The latest episode of the AZ Big Podcast with Michael & Amy has officially dropped. Episode 185 features Gregory Rosenthal, shareholder at Burch & Cracchiolo, who talks first-party insurance claims.
Listen to more of the AZ Big Podcast here.
Transcript:
Michael Gossie
Welcome to the AZ Big Podcast sponsored by Burch & Cracchiolo. I'm Michael Gossie, editor-in-chief at AZ Big Media, and I'm joined by my co-host, our publisher, Amy Lindsey. Today, Amy, talk about a topical topic.Very excited to be joining the studio today by Greg Rosenthal, shareholder at Burch & Cracchiolo, who has a very interesting specialty.
Amy Lindsey
What is the specialty?Michael Gossie
Why don't you ask him about it.Amy Lindsey
All right, Greg, thank you for joining us. Tell us about what your practice is at Burch & Cracchiolo.Greg Rosenthal
Well, thanks for having me, first of all, and thanks for hosting this podcast. It's a great benefit to the community, and our firm is just honored to participate, you know, frequently as we do.Amy Lindsey
We always appreciate you guys. You're great partners.Greg Rosenthal
Well, thank you. My practice is kind of broad-based in all sorts of injury and casualty law. I've had quite a background in insurance- related matters that has transitioned me to do some stuff on the plaintiff's side, so I'll do plaintiff's personal injury work, but for 30-plus years, I've had a focus on insurance-related claims, insurance defense, and over the past five-plus years, I would say, I've started to get a few more in the realm of what's called a first-party insurance claim, which is, I think, what mostly what we're going to be talking about this morning.Amy Lindsey
So, can you start just explain what is first-party insurance?Greg Rosenthal
Sure. So, the idea, the term first-party really comes from good old-fashioned ancient contract concepts, and insurance policy is nothing more than a contract. It's kind of governed by some long-standing rules of interpretation, but it's contract, and so when you talk about who are the parties to the contract, when it's the insured individual or the insured entity under that contract with a claim against their own insurance company, they are the two parties, so that's first party.A lot of what folks are more familiar with, and maybe what you see advertised a lot on TV, is claims against somebody else who harmed you. That other person is not a insurance contract. They're considered a third party in the terminology.
So, a first-party claim is really when the insured person or the insured entity is making a claim against their own insurance policy, and then that insurance policy would step in to pay the money to the insured.
Michael Gossie
That's super interesting. So, that can be an individual or a business?Correct, yeah. So, you'll see business owners policies that will cover all sorts of things. The business structure, the business personal property, the business contents.
They'll insure themselves for loss of income, for business interruption, and there's all sorts of scenarios where a business can have a first-party claim. Everybody is, by and large, is familiar with the most common areas of first-party coverage. Your own collision coverage on your own car, your own coverage if a tree falls on your car, you have a fire loss in your own house that, you know, maybe a kitchen grease fire, which we see a lot of unattended kitchen fires.
Those sorts of things.
Amy Lindsey
So, what are some other scenarios where a first-party claim would arise?Greg Rosenthal
Well, there's also when a policyholder has a claim against their own insurance company, let's say because they're harmed by an uninsured or an under insured motorist. UMUIM is the vernacular we use. That's also a first-party claim even though the harm was caused by a third party.The insured is in that setting going against their own insurance company to essentially compensate them for what was not compensated by the the person who was at fault. So, that's a first-party claim even though it arises from a third person's actions.
Amy Lindsey
So, how would it go from a claim to a lawsuit and at what point would an attorney have to get involved?Greg Rosenthal
Well, in the first-party context, which is I kind of kind of the heart of what I thought we might want to talk about a bit this morning, is that the claims resolution is governed by the terms of that contract. And it depends on the nature of the claim and the nature of the first-party claim, but if you have essentially a straight property loss, for example, the example I gave a few minutes ago, let's say an unattended kitchen fire or water damage case. I've had many cases involving broken water lines or fire suppression systems that leak, those sorts of things.If it's a pure property case, then the insured, whether it's a business or a homeowner, is going to open a claim with their own insurance company, try to get that claim resolved, but if there's a dispute and it has to be resolved, typically in a first-party policy there's a clause which calls for what's called appraisal. And a lot of people don't really know about the appraisal process, but it's been around for a long time, it's very common. It works essentially like an arbitration claim, at least the law kind of views it under the same rules.
Procedurally it is a bit different. If I have a water loss in my home or if a client of mine has a fire damage and they make a claim against their own insurance company and there's a dispute about how much or the scope of that claim, then each side can pick a neutral, knowledgeable person to essentially present their version of the loss and those two are supposed to try to work it out. And if they can't, then the two of them pick a third called an umpire and it goes essentially to a three-person panel.
And two of the three vote and they write up their report and you get an appraisal award. And I've had a few where I've had to step in to kind of assist to push the appraisal process along on behalf of the client. Although I'm not the appraiser and I'm not advocating in the actual appraisal itself, but there are some issues that can come up when there's an appraisal process going on.
Michael Gossie
Greg, we have a million questions for you, but before we get to them I have to say, Burch & Cracchiolo is honored to have been chosen one of Arizona's most admired companies for the fourth consecutive year. Every day Burch & Cracchiolo strives to portray their pillars of the program. Leadership excellence, workplace culture, corporate and social responsibility, customer opinion, and innovation for both its clients and its employees.Let Burch & Cracchiolo be your law firm for life. Contact Burch & Cracchiolo today at 602-274-7611 or bcattorneys.com. That's bcattorneys.com.
So Greg, lots of headlines recently about the California wildfires and how a lot of people, their insurance coverage was taken away or canceled or how does that fit into what you do in your practice?
Greg Rosenthal
Well, so that is an extreme example of what can really go on in first-party claims and and I think the industry is kind of waiting to see how California, broadly stated, the state, the regulators, the insurance companies are going to muddle through these massive amounts of these first-party fire losses. When you think about, in particular, a fire loss, the evidence of what it is that's involved in the case, the personal property items, the structures, it's all destroyed in the event itself. So the proof problems that arise in fire cases are always challenging and then you add to it the just the scope of what's going on in California.I know I've seen some reports that the state has ordered, essentially through executive action, insurance companies to staff up and get more adjusters on it, but as far as I know, each of those cases is going to be handled according to what the terms of those policies are and those homeowners are going to have a claim for the structure, for the loss of their personal contents, for other items that might be covered under their policy. If it's a business and your business is burned to the ground, you might have a significant loss of business income claim and all of that is subject to a claim with the insurance company to be adjusted by the insurance company and if the two parties don't come to a meeting of the minds of what that loss is, then it goes, it can ideally go through the appraisal process and each each side would pick an appraiser and the two of them would try to work it out as kind of like the process I mentioned before.
Michael Gossie
How do you see this changing your practice long-term, the outcome of what's going to happen in California?Greg Rosenthal
Well I think it's going to bring a lot of attention to the notion that if you have a loss and if you are not seeing eye-to-eye with your own insurance company in that loss, that you have options and rights under your policy. Contrary to the public perception and having worked with a lot of insurance folks in the last several decades, the adjusters tend to know what they're doing, they know the policies, they know the law, they know the market and they are by and large people of good faith who want to get to a good result for their policyholders. And remember these are their policy, these are the people that paid the premiums.So insurance companies know they have a contractual and and some would call it a fiduciary duty to take care of their policyholders. You see it on the ads, right? We all know the catchphrases about being in good hands and you've got friends and all that.
Well they're saying they're saying when you have a loss we'll take care of you and and I will say that by and large they really try to do that. But that doesn't mean they always see eye-to-eye on all occasions and it doesn't mean that there's not a areas for dispute and now that's going to be brought quite to the forefront in the media I I'm anticipating. And I expect that even though it's going on in California a lot of Arizona folks are gonna go wait a minute I had a fire too and and I saw on the news that somebody had a big dispute with one of the big insurance companies what are my rights and if they wanted to explore that they can always give me a call.
Michael Gossie
Yeah so you mentioned that you know the catch phrases I feel like I'm in good hands but but they're also raising my prices like dramatically. Why do you think insurance costs have gone up so much over the last few years?Greg Rosenthal
Oh well so this was going on in California even before the wildfires and it's been good and actually not just California it's been going on nationwide. It's in response to the housing crisis that was very prevalent in the news it's in response to the the cost of building materials it's in it's in response to the prevalence of more natural disasters you know flooding in the Gulf region we see it on the news we're all familiar with it. There's a reason that the casualty insurance business through good and bad has survived and thrived since the 18th century because they for the most part get folks to submit a small amount to cover a big risk and then when that risk goes against them then they can increase that small amount to a little bit bigger amount a little bit bigger amount.It's a it's a it's just a way of saying what we all know is that when there's a lot of losses premiums go up and the premiums eventually compensate for what the insurance companies paid out and they can stay in business so that they are there to cover the catastrophic loss when it happens. Greg what do you enjoy the most about your practice? I really like getting to a resolution for people and that doesn't make me unique in the law but when I have a client who's had a water loss or a fire loss and they are out of their home or their business has been disrupted and they don't know if they're gonna get get it rebuilt or their family is displaced and they've got a family of five living in a hotel for at least for a short period of time to be able to you know give them advice get them to resolution get them that satisfaction to get their life back on track and that's that's always always the best part.
Michael Gossie
If somebody has a question like they might they might think that they have a first-party lawsuit on their hands or they're worried about not having the coverage that they should that they thought they were going to get or that their claim wasn't resolved like they wanted what advice would you have for that person or that business owner?Greg Rosenthal
Well, I think it possibly depends. I mean, there's so much nuance there. It's a great question, but there's so much nuance there; it depends on the nature of the loss. I would—I would say that, contrary to what you know some lawyers might say, a good lawyer will tell you when you don't need one.And, hearkening back to what I said a few minutes ago, if you have a smaller loss and it's a pure property loss, and it's kind of... can be evaluated based on known sources in the market—they'll cost X amount to replace this piece of personal property or X amount to repair this structure—and it's going to be a relatively straightforward thing, then any insured should make open a claim with their insurance company and work collaboratively with them.
Communicate with them; communicate in writing. That doesn't mean to be informal or overly formal, but if you have a conversation with an insurance adjuster, there's no harm in confirming that by an email and keeping your documents. You can go in with the notion that the insurance company, who says "you're in their good hands," will take care of you. And when you get the sense that that's not going to be the case, then by all means, reach out for help. There are a lot of folks out there who kind of prey on people when they have a casualty loss. It winds up in the news, and someone sees a news report—buyer beware when you're the homeowner. But if they ever had a question, they give me a call.
Amy Lindsey
So how can people learn more about the topic and get in touch with you or the team at Burch & Cracchiolo?Greg Rosenthal
Boy I mean there are plenty of resources out there there's policyholder advocacy groups that publish materials it can be a little bit dense you know you got to be kind of one of these insurance nerds like me but they can certainly give us a call or find us on the web you know Google me at Burch & Cracchiolo, give me a call, find me on the web and give me a call and I'm glad to talk to folks.Michael Gossie
Well thank you for listening to the AZ Big Podcast with Michael and Amy for the latest and greatest business real estate and lifestyle news check out the all-new azbigmedia.com once again thank you to our sponsors Burch & Cracchiolo and thank you so much to Greg Rosenthal shareholder at Burch & Cracchiolo give them a call.