In the past six weeks we have discussed the 7 myths of a company crisis and the first four of ten tips on how to manage a company crisis presented at the MSBA Legal Summit Series, “Top Ten Tips on How to Manage a Crisis,” moderated by Marisa Trasatti, Esquire, partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP.
This week we will be discussing the fifth tip on how to manage a company crisis identified by the panel of experts at the MSBA Legal Summit: Insurance. Hopefully, when your company is faced with a crisis you will have an insurance policy in place to help you navigate through the crisis. But do you?
Again, as with all of the other tips, it is important to pre-plan and purchase insurance policies that will cover your company’s unique risks. Remember that not all risks are covered under the normal general liability insurance policies so your company will need to purchase specific coverages for those instances, i.e. risks like cyber, product recall, pollution and toxic torts. “It is important to talk to your broker and carrier and understand fully what coverage is available out there and also understand what the policy actually covers,” said Sam Terzich, Director at Gallagher Bassett. According to Mr. Terzich, even if your company purchases specialty insurance the policy may not cover all the costs of the crisis. For example, product recall insurance covers only the costs of the recall and not the costs of the product which is usually the greater expense.
Once a crisis occurs, your crisis management team should pull the insurance policies off the shelves and determine what your company’s exclusions and endorsements cover. Also look at any notice requirements. All policies require that you place your insurance carrier on notice. The trend has been for “carriers to crack down on notification requirements in their policy,” which have been strictly enforced, said Mr. Terzich. Your company may have multiple policies that overlap and cover a particular crisis – place all carriers on notice. There is also a possibility that there will be various insurance disputes among multiple insurance carriers on who has responsibility for the particular crisis, but “most of the time you can get an agreement to push those disputes aside for the time being so that your company can focus on” managing the crisis and then “deal with the coverage issue at a later time,” said Robert E. Scott, Jr., partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, who handles litigation on insurance coverage.
Of course, it is also important that your company has a plan to address the crisis and quickly communicate that plan to the carrier. “Carriers will defer to a great extent on the insured in order to handle or manage the risks, but they want to have a line of communication,” said Mr. Scott. Mr. Terzich agreed, adding, “if there is a power or leadership vacuum, the carrier will fill the vacuum.” Present the plan to the carrier, allow the carrier an opportunity to provide input, but have a plan going forward.
Additionally, carriers can be a great partner in managing the crisis. Carriers may have access to speciality services like remediation, clean up contractors, or forensic accountants for a business loss that may be fire related or cyber related. Early on if your company or crisis management team believes there may be a dispute on coverage, then your company should immediately hire coverage counsel to review the policy. Some carriers may also have a hotline for their insureds to use during the crisis or public relations services to help navigate your communications through the crisis.
Ms. Trasatti, General Counsel of Sciton, shared a unique experience after her client was served with an FDA letter notifying Sciton of a possible regulatory infringement. Lawyers around the country began soliciting clients for third party injury claims arising from the regulatory infringement issue. In that instance, Sciton gave notice from the outset to their carrier because of the possibility of future claims. As Ms. Trasatti pointed out, “it’s not just the instant crisis” that may trigger notice to your carrier, derivative claims that arise out of the current crisis may require your company to serve notice on your carrier.
In sum: Understand your risks, consider all the available coverages that are out there to protect your business and look for the companies that specialize in these different areas to purchase those policies. Understand what coverage you have so that you can understand your financial risks. It is incumbent on the insured, your company, to have a plan to address the crisis. Notify your carrier of the crisis and share that plan with your carrier. Take advantage of your carrier’s specialty services. Hire coverage counsel, if necessary. You may watch the experts discuss the fifth tip on how to manage a company crisis below:
This article is the seventh of a 13-week part series that will discuss in detail how counsel can help their clients create a crisis management strategy. This series is designed to assist you, as counsel, in weathering a company crisis. Last week, the MSBA discussed the fourth of ten tips on how to manage a company crisis. Next week, the MSBA will discuss the sixth of ten tips to manage a company crisis with comprehensive suggestions and actions for implementation. The immediate next four weeks we will address, individually, the other four tips to manage a company crisis. The final week will include a comprehensive summation of all the myths and tips including the advice and counsel of the professional panelists listed below. In week one of the series, the MSBA generally discussed the top ten tips on how to manage a company crisis. Week two was a detailed summary of the 7 myths of a company crisis. The MSBA wishes to express sincere gratitude to the professional panelists, without whom it would not be possible to offer this series.
The top ten tips on how to manage a crisis were identified by the panel of crisis experts:
- Determine What Activities the Crisis Management Plan (Before the Crisis)
- Formulate the Crisis Management Team
- Assess the Crisis
- The Initial Response
- Manage the External Appearance: Public Relations, Media and Customers
- Manage the Internal Appearance: Advising Employees and Communicating with Key Opinion Leaders
- Adjust the Company’s Promotional & Sales Practices
- Response to Regulatory/Law Enforcement
- Concluding the Plan
Join us in the coming weeks as we continue to cover in detail the 10 Steps in Managing a Crisis.
Aaron C. Burton, CEO of Sciton, Inc. Sciton, Inc. is the largest privately held dermatological and medical device laser manufacturer. Aaron shared his experience as CEO and especially the crisis that developed at Sciton during his first year. Aaron also generously shared how Sciton handled and endured the COVID crisis.
Linda Lenrow Lopez, Director of Operations, Risk Alternatives, L3 Management Innovations, LLC. Linda has more than 25 years of experience in private and non-private sector risk management. Linda shared her experience as a project manager and Director of Operations at Bechtel Corporation. Other roles Linda served at Bechtel include corporate risk manager for a global business unit and project risk manager. Linda currently works at L3 Management Innovations and draws upon her years of professional experience in this area to share with the group.
Robert E. Scott, Jr., partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP. Robert handles litigation on insurance coverage, drug and medical devices and many other areas. Robert shared his expertise on crisis management and his insights on planning ahead to control future crises.
Sam Terzich, Gallagher Bassett. Sam is a current director of the company and manages specialty claims including product liability, cyber, environmental, pollution and product recall. Sam has been in the claims industry for 25 years and will address the insurance issues that arise during a company crisis.
Marisa Trasatti, Esquire, partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, and also General Counsel to Sciton, Inc. Marisa is the moderator of the Top Ten Tips to Manage a Crisis. Marisa shares her unique experiences of managing a crisis as General Counsel for Sciton along with valuable lessons learned as counsel for an organization in the midst of a crisis. Marisa’s practice focuses primarily on civil litigation, with an emphasis on product liability litigation, including cases involving drugs and medical devices. She is a past president of Maryland Defense Counsel and served as the DRI Maryland State Representative.