Texas-Wide Underwriting Conference, April 2011

UNDERWRITERS & DEPOSITIONS:

Don’t be made to look the “Fool”

Daniel Perkins, JD, MBA, FALU

Attorney and Counselor at Law

Two-Part Discussion

Theory of underwriting as it applies to the legal foundation for providing testimony at time of deposition or trial

Nuts-and-bolts considerations to avoid being made the “Fool” at time of deposition or trial

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Main Themes on U/W TheoryIs the methodology used one that is

scientifically proven to be accurate with a high degree of accuracy?

Does the underwriter understand the theory behind the methodology, and can the underwriter apply the methodology to factual and hypothetical situations?

TRAP: Tested, Rate of error, Acceptance, Peer review

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T: Methodology Tested?

Yes, the numerical rating system has been used for approximately 90 years and has been extensively validated in the scientific and actuarial communities.

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R: Rate Of Error?For the methodology, what is the

known or potential rate of error?

Are the latest improvements in mortality and morbidity reflected in the rating criteria used?

Does the underwriter correctly apply the numerical rating system?

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A: Acceptance of Methodology?The numerical rating system has been

extensively validated in the scientific and actuarial communities.

Courts have accepted the validity of the risk classification system but require that it be based on sound actuarial principles or actual and reasonably anticipated experience.

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P: Peer Review Of Methodology?Research papers

Mortality studies

Medical abstracts

Underwriting manuals

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A Couple Of Useful Definitions by dpActual and Reasonably Anticipated

Experience: Knowledge gained in accordance with sound thinking as to existing facts and those facts expected in the future (ARAE)

Sound Actuarial Principles: Assumptions of future anticipated experience, based on valid reasoning (SAP)

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Do’s and do not’s : PhasesFile

Manual

Preparation

Deposition

Experts

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Do’s and do not’s : FileMeet or exceed all required govt.

regulations for the processing of insurance applications

Follow all company procedures and guidelines, and provide analysis if not done

Underwriting notes should be detailed enough to allow a third-party to read and understand them years into the future

The appraisal of the risk should be based on SAP and/or ARAE, and show a logical progression of analysis 10

Do’s and do not’s : FileHave conformity in abbreviations

No funny comments in file, internal correspondence, external correspondence, etc.

For MD referrals, provide tentative assessment by underwriter

Consistently do the activities noted on these two slides, and do them correctly (reasonably) 11

Do’s and do not’s : ManualNeed correct version of underwriting

manual, both ratings section and explanatory material

Take complete copy of manual to deposition: do not forget any linked material—ex. Definitions

Manuals typically call themselves “guides” but they are actually the “rules”

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Do’s and do not’s : PreparationReinsurance involvement needed?

Review treaty?

Do not volunteer to testify

If chosen, prepare as thoroughly as possible

Work with your attorney to identify all relevant issues and points for discussion (earlier rather than later)

Organize underwriting file by receipt/analysis 13

Do’s and do not’s : PreparationCreate identifiable underwriting files for

each period of underwriting as well as a claims file

Review all relevant documents in detail but do not try to memorize all information

Review the insurance policy that is the subject of the lawsuit to develop familiarity with contents

Know and be able to discuss all underwriting related sections of the insurance policy

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Do’s and do not’s : PreparationKnow, in general, the department

functions or activities that relate to underwriting, ex. policy assembly

Be prepared to discuss the theory of underwriting in general, as well as the specific theory (and facts) for the policy the subject of the lawsuit

Prepare notes for deposition in detail

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Do’s and do not’s : DepositionMost lawsuits won or lost on basis of

depositions and not at trial

What do you say if asked “What is underwriting?” Can you explain it in layman’s terms?

Know what you know and know what you do not know

Depositions can last for hours, eat before you get started

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Do’s and do not’s : DepositionIf necessary, bring snack food to consume

during breaks

Control the clock: If you need a break, ask for it and do not wait for attorney to suggest one

At time of deposition, it is OK to be nervous if it helps get your adrenaline pumping

Remember, you as the underwriter know more about underwriting than the attorneys

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Do’s and do not’s : DepositionHowever, attorneys are trained and

experienced in learning new fields of knowledge

The easiest question to ask is often the hardest to answer: “Why?”

Listen closely to the question so you know what is being asked (and hopefully why)

Only answer the question asked and be succinct, except when (?)

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Do’s and do not’s : DepositionIf you do not remember the entire

question, ask the attorney to repeat it

If you do not understand the entire question, ask the attorney to re-phrase it

Be careful about opining on subjects outside the scope of your knowledge as an underwriter

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Do’s and do not’s : Experts Consider retaining a consultant or

expert witness early in the litigation

Provide information to consultant or expert as soon as possible

Provide consultant or expert with complete information

Make the consultant or expert’s job easier by doing everything previously discussed 20

Contact Information

Danny Perkins Law Office of J. Daniel Perkins 105 S. Tennessee Street, Suite 101 McKinney, Texas 75069 Ph: 972-529-1111 Fx: 972-542-9149 Em: danny.perkins@jdperkinsattorney.com Website: www.jdperkinsattorney.com

Re-locating as of April 1, 2011 with new address and fax number

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