London Law Firm Reporting Protocol

LAW FIRM REPORTING PROTOCOL

Précis

This Protocol is to be utilized by all Law Firms as a guideline in connection with the preparation of Reports, including Year End Reports and Litigation Activity Reports, on behalf of and for the London Company Market. The London Company Leaders have agreed to the key points detailed below and request that all Law Firms follow these procedures going forward.

A. Enhanced Communication

1. Law Firms to maintain frequent communication with Leaders.
2. Law Firms to engage in phone conversations rather than email communication with Leaders whenever possible.
3. Law Firms to schedule teleconferences between Attorneys and Leaders to discuss any potential issues which exist or arise on specific cases. Brief details of matters to be discussed should accompany teleconference requests.
4. Attorneys must communicate all substantive and important factual developments to the Leaders promptly.
5. When Attorneys are asked to represent other non-London Domestic Insurance Companies where there is a known London Company Market involvement, they must clear all conflict issues in advance with the appropriate London Company Leader. There should be clear instructions on apportionment of Attorney Fees between the different carriers from the outset of such engagement.

B. Reporting

1. Law Firms to provide Leaders/cc Leaders with draft Year End Reports (including the Private Letter, Attachment A’s & Alternate Attachment A’s) in a word document, for approval prior to being posted on Maestro and circulated to the Market. This must be sent a minimum of seven (7) days before the report due date.
2. The draft Year End Report is to be presented to Leaders/cc-Leaders in a red-lined format, along with a clean version, so as to show the differences from the prior year’s report. The Leaders must respond to these drafts within seven (7) working days so that the due dates are not overlooked. Lawyers can automatically upload onto Maestro on the eighth working day if at least one leader has approved the report, or two leaders if there are four leads on file.
3. Year End Reports are to include a “Précis” at the beginning of the report. The Précis serves to provide a summary of the overall status of the account and the currency of the information upon which the report and the reserve recommendations have been prepared.
4. Law Firms must adhere to the due dates set for all Year End Reports unless an extension is specifically approved by Leaders.

a) Each Law Firm will submit a list of all Year End Reports and corresponding reporting due dates for review and approval by Leaders, before the commencement of the Year End Reporting period.

b) Lawyers will advise the Leaders of anything imminent that could affect the reserve/ARP’s (for example updated site costs, a court decision, etc.) which may warrant delaying the submission of the Year End Report.

c) Extension requests are to be presented as far in advance of the due date as possible, to the appropriate Leaders with LMCS copied in.

d) If a case is due to be settled based upon the reserves advised in the prior reserving season, or if settlement is imminent, then there may not be a need to complete a Year End Report. The lawyer should discuss the need for a Year End Report, with the Leaders prior to drafting. If no Year End Report is required LMCS should be notified.

5. Law Firms are encouraged to submit their Year End Reports as early as possible in advance of scheduled due dates.
6. Law Firms must ensure that all Year End Reports are uploaded to Maestro by 14^th October each year to accommodate the internal deadlines and requirements of all Company Market Insurers. Any exceptions to this must be agreed by Leaders in advance of the report due date; with LMCS notified thereafter.
7. Closed Files: A final bill is to be submitted by the Attorneys for any file being closed within 6 months of notice of closure/submission of formal Closing Report.
8. Law Firms to provide Leaders/cc Leaders with advanced circulation of draft reports regarding settlements and collections for approval prior to being posted on Maestro.
9. Attorneys are responsible for monitoring the status of Reimbursement Request Reports posted on Maestro. When uploaded onto Maestro the attorneys will e-mail the Leaders and identify the due dates for reimbursement. LMCS will continue to monitor the Maestro status of Year End Reports and Settlement Reports.

a) Reimbursement Request Reports should be fully approved by the Maestro Leads within ten (10) days of being posted to Maestro.

b) Attorneys are to follow-up with the Maestro Leaders for their approval, copying all Leaders on any email communication related to same.

c) If full approval is not obtained within ten (10) days from the date of submission, the Attorneys must notify the Leaders.

10. Law firms are to update the following market more frequently on non-litigation cases, by submitting more Narrative Reports via Maestro and less email reports solely to the Leaders. For example; substantive developments, case activity, settlement discussions and the like are all items which should be shared with the following market. Narrative reports should be in Private Letter format with the appropriate legend. Lawyers must consult with Leaders prior to drafting the report.

11. Each Law Firm should submit a recap report to the Company Leader Group by the middle of February each year summarizing the year end reporting season and explaining reasons, if any, why reports were not submitted by the scheduled due date.

C. Report Format

1. Format and structure of Year End Report will remain the same.
2. Legend at the beginning of Year End Report should note any change in reserves or reserve potentials and should simply read either, “Reserve Changes” or “No Reserve Changes” or for pollution accounts “Changes to Reserve Potentials” or “No Change to Reserve Potentials.”
3. Law Firms must continue to ensure that all Year End Reports are sufficiently thorough so that each report can “stand alone.” Attorneys should work to minimize redundancy where possible. If Attorneys refer back to previous reports on a particular subject they must provide the date and type of report where such issue was fully explained. However, if the reference is to a report that is over three years old, Attorneys are to supply a summary or update.
4. Law Firms to include a Précis at the beginning of all Year End Reports (as mentioned in Section B above).
5. Attorney client and work product shall be included in a Private Letter for all Asbestos, Pollution and Health Hazard files which includes rationale for reserve potentials. This is to include the ‘Reserving Methodology’ section which details the analysis upon which the Claims Universe (or site valuations in pollution matters) and reserves were calculated. Changes in methodology must also be discussed with Leaders prior to the drafting of the report. If there is a need for an Alternate Schedule A, this must only be discussed in the Private Letter.
6. For Declaratory Judgment actions, Litigation Activity Reports (LARs) or Interim Narrative Reports shall be prepared monthly, unless otherwise instructed by the Leaders.
7. New information in a LAR shall be italicized. As some LARs are becoming extremely large, historical issues should be précised and LAR should not exceed 10 pages.
8. If there are no new developments during a month, the Law Firms shall request, via e-mail to the Leaders, that no new LAR be drafted for that month.
9. The first page of the LAR should be addressed to all leaders on the account and clearly identify the assured, type of loss and the attorney file number, as per the standard Year End Report format and then followed by the particular attorney firm layout.

D. Claims Universe for Asbestos and Health Hazard Claims

1. Law Firms must present draft Claims Universe figures and reserving recommendations to Leaders/cc Leaders for approval prior to submission of the Year End Report/Private Letter.
2. Each Claims Universe is to be individually tailored to the account at hand.
3. Law Firms to rigorously pursue assureds for accurate and timely claims data, especially for major accounts, unless otherwise agreed in advance with the account Leaders.
4. There should be a minimum of nine months of new claims data captured in the Claims Universe.
5. Quality of data received from the Assured is to be explained within the report.
6. Year End Reports should discuss if the current Claims Universe data is inconsistent with data presented in prior year(s).
7. If an Assured provides revised claims data, the previous year’s data as presented in the Claims Universe should not be amended. Attorneys must discuss changes in data or revisions to the Claims Universe with Leaders, and explain same within the body of the Year End Report.
8. Attorneys must discuss with Leaders any anomalies, such as outliers and large settlements, to determine whether these matters merit removal from, or some other adapted treatment within, the Claims Universe. Attorneys should identify, question and analyse the impact of any such anomalies and must do so before the draft Claims Universe is presented to the Leaders.
9. Defense Cost analysis is to be discussed with the Leaders and should be analysed by claim type where possible.

10. Footnotes should not be the source of pertinent detail or substantive dialogue. Anything beyond an explanation of the numbers presented in the Claims Universe should be discussed in the body of the report.

E. Data Collection – Asbestos and Health Hazard Claims

1. Leaders/Companies are to work together to share information/data obtained from other sources.
2. Law Firms to provide a narrative in the Year End Report which discusses the data collection process undertaken for preparation of the Claims Universe.
3. Attorneys are to maintain and complete a “Year End Report Process Tracking” document for each file for which a Year End Report is being prepared. See form attached.
4. Law Firms to use best efforts to obtain data on an annual basis from date of prior year’s data. Leaders would like data collection to be consistent from year to year, i.e. if an attorney receives data as of June 30, 2015 then, if at all possible, next year’s data should be as of June 30, 2016.

F. Reserves Asbestos and Health Hazard Claims

1. Reserves should be calculated to capture all pending and projected claims. Projected claims should be to year end and no further.
2. Reserve analysis should utilize actual agreed-to-settlement amounts as part of the projected figures calculated for setting reserve recommendations.
3. Law Firms to prepare Reserves on a case by case basis. Leaders/cc-Leaders are to be consulted on the reserving methodology early in the preparation process and shall approve the same.
4. Reserving analysis is to contemplate more than just the last 12 months of claim data.
5. Law Firms to include a reserving methodology section in Private Letter which explains the specifics of the methodology being utilized and any case specific peculiarities being accounted for. It should also indicate how the figures used in the Claims Universe were used to achieve the reserve figures which appear on the Schedule A. The reserve methodology section should also discuss the methodology for the prior year’s calculations, noting any differences from the current calculations.
6. No Fee Reserves are to appear on a Schedule A for a pure Fixed Fee account (currently applicable to Goldberg Segalla and Mendes & Mount). For all other files where a flat fee scheme, mixed fixed fee, or quarterly billing arrangement is in operation, fee reserves must be set and included on the Schedule A.
7. Non DJ Fee Reserves should be presented on an annual basis.
8. Non DJ Fee reserves are to be allocated to the lowest unexhausted layer with London Company involvement.
9. Declaratory Judgment (DJ) lawyer representation reserves are to be allocated to every London policy that is involved in a pending litigation on a unitary basis. These DJ reserves should reflect an accurate estimate of the total cost of litigation. The DJ reserves must be explained in the Private Letter.

10. No Fee reserves should be placed on 100% Resolute policies where Resolute is not represented.

11. Attorneys should not post Cash Flow reserves on the Schedule A; however, a discussion of potential cash flow should be included within the body of the Private Letter.

G. Schedule A – Asbestos and Health Hazard Claims

1. Leaders had the default cost code changed from Costs-in-Addition to Costs-Inclusive (as this is the most likely scenario in the absence of evidence proving otherwise). This change has been implemented by LMCS within their systems for all accounts.
2. Leaders and Attorneys are to resolve any issue regarding the treatment of primary or underlying insurance on a case by case basis without the involvement of LMCS.
3. Based upon data received from the assured, if Reserves are placed on London layers, Attorneys are to confer with the Leaders with respect to treatment of underlying layers/primary insurance when preparing the Schedule A.
4. Primary policy designation, limits and consumption levels should be reviewed and verified to the extent possible, especially with respect to the years and layers that are receiving reserve recommendations.
5. Footnotes on a Schedule A, if important, should also be discussed in the Private Letter. (For example, where there are substantial missing markets.) Attorneys are to ensure that all footnotes on a Schedule A are current and are not included as carryovers from prior versions.
6. Cash Flow figures will no longer be presented on the Schedule A (as mentioned in Section F above).
7. Attorneys are not required to use the HAZAT allocation tool if it is not appropriate for specific account scenarios.

H. Pollution Accounts - Reporting

1. All procedures and protocols outlined in section B and C above to be implemented on pollution accounts as well.
2. Law Firms to prepare Attachment A Reserve potentials / ARP’s on a case by case basis. Leaders/cc Leaders are to be consulted on the reserving methodology early in the preparation process and shall approve the same.
3. All reserve cases should be accompanied by a Site Analysis Matrix and a Period Summary Matrix for the Leaders consideration. The Leaders will decide on a case by case basis whether there is a need for the entire package to be uploaded to Maestro depending on the sensitivity of the case. Matrices must be separate and apart from the Attachment “A.”
4. Law Firms to provide updated Attachment C’s to the Market for all major sites in a DJ action and for any other cases where reserve potentials for a site are recommended.
5. Attachment C’s must be kept current. As the font on the Attachment C cannot be bolded, new information should be dated and commentary also made within the body of the Year End report.
6. Site values on the Attachment “C” should make it clear whether the evaluations and PRP share is the assureds or the EPA. LMC’s environmental consultants’ figures and opinions should only be contained within the Private Letter.
7. With the draft Year End Report, the Law Firms shall provide the Leaders with an Allocation Comparison Report generated through LPRS which compares the reserve potential changes from the prior year on a per policy basis. Please note this is only required where there has been a change in reserves. Also note this should only be included in the reserve package circulated to the Market at the Leader’s request.
8. With the draft Year End Report, the Law Firms shall provide the Leaders with a coverage chart generated through LPRS, if possible.
9. Declaratory Judgment (DJ) lawyer representation reserves are to be allocated to every London policy that is involved in a pending litigation on a unitary basis. These DJ reserves should reflect an accurate estimate of the total cost of litigation. The DJ reserves must be explained in the Private Letter.

10. Non DJ Fee Reserves should be presented on an annual basis.

11. Non DJ Fee reserves are to be allocated to the lowest unexhausted layer with London Company involvement.

12. No Fee reserves should be placed on 100% Resolute policies where Resolute is not represented.