The higher education industry is facing challenges. Traditional funding models and sources are under attack. Changes in the political landscape and social norms have increased the cost and frequency of investigations and litigation. Insurance premiums continue to rise. College and university risk managers are often the first line of defense on these issues. They must respond in real time to questions about the nature and scope of the institution’s insurance coverage and the likelihood of certain risks being covered.
The good news is you’re not alone. There is an entire industry of professionals dedicated to protecting policyholders like yours, whether it’s through negotiating stronger policy terms or assisting with reviewing, reporting, and resolving complex claims. Many risk managers and insurance brokers that I have spoken to over the years are unsure of when to involve outside insurance coverage counsel. In some ways, this makes sense. Risk management and insurance procurement are heavily legal—or legal-adjacent—tasks; however, they often sit outside the scope of the general counsel’s office. This article seeks to bridge the gap between risk and legal by providing foundational guidance on when to seek outside coverage counsel and what to ask.
Involving Trusted Counsel in Policy Placements and Renewals
For most institutions, renewing their various lines of insurance coverage creates a series of annual seven-to-eight-figure transactions. In any other area, spending at that level would trigger a line-by-line legal review of the relevant agreements, whether by in-house or outside lawyers. Yet insurance coverage is often treated differently. To be clear: There is nothing wrong with an experienced risk manager partnering with a sophisticated insurance broker to manage policy renewals. However, bringing in an outside coverage lawyer who specializes in coverage disputes can add value to your placement team.
WHEN TO CALL
Insurance policies are, at their core, highly complex legal documents whose meaning and interpretation change depending on applicable law. There is no “federal” or “unified” insurance law, so how a term or condition may apply to a risk often depends on: (1) what law governs the policies and (2) how the courts in the relevant jurisdiction have applied the same or similar policy language.
Having outside counsel provides guidance on choice-of-law and summarizes judicial approaches to key issues in your jurisdiction, which will help the institution better understand what it is buying.
Having an outside lawyer perform a line-by-line audit of insurance policy language can help identify gaps in coverage or opportunities to secure better terms.
This type of audit can be especially valuable when insurers introduce new base forms or when the institution is considering moving to a new primary insurer on a given line of coverage.
"In that way, high-stakes claim investigations often become an episode of Law & Order. Anything you say can and will be used against you."
WHAT TO ASK
Are there any exclusions that present obvious risks of noncoverage based on the scope of the institution’s operations?
Are there any provisions using nonmarket terms or terms that are more restrictive than other insurers? For example, “conduct” exclusions in professional and management liability policies should always have limiting language stating that they apply only after a “final, nonappealable adjudication” of the claim.
What is the dispute resolution mechanism in the policy? Dispute resolution provisions often strip the policyholder of legal rights that would otherwise be available in their jurisdiction, including shortening statutes of limitation or forcing disputes into forums with fewer procedural protections.
Once the legal review or audit is complete, an outside lawyer can help prepare the renewal team by arming the risk managers and brokers—who already have valuable relationships with the insurers—with a list of key terms and items to negotiate.
The Claims Process: Don’t Bring a Knife to a Gun Fight
Insurance claims can be the bane of a risk manager’s existence.
WHEN TO CALL
When you need help building a risk management culture: There is an ongoing struggle to educate colleagues and stakeholders about the importance of issue spotting and timely reporting. Most people not steeped in the day-to-day of insurance do not appreciate just how broadly most liability policies define “Claim”: Typically, any “written demand for monetary or non-monetary relief” is a “Claim.” That means even a basic email from a vendor, business partner, student, or parent asking a university official to undertake some action—even if that action does not involve paying money—can be a “Claim.” If litigation follows years later, that prior, unreported email unearthed during discovery can provide insurers with a basis to deny coverage for late reporting. Outside counsel can help educate stakeholders on this issue.
When a matter first comes in: Even when a potential “Claim” is detected and reported, tight budgets and high hopes often lead policyholders to try to go through the claim process themselves. There is certainly a time and a place for that. Outside counsel, however, can assist with reviewing policies for potential coverage, ensuring compliance with notice provisions and getting a claim up and running.
During the claims process, even before a denial (i.e., bringing your gun to the gun fight): On claims with the potential for significant exposure, institutions need to be aware that their insurer is likely to have outside legal counsel directing the claim investigation from the beginning. As such, even neutral-looking questions from an insurer or third-party adjuster may be a thinly disguised fishing expedition to seek information that will be used to deny the claim. In that way, high-stakes claim investigations often become an episode of Law & Order. Anything you say can and will be used against you. Bringing in outside counsel to respond to insurer requests for information, seek necessary consents early (like for hiring preferred defense counsel), and assist with the claim investigation can often pay dividends later.
WHAT TO ASK
"Obtaining a coverage opinion from outside counsel can help set expectations internally. Such opinions can be beneficial should the insurer deny coverage. Never accept a denial at face value."
How do the various policies in the institution’s liability program(s) define “Claim”?
How has the definition of “Claim” in these policies been applied in this jurisdiction? The more education risk managers can do within their institution to identify and report “Claims” early, the better off everyone will be.
What is the timeline for reporting claims under the primary and excess policies throughout the institution’s insurance program?
Being aware of strict reporting periods is crucial. Missing those periods creates pesky coverage defenses for insurers.
Which liability policies are “duty to defend” and which allow the institution to select defense counsel? Understanding the insurer’s responsibilities around defending a matter can help the institution select counsel and set clear expectations regarding costs.
Are there any policy limitations or exclusions likely to impact this “Claim”? Obtaining a coverage opinion from outside counsel can help set expectations internally. Such opinions can be beneficial should the insurer deny coverage. Never accept a denial at face value.
TAKEAWAY
Insurance, like any other area of operations, is complex. Though a talented risk manager is worth his or her weight in gold to an institution, do not be afraid to seek outside advice, especially in this moment of heightened stakes and risks.