The work that paralegals and lawyers do in the insurance industry is critical at both ends, both in drafting the legal language that defines the terms of the policies we all hold and at the center of adjudicating insurance claims, both as counsel for claimants and as bulldogs for insurance companies.
Insurance claims for house fires, floods and car accidents are all in a day’s work, but it’s during large-scale emergencies that things really get interesting…
The lights started to flicker just after four in the afternoon on August 14, 2003. Across eight states in the Northeast and one Canadian province, a sudden electrical surge ripped across the transmission grid. In a cascading failure, more than 500 generating facilities tripped offline.
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In Michigan and Ohio, automobile production lines jolted to a halt. At a Ford engine block casting plant in Cleveland, molten metal in a furnace suddenly lost heat and began cooling into a solid ingot that would permanently destroy the machinery if left in place. Desperate workers dumped the slag out into emergency spill areas to harden.
At the Marathon Oil Corporation, emergency shutdown procedures caused a boiler explosion and subsequent evacuation. Businesses across the affected belt shut down. Airports closed; refrigerators in grocery stores went off-line, resulting in $250 million in spoiled food. Across the affected area, 12 people died in blackout-related incidents.
More than 50 million customers were impacted across 8 U.S. states and 1 Canadian province. When the power came back on the morning of August 15, phones started ringing off the hook at insurance companies across the country. The event resulted in more than 63,000 claims totaling more than $180 million in losses.
The attorneys and their paralegals working on behalf of the insurance companies who drafted the original language in those policies were never busier than in the months that followed. And in businesses affected by the outage, other paralegals went over that same policy language to determine what could and could not be claimed under the coverage. And, inevitably, disagreements arose in interpretation, resulting in lawsuits, which still other paralegals helped to both prosecute and defend.
Paralegals Work At The Heart of the Insurance Industry
Insurance is a business of risk and reward.
When people or businesses have potentially expensive risks to run, they turn to insurance companies to cover them in the event that things go bad. By calculating the odds of disastrous events happening to a few customers, and pooling resources from the payments made by many customers as a way to cover those disasters, insurance companies can mitigate risks for their policyholders.
But this, in itself, is a risky business: despite all the best calculations, it’s still possible for unexpected disasters like the 2003 blackout to affect many customers all at once—putting insurers on the hook for a lot more money than they ever expected to have to pay out at the same time. In the worst case, insurance companies can’t cover the cost of all the legitimate claims and they go bankrupt, as happened with Reliance Insurance Company, which failed in 2001.
Every insurance company has a substantial legal department to help protect itself against such failures. Work in these positions has three primary roles:
- Assisting in designing and writing policy documents to protect the company and conform to various federal and state regulations.
- Defending the company against claims in court.
- Asserting the company’s rights by pursuing settlements in court from other insurers, at-fault parties to claims, or fraudulent claimants.
Insurance Work Is Aimed At Preventing Litigation… or Winning it
Legal work in the insurance industry involves a considerable amount of litigation; so many paralegals in the insurance industry spend their time in much the same way as they would in any other litigation practice:
- Assisting with discovery efforts including document collection, responding to discovery requests, and analyzing evidence.
- Participating in witness depositions.
- Locating and preparing key expert witnesses to support the case.
- Cataloging evidence and preparing exhibits for display in court.
- Compiling reference materials and researching case law for citations.
- Drafting briefs, formulating legal strategy, and assisting the lawyer at trial.
Paralegals are also typically responsible for keeping the case on track, meeting filing deadlines and drafting motions for the court. They may be heavily involved in communicating with the opposing party; most cases are settled rather than decided in court and negotiations can occur throughout the course of the trial.
Many insurance cases hinge on relatively esoteric details of policy and law. This type of litigation appeals to paralegals who enjoy deep dives into issues of indemnity, subrogation, and faith.
The field can also be an emotionally taxing one. Whether representing a client or an insurance company, many cases revolve around real human loss and suffering. Yet this also provides an opportunity to perform tangible, immediate good works for people. Whether it is obtaining a settlement for a cancer patient who was wrongly denied coverage or a car accident victim, paralegals can feel good about the payouts they fight for.
There are also elements of humor and absurdity that can come with insurance work when dealing with frivolous claims, as serious as the issue is: in one 2014 case, the Los Angeles Lakers sued their insurance company to attempt to force it to provide coverage for a settlement the team was forced to pay to a fan who claimed he had received an excessive amount of text messages from the team.
Working as a Corporate Paralegal in the Insurance Industry
On the policy side, paralegals are asked to perform research on state and federal regulations governing the industry. They are heavily involved in the development of new insurance products or any changes in policy language to existing products to ensure that the policies still comply with those regulations.
When policy offerings are made, there is a considerable amount of regulation to deal with from state insurance commissioners. These regulations may govern:
- Policy costs
- Mandatory coverage for certain items
- Policy holder notification requirements
- Solvency requirements based on the total amount of policies the company issues
Paralegals are responsible for making sure that the fine print matches those regulatory requirements. They are often in charge of making all the necessary filings and communicating with the regulatory agencies as required for compliance and approval.
There is a high degree of specialization for paralegals within the insurance industry. Insurance products are enormously complex, with policy language running up to 40,000 words, the length of a short novel. Paralegals who are responsible for either crafting or defending that policy language in court have to be intimately familiar with all of it, as well as with industry trends, jargon, and practices.
For example, paralegals working for an insurer that offers medical malpractice insurance have to become familiar with healthcare issues and medical standards and practices in order to effectively work with clients.
Working as a Paralegal in Private Law Firms Specializing in Insurance
Most paralegals who deal with the insurance industry while in private practice do so while working for firms handling tort litigation. Claims against insurance companies are dealt with in civil court and are common in some areas of tort specialization like:
- Medical malpractice
- Automobile accidents and injuries
- Industrial and corporate claims
Other law firms specialize in helping clients navigate the complexities of government insurance programs, like Medicare or Social Security Insurance (SSI). Since they run primarily under administrative law, an area where non-lawyer legal professionals like paralegals can advise and represent clients; these practices offer a unique opportunity. Since most administrative courts allow non-lawyers to represent clients directly, paralegals can actually argue cases directly without attorney supervision.
Specialty Certification Options for Paralegals in the Insurance Industry
It’s common for paralegals to get into positions working in insurance by coming from related fields, such as real estate or healthcare. Because many cases dealing with insurance stem from tort claims, others end up specializing in insurance at law firms that specialize in civil litigation after joining as general paralegals.
Since insurance policies represent contracts, a strong understanding of contract law also looks good to potential employers.
NALS, the association for legal professionals, offers a specialty certificate program in insurance law that PP designees can enroll in. The association also has certificates in civil litigation and administrative law, which are applicable to some types of insurance practice.
The Advanced Paralegal Institute offers a certificate in Litigation and Alternative Dispute Resolution that is recognized by the National Federation of Paralegal Associations as contributing to the CLE required to earn the RP credential. This provides a solid background in litigation topics and mediation practices, which are heavily used in some insurance disputes.
Finally, the National Association of Legal Assistants, NALA, also offers an advanced paralegal certificate for personal injury law, which has a further breakdown into eight different specialty areas, each of which can have different levels of applicability to some types of insurance work:
- Automobile Accidents
- Entity Medical Liability
- Individual Medical Liability
- Intentional Torts
- Premises Liability
- Worker’s Compensation
- Wrongful Death