Insurers need talent to meet catastrophe, COVID-19 demands
Lawsuits and natural disasters have brought in a new crop of general counsel in the insurance industry during the pandemic.
The retirements of experienced in-house attorneys at major insurance companies, coupled with incoming COVID-19 lawsuits and natural disasters, have brought in a new crop of general counsel in the industry during the pandemic.
An increased focus on litigation around COVID-19 pandemic conditions and regulations have led to several insurers promoting experienced in-house attorneys or hiring them from legal departments in highly regulated industries.
Stef Zielezienski, the chief legal officer at the American Property Casualty Insurance Association (APCIA) in Washington, D.C., said in an email to ALM sister site Corporate Counsel that insurance companies should be making sure they have top talent to meet those demands given the current climate.
“The pandemic crisis brought with it a wave of threats to retroactively impose insurance coverage and opportunistic trial lawyers leveraging the pandemic,” Zielezienski said in the email.
Recently, Allstate Corp. appointed former Union Pacific Railroad chief legal officer Rhonda Ferguson as the insurer’s general counsel. GEICO also announced that Jonathan Shafner had been promoted from deputy general counsel to serve as the company’s general counsel.
Overseas, Allianz made Christopher Twemlow general counsel, and Zurich Insurance Group appointed Katja Roth Pellanda to lead its legal department.
The challenges of the general counsel at an insurance company have been heightened because of a particularly destructive catastrophe season. Hurricane Laura, for example, is responsible for $8 billion to $12 billion in residential and commercial property damage, according to CoreLogic Inc., a global property information solutions provider.
After a dangerous Labor Day weekend of record-breaking heat at over 120 degrees in some parts of the U.S., California continues to fight intense wildfires. Earlier this month, state insurance commissioner Ricardo Lara issued a notice to all California property and casualty insurance companies urging them to cover additional living expenses for policyholders who had to evacuate or cannot access their homes due to the wildfires.
“Insurers are focused on keeping promises to all consumers — paying claims for motorists, injured workers, homeowners, renters and business owners,” Zielezienski said.
‘Unprecedented series of lawsuits’
Brian Levinson, a managing partner of Alevistar Legal Search in Conshohocken, Pennsylvania, said litigation experience is also helpful for incoming general counsel at insurance companies. The top lawyers will most likely work at companies facing an unprecedented series of lawsuits throughout the U.S. over coverage related to the effects of COVID-19 and natural disasters.
“The understanding that I have from one of the insurance defense firms we work with is that defense companies are looking to settle more than ever,” Levinson explained.
Allstate and GEICO are currently facing six lawsuits in Illinois over whether they gave drivers enough of a discount at the beginning of the pandemic when driving claims were low. According to a report in the Chicago Tribune, Illinois policyholders claimed the companies failed to provide fair rebates and that the insurers profited from high rates.
United Policyholders, a nonprofit organization that acts as an information resource for policyholders, found 90% of lawsuits against insurance companies get settled before trial in mediation or arbitration.
One of the key requirements for those coming into the role of general counsel at an insurer is having previous experience with insurance and government regulation.
“A lot of companies will prefer to have someone who does have an insurance industry background, but I know of many companies that have hired someone who has never worked in the industry before but is used to the interplay between government regulators and lawyers,” Michael Sachs, a partner in the in-house recruiting group at Major, Lindsey & Africa in Chicago, said.
A majority of the general counsel roles at insurance companies were given to those with previous experience of working in the industry or working with government regulators.
For example, Shafner joined GEICO in 1986 and, in his promotion, replaced Hank Nayden, who worked with the company since 1992. Nayden became GEICO’s general counsel in 2017 and has since retired.
Prudential Financial Inc.’s general counsel, Timothy Harris, announced in July that he would be retiring after 30 years in the legal department. Ann Kappler, the company’s deputy general counsel, started her role as the top lawyer earlier this month. Kappler had been with the company since 2009 and previously worked at Fannie Mae, dealing with state and federal financial regulations.
Ferguson, who will become Allstate’s top lawyer later this month, does not have insurance experience but does have managerial experience and worked with the federal and state government as general counsel of Union Pacific. The American Automobile Association, better known as AAA, named Douglas Kelly, who worked in-house at timeshare company Marriott Vacations Worldwide Corp., as its next general counsel.
Right now, insurers face the possibility of several state legislatures passing laws that would require them to cover risks that were previously not in the scope of the coverage, according to a report from Saul Ewing Arnstein & Lehr.
“Specifically, the proposed legislation would require that policies that are issued to small businesses and that contain business interruption coverage be construed to provide coverage for losses resulting from the COVID-19 pandemic,” the report states.
If those laws passed, general counsels would have to learn how to best comply with them on top of state laws.
Without experience in litigation and regulatory affairs, it is difficult to land the top legal job at an insurance company, though that does not necessarily stop experienced attorneys from trying. The work of managing a large group of attorneys and navigating a business through regulations is exciting to many candidates, Sachs explained.
“When you do an insurance search, and you ask someone who has not been in insurance why they’re interested, the stability, the profitability, and the climate of them are some of the reasons attorneys want to work for those companies,” Sachs said.
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