Hermes Law

Dwayne Hermes of Hermes Law, along with James Dickey of iMGA are rallying support for SB 10 and HB 1774 following a huge 1400% increase in weather-related lawsuits since 2011.

In a testimony prepared by James Dickey he explains how iMGA almost went out of business due to false claims made after the hailstorms experienced in Texas between 2012 and 2014. iMGA builds relationships with insurance companies willing to sell a product that they underwrite. They then recruit and manage the retail agents, and provide all the policy service. iMGA specializes in providing coverage for homes that, on average, are much smaller, older and lower in value than those insured by the mainstream companies.

Following the Texas hailstorms in 2012, 2013 and 2014, insurance companies had lost money each year but were still doing well enough to continue providing the coverage Texas homeowners needed via iMGA. However, in late 2014 lawsuits started to arrive for cases which were previously thought to have been resolved and closed.

In the majority of cases, up to a year would pass after a case had been resolved, or in some cases when a claim had never been made. Then a lawsuit would arrive asking for large sums of money, with law suit costs approaching that of replacing the entire house. These demands would bear no reasonable relationship to the losses incurred. The insurance companies would be forced to spend tens of thousands of dollars defending the lawsuit and then the case would settle for a small fraction of the original amount demanded. In most cases the plaintiff’s lawyer would receive several times more than the insured.

It was thanks to those lawsuits that iMGA very nearly went out of business. Their original backers refused to do so anymore and they had to search for another company willing to step up. But that could only happen if iMGA significantly increased rates and deductibles and stopped selling policies at all in the counties where they’d had the worst lawsuit experience. Of the 3,321 first party claims since January 2012, iMGA managed to involve a lawyer in 122. Nevertheless, the legal defence fees on those cases have totalled over $3.8 million.

If Texas homeowners are to be able to continue insuring their homes with the security of being able to raise a genuine lawsuit, this simply cannot be allowed to continue. The current system encourages abuse to the point that there is serious market disruption, and if it continues, it will be the homeowners of Texas who pay the price.

This is why Hermes Law is supporting James Dickey and SB 10 and HB 1774. To find out more, watch James Dickey lobbying for support here.

Although collaborative law has traditionally only been utilized in the family law context, there are opportunities to adapt the collaborative law framework for an insurance defense practice. In the insurance defense context, collaborative law can be utilized as a means of reducing the cost of litigation. Regular reporting to the insured and carrier that includes analysis of whether collaborative law is an option is a method of demonstrating to the carrier the firm’s ability to achieve resolutions creatively and in a way that furthers objectives of all involved.

According to the 2015 Claims & Litigation Management Alliance Litigation Management Study General Report, risk industry executives indicated that they wished their panel firms did a better job of demonstrating creativity, focusing more on resolution and utilizing non-discovery and nontraditional methods. Simply put, carriers are looking for defense firms to ‘think outside the box’ in achieving resolutions. This is where collaborative process comes into play. The goal of this article is to share a few strategies for adapting the collaborative law framework for an insurance defense practice. The process described is a robust version that can be modified based on the particular case.

Educate the insured and the carrier regarding the collaborative process

Make sure that the insured and the carrier agree to expectations of conduct and sign the participation agreement. After the insured and the carrier agree to the process, defense counsel should contact the counsel for the other party and gauge the other party’s receptiveness. Assuming that the other party agrees to engage in the collaborative process, ask the insured and carrier to identify the goals that they would like to accomplish during the collaborative law process and their reasons for identifying each goal. Also, ask the insured and the carrier to identify what they believe are the goals of the other party. Finally, ask the insured and carrier to identify their greatest concerns regarding the lawsuit/matter. These steps ensure that you as the attorney are fully cognizant of your client’s position. These steps also help the client begin to think about the case from the perspective of the other party.

Schedule the first joint meeting

This meeting is an opportunity for both parties to share their respective goals for the process and to share any pressing needs. There should also be a discussion regarding the sharing of leadership amongst the professionals. It is best for the parties to refrain from actual negotiations at this meeting.

Start information gathering

First, decide what information is needed and assign information gatherer(s). Then review all information shared by the other party. After gathering all the necessary information, identify the hot button issues based on the investigation. Start brainstorming options and discuss probable outcomes of each option.

Negotiate the agreement

Another joint session should be scheduled to allow the parties to discuss the various options they have identified. Narrow down the options to those that meet the most important goals of both parties.

Begin preparation of the legal documents

Exchange drafts with the other party’s counsel, and schedule a joint session to present the document to both parties for their review and comments. Jointly determine whether all closing documents have been prepared and finalized. The meeting concludes after all closing documents have been signed.

The collaborative process described in this article can be modified based on the particular case and the parties involved. The collaborative process can also be used to resolve disputes that arise within the case as opposed to the case as a whole. In the insurance defense practice, collaborative process is an opportunity to demonstrate to carriers that you, as defense panel counsel, have a vested interest in partnering with the carrier to reach a desired outcome and that you have the ability to formulate creative solutions to complex legal issues. Collaborative process is generally under-utilized and therefore, carriers are unlikely to request it. However, the typical benefits of collaborative process, namely, reduction in defense costs and more timely resolution, are benefits that resonate with all carriers. In addition, the fact that the process is designed to promote civility among litigants is a benefit to all parties involved.