed to successfully take cases to trial after a loss.

What are you and your partners seeing and hearing from the insurance industry?

Mike Childress: We are in the midst of the worst insurer behavior I’ve seen in my thirty-year career. Insurers and their adjusters are simply refusing to take action, much less pay claims. This behavior is widespread across insurers. I’m talking about top-tier insurers as well as second- and third-tier insurers. Property claims that at least might have been paid in part two years ago now go completely unpaid. We talk to other plaintiff’s lawyers around the country and they share my opinion.

What are the short-term consequences?

Mike Childress: For our clients, cases must be prepared for and pushed to trial. Public adjusters try to push claims through without getting involved in trials, but they too tell us they are seeing the same refusal to pay and so are calling us to try cases that might  have been settled fairly in the past.

We tried a seven-figure case last year after the insurance lawyer said that, if he could not win that particular trial, he should just return the rest of the files involving claims against that insurer. We have twelve cases against that same insurer, all of which involve the same type of loss. Our client won full damages at trial, but the insurer is still refusing to settle the remaining cases. In fact, it is the second case we have tried against this insurer and won. So, we will try the rest of the cases.

Insurers also continue tinkering with policy terms, seeking to create hidden or non-obvious exclusions or defenses. Insureds do not really appreciate the consequences of those terms when they buy the policy.
 
What’s ahead in terms of reactions and long-term consequences?

Obviously we will take more cases to verdict, and there will be more pre-judgment interest awards in states such as Florida.

We also see more corporate counsel and risk managers expressing anger and frustration with their brokers and insurers, and moving or taking away business from brokers and insurers. One of our clients recently said – with a smile – that she suspects the insurance industry probably wants to hire a hit man to get her after she jumped into insurance purchasing and chopped out millions of dollars of wasted premium payments.

Like other segments of the plaintiff’s bar, CDG is taking on insurers in places other than just single-trial battles. For example, we are active in legislative areas, we are expanding contacts with and sharing information with government lawyers, and we are sharing information and efforts with not-for-profit advocacy groups. We are also moving into bankruptcy and mass actions areas, including drywall claims.

We will likewise be more active in scrutinizing or challenging  insurer insolvencies and “schemes of arrangement” in which insurers try to limit their losses by transferring profitable clients to new businesses and then leaving the old shell to die, thus trying to cut off the rights of insureds. In short, we see and are in place on the entire playing field.

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Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.