Insurers are mitigating clients' risk with crisis management, communications
Crisis communications and management services are designed to help reduce the impact of any potentially volatile or controversial situation.
At long last, legal departments and law firms are becoming aware of crisis communications and litigation public relations services in relevant insurance policies tied to legal matters. The reason for the delay/? There are a number of possibilities, including: lack of clarity whether legal departments or firms are responsible for such activities, how to source and utilize such services in connection with legal counsel or bias against speaking to the press.
Simultaneously, in recent years, the world’s most reputable and fastest-growing insurers are increasingly reviewing crisis communications and public relations recommendations as part of their overall coverage as another means to reduce overall risk — and rely less on legal counsel. Even if they don’t have riders, endorsements or specific crisis policies, insurers are still providing guidance and encourage the use of such services.
In AIG’s “Crisis Communications: undervalued and misunderstood? A handbook for brokers,” the insurance giant’s United Kingdom division provides guidance with the assistance of a public relations agency. The handbook speaks to brokers regarding AIG’s insurance product coverage for crisis communications to directors and officers or private companies if they are sued, investigated, threatened or prosecuted.
Employers Mutual Casualty Co. (EMC Insurance Companies), a top-60 property and casualty (P&C) organization in the United States, published an article titled, “Loss Control Insights: Your Crisis Communication Plan: 5 Steps to Prep Now,” on its website for its policyholders and independent agents.
Allianz, the world’s largest P&C insurer, publicly touts its relationship with a public relations agency offering its clients 24-hour access in support of Allianz’s crisis management insurance which covers contaminated products, product recalls, terrorism and political violence and hostile environment situations.
What are crisis communications and management services?
Crisis communications and management services are designed to help reduce the impact of any potentially volatile or controversial situation, as well as help organizations improve for the future. According to the Public Relations Society of America’s Glossary of Terms, crisis communication means: “Protecting and defending an individual, company or organization facing a public challenge to its reputation. These challenges can involve legal, ethical or financial standing.”
The uptick is a result of ongoing diligence into reducing exposure including better understanding the lifecycle of any specific incident or event. This is combined with a growing appreciation for brand reputation and value in the midst of the internet and social media, as well as litigation environments. And in some instances, communications in the form of notices are required by governmental, regulatory, licensing, voluntary and other bodies to various situations that arise. Not following mandatory notice requirements can result in fines and other penalties that are potentially more than the financial exposure of the actual crisis incident.
Importantly, crisis challenges should be seen as opportunities to not only reduce risk in the short-term, but also make key changes which can improve safety, build trust, enhance market share and increase revenue.
What’s at stake?
The stakes in crisis situations could not be higher. Without exaggeration, they include:
- Reputation of the insurance industry.
- Brand equity of an insurance company.
- Client relationships or reputation of an insurance broker.
- Happiness, well-being, livelihood, money and even life, of any given insured, whether business or personal.
Insurers have become keenly aware that a limited perspective of short-term coverage issues does not fully serve clients because it fails to take into account potential long-term brand value and reputation impacts. The truth about impact is underscored by the reality that how a traumatic situation is handled can actually increase risk and exposure.
How does crisis interrelate with claims?
Many crisis management and communications agencies are preapproved by insurance companies and are listed on “insurance panels,” just as law firms are seated on such. This means that in addition to having worked with the insurer previously, they have been vetted in advance of any situation and have a pre-determined contractual relationship with the insurer, among other factors.
Interestingly, the term “panel” is also used for law firms, a system which has been in place for decades as insurers logically need attorneys to handle their contested or complex situations. Law firms are now going further, however, and expanding from traditional insurance or litigation practices and service lines into crisis management services, which can encompass crisis communications.
Our agency recently conducted a survey which showed that 53 law firms on the 2023 Am Law 100 list have legal practices with “crisis” in the name. There are many other firms that also promise crisis management services but do not use the word in a practice name.
Moreover, in March 2021 our agency conducted a survey with the Association of Corporate Counsel (ACC) Georgia Chapter that examined the “The Role of In-House Counsel in Corporate Communications.” That research revealed that 90% of in-house legal counsel respondents agreed they are responsible for maintaining their organization’s reputation.
These factors all underscore the growing interrelationship between the two services. More and more often, insurers are contacting crisis management agencies in advance of their attorneys— meaning that a crisis response may be needed even faster than a legal one. Looked at from another perspective, the legal defenses asserted the formality and confusion of legal terms and other activities by attorneys can add to the crisis situation. In fact, many legal departments now require communications review of any legal argument or filing to avoid “making things worse” through legal arguments.
The definition of a crisis is often in the eye of the beholder. But how insurance companies define crises, and what they will cover, varies widely by the policy endorsements or riders, if not a specific crisis communications product.
Here are a few questions a broker or insured might ask about various coverages or endorsements:
- What risks are covered?
- Whether the coverage includes and/or requires advance crisis planning?
- Do notification provisions or conditions apply and how is that properly achieved?
- Is there a clear understanding of how such claims are processed?
- Who pays for services and by what methods?
- What miscellaneous fees are covered?
- Are there attorney-client privilege and work-product doctrine considerations?
Both large and small insurers write crisis communications and management coverage as standard parts of policies and as endorsements or riders. The typical endorsement or rider will cover:
- A crisis management team.
- A crisis management plan.
- Media training and coaching.
- Communications channels.
- Stakeholder communications.
- Reputation management.
- Media relations.
- Social media.
- Crisis responses expenses.
It’s important to note that the specific coverage and terms of a crisis communications rider can vary between insurance providers and policies.
What risks are addressed?
The need for crisis communications and management isn’t limited to the specialty sector for things like construction defects or accidents, situations arising at hospitality locations and the myriad of problems that arise in senior living facilities. It also exists for unique risk such as cybersecurity, high-profile persons, global terrorism and political violence. Such insurance can cover recalls, accidents, scandals, lawsuits, social media situations or other incidents that can harm reputation.
The typical crisis communications approach is to prepare, respond and recover. The tactics and skills required encompass both internal and external communications. Agencies must be experienced and comfortable assessing and guiding insurance companies, boards and the C-Suite.
It is important to state that insurance companies, brokerages, insureds and their law firms may have incredibly talented communications, public relations or even crisis communications professionals on staff. To most confident and competent outside agency leaders, those individuals are invaluable and should have a seat at the table. While it may be true that those professionals may not have extensive experience dealing with the insurance and legal aspects of crisis situations, their knowledge of the strengths and weaknesses of the brand, its spokespersons and messaging, as well as audiences and culture, will be essential.
We suggest the following steps to address this topic:
- Vet and create a roster of crisis agencies.
- Contract with them in advance.
- Publicize the relationship.
- Train brokers and agents on how to assess and utilize the crisis agency relationships to serve each clients’ best interest.
- Train insureds on how and when to contact the insurer to review a claim if necessary.
- Encourage insureds to create crisis plans as a contingency of allowing claims.
The best crisis communications agencies will be ones with knowledge of both insurance and law. Law is conflict. News is conflict. They go hand-in-hand. An agency must understand the impact of communications on claims and beyond — potentially into litigation. They must know the ins-and-outs of forming and advocating for attorney-client privilege and work-product doctrine protections in litigation. The court of public opinion is as important as the court of law, to be sure, but crisis agencies that can’t follow a matter all the way into the courthouse may come up short along the way.
Dave Poston is the CEO and general counsel of Poston Communications, a public relations agencies in both crisis and litigation public relations. The agency works directly with insurers, reinsurers, excess insurers, brokers, legal departments, company executives and law firms.