ALPS In Brief Podcast-Episode 3: Stay Away from the Gray Area. Reporting Claims.

There are a number of common questions that policyholders ask in regards to reporting claims. In this episode, ALPS Claims Attorney John Ries talks with Mark about some of questions he often hears. John also sheds light on why it’s important for attorneys to call their legal malpractice insurance provider even if they suspect that an issue or event may give rise to a claim.

ALPS In Brief, The ALPS Risk Management Podcast, is hosted by ALPS Risk Manager, Mark Bassingthwaighte.

Transcript:

MARK:

Welcome to ALPS In Brief, the ALPS risk management podcast. We’re recording here at ALPS home office in the historic Florence building in downtown Missoula, Montana. I’m Mark Bassingthwaighte, the ALPS risk manager. I have the pleasure of sitting down today with ALPS claims attorney John Reis. John, before we get into some discussions here, can you tell our audience just briefly a little bit of your background here at ALPS?

JOHN:

I’ve been here eight years. Before that, I was in private practice in Washington state for about five years. Then before that, I was in Oregon as a prosecuting attorney.

MARK:

Ah, interesting. Very good, very good. Both of us in terms of the roles that we’re in get some common questions, which are just concerning, “I think I might’ve made a mistake. There’s a problem out here. What happens? What do I need to do? What should I do?” The idea today is just to have some discussions about the claims process. If I am an attorney and I’m concerned that a mistake has happened, can you talk me through what the basic reporting requirements are? When do I need to report this? You see where I’m going? I don’t even know.

JOHN:

In the past, and this is changing starting next year, we have in the past asked for attorneys to give us notice as soon as reasonably possible. Like all attorneys, reasonable is up for interpretation. Now we are changing it to “immediately notify us.” Basically, I always tell attorneys when they call, inevitably they’ll say, “I wasn’t sure if I should report this or not because it’s not a claim yet.” Sometimes there are claims; they’re just flat out “I missed the statute and I had to my tell my client.”

MARK:

Right, of course.

JOHN:

Sometimes, it’s a little more in the gray area. “I’ve just lost a summary judgment motion. Is that a claim?”, or, “I may have forgotten to list an expert. Is that a claim?” I always advise people that it is a claim as soon as you think it’s a claim. If you’re thinking about whether or not to report it, you should just default and automatically report it, and not wait and see if it develops into an actual malpractice claim. There’s a lot of problems if you wait. There’s always the problem down the road. Someone will accuse you of having knowledge of it and not telling ALPS.

MARK:

Right, right.

JOHN:

Nobody wants to fight over that. ALPS doesn’t want to. We’d rather you just tell us up front. It doesn’t hurt you any, so you might as well tell us as soon as you think it’s a possible claim.

MARK:

Right. A takeaway for me here is some people just assume “I don’t have a claim until I’ve been sued,” and that’s not really what this is about. It’s about awareness. If you have questions or concerns, just call us. We’ll sit down and work through it. I think just as a side note, we don’t open everything that is reported as a claim.

JOHN:

Right.

MARK:

Would you explain that just briefly?

JOHN:

Yeah. We have the choice. Sometimes someone will call in and it’s clearly not a claim or even a potential claim, and so we don’t even open anything. We just put a note on the file. Other times, maybe many years down the road, it can turn into a claim or not. We’ll open those as circumstances. A circumstance, we don’t report it when you go to another insurance company, heaven forbid. We don’t report those, so it’s just an internal notation. If it does develop into a claim, they can turn it into a claim down the road. We call them circumstances. Sometimes, you’ll see some insurance companies say, “We don’t require you to report circumstances.” Basically what they’re saying is, “We don’t require you to notify us of things that are not actual claims,” which we think is problematic. That’s why we ask you to report even potential claims, what we call circumstances.

MARK:

It seems to me, the value of that is “we’re just going to pin down coverage.”

JOHN:

Yeah.

MARK:

“We’ve taken care of our reporting requirements just in case it’s a little muddy.”

JOHN:

Right.

MARK:

Okay, okay. So, I’ve had a call with you or someone to chat with me, and the decision is, “Okay, this is something that should be reported.” Is there a formal process that I need to go through to formally report a claim?

JOHN:

Required in writing. We don’t have a form. A lot of people call and ask, “Is there a form we have to fill out?” There’s no form. Oftentimes, it’s best you just call us first and we’ll give you an idea of what we want so you’re not sitting down and writing a 10-page letter that doesn’t really help us that much. We just require written notice that just basically puts us on notice of what the issues are. Has what has been missed, what’s being alleged, who the client is, when did this happen. It could be as short as a paragraph, depending on what the error or the potential error is.

MARK:

So you’re talking about writing. Can I do this even via email?

JOHN:

Email’s fine. Fax, email, regular mail.

MARK:

Okay, very good. Now you and I both know we get these questions a lot too: “Are you guys going to raise my rates?” This kind of thing. Is there an impact? What happens? How does ALPS deal with the fact that a claim has been reported? When we think about underwriting, rates, those kinds of things going forward.

JOHN:

Yeah, there’s no impact on your future rates for just reporting claims.

MARK:

Mm-hmm (affirmative).

JOHN:

In fact, I would consider it to be more of a benefit to you as far as underwriting, that you’re more cautious than the average person if you call in something that’s maybe not a claim. At least it shows that you’re thinking about the issue, which is much better than the other way, if you call us up six months after the claim has been made.

MARK:

Right.

JOHN:

If anything, I think it helps your future rates. There’s not formula that really takes it into consideration. It all goes into the black magic of underwriting. There’s not direct impact on your rates.

MARK:

So what I’m hearing is if I report a claim, you guys do your thing in claims and provide excellent customer service, and the claim goes away. I’m successfully [defended 06:45]. I’m hearing that that’s really not going to be a problem. How about I’ve blown a statute and there is a significant loss here? Let’s say there’s a $300,000 loss and I don’t know, $50,000 or something in defense costs, these kinds of things. Is that a similar outcome? What happens rate-wise there?

JOHN:

Yeah, the first thing that happens is there’s a surcharge. Anything over $30,000 is surcharged.

MARK:

Whether it’s loss or defense?

JOHN:

Right, loss or expense. I don’t know what the exact number is, but the majority of claims are probably in the surcharge level. A fair number don’t ever get to that high number. We can resolve them for next to nothing, or nothing at all. The ones that go over $30,000, the surcharge is relatively small. It’s half the basic rate, which is 1900. It’s a $950 surcharge, but that’s added into the formula mid-way through, so the final number could be higher than that.

MARK:

Are there any obligations that I have under a policy when a claim arises?

JOHN:

Well the only real obligation is you have to report it. When the new policies go into effect beginning next year, you have to immediately notify ALPS as soon as you become aware of a potential or actual claim. That’s your only requirement, is to immediately notify us. All of the claims attorneys have cellphones. We take calls 24 hours a day. Sometimes people say, “Oh, this came in over the weekend.” You can call us on the weekend.

MARK:

I get that I need to report the claim, but how about as you handle the claim, go through the process? Do I have obligations along those lines?

JOHN:

Yeah. The first thing that we’ll tell you after you report the claim, if it is a claim and it’s not just a potential claim or a circumstance, we’ll ask for a complete copy of your file. That’ll be the first, probably the biggest task you have as an insured is copying a file, depending on who the-

MARK:

– the importance of file maintenance and keeping files, but …

JOHN:

Yeah. Some people or some firms and some attorneys have a lot better record-keeping procedures than others. For some people, it’s not a big deal. They can just hit a button, copy it to a memory stick, and mail it to us. Other people, their banker box is scattered through several offices. Papers are loose, they’re difference sizes. I understand that’s a bigger task. Some files are just plain huge. They can take a whole room. If that’s the case, sometimes we can limit the request. Just give us the pleadings for now, or just give us the correspondence for now. Just enough to get us going. I guess the flip side would be if, we usually err on the side of just getting everything. It’s just like when you get a new claim or a new case as a lawyer. You want all of the information, or in discovery, you want all the information. You don’t want just the little bits that they give you. If there’s too much there, we’ll let you know and we can send it back, or just tell you not to send it to us to begin with.

MARK:

Do you prefer that digitally?

JOHN:

It’s a lot easier for us digitally. I guess the downside of digitally, sometimes people copy a file, if there’s multiples of thousands of pages, if it just goes from one to ten thousand, it’s a little hard to sort through. We manage.

MARK:

I can imagine that one.

JOHN:

Yeah. It happens a lot, so we’ve gotten pretty good at going through and sorting it out. Most files are, even poorly kept, some files are better kept than others but all files have some natural order to them. Pleadings, correspondence, notes. There’s a predictable outcome to each one.

MARK:

Going back to this sort of example of blowing a statute or something, I realized, “Oh my gosh, I really have made a mistake here and messed up here. This is going to be a malpractice claim.” Do you have any thoughts or advice that you would share in terms of, what do I do with my client? Should I just run out and fall on my sword and say, “[inaudible 11:18], I’m so sorry. I’m so sorry. I’ll make it right?” What is your advice? Walk through that, that issue of client information or management.

JOHN:

That’s a tricky one. Knock on wood, I’ve never had to deal with that, even when I was in private practice. I can understand that’s a difficult situation. I think most attorneys really want to tell their client, “I’ll make it right,” or they feel bad. If it’s a missed statutes of limitations, for example, they feel bad inevitably. Any error I guess an attorney feels bad. Then the next question is, “Well how do I communicate that to the client?” Well I guess we all tell the insured that you can be honest with them and tell them that the mistake was made. The only thing you can’t do is tell them that the insurance company will pay you a certain amount, or that the insurance company will fix it somehow. You have to limit it to just, “I made a mistake. Here’s what the error was.” You can’t say, “And you’ve been damaged in the amount of x dollars. Just call up John and he’ll cut you the check on Monday.” In the policy, it requires the insured to cooperate with ALPS. Part of that is to not undertake any debts or any obligations with your client.

Within that limitation though, you can pretty much tell your client anything that you feel is necessary. That you feel bad, you wish it never happened. All of that’s fine. It will come back in your deposition, so you have to be aware of that. If you say that you feel bad and you wish it never happened, you’ll be asked about that. Keep that in mind. I think the best advice is just to tell them succinctly as possible, “I made an error. Your case is no longer viable. I’ve reported this to my insurance carrier. Here’s the claim number. Please call him or her as soon as you can.” That’s good enough.

MARK:

Well, my takeaway here is not to be afraid. If I am concerned that I’ve made a misstep, just to call and talk to the people that are experienced in handling these kinds of things and you will work with any of the attorneys calling in to try to understand, “Is this reportable or not?”, understand, explain how the process works. The other takeaway that I have here is, “Hey, if I am afraid I’ve made a mistake, I want to call ALPS first and have some discussions about how to handle this because I can get into some trouble in terms of just coverage issues and these kinds of things. I want to be informed.” For those of you listening, any time a claim comes up, I would just, “Hey, call John and he’ll take you through the process.

Well John, thank you very much for spending a little time. Thanks to all of you for listening to our show. If any of you happen to have any questions about the issues we’ve discussed today, please don’t hesitate to contact me at mbass@alpsnet.com. We’d love your feedback on the podcast, including other issues you’d like to hear us cover. Thanks again. It’s been a pleasure.

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