Sep192012

“As a small firm with stable employees, we never forget the big picture.”

Paul Schroeder
Paul Schroeder
HCMS Legal
Shareholder

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Paul Schroeder advises businesses on a wide range of matters. This includes contract drafting, advising on insurance related issues, regulatory compliance and planning so as to avoid litigation. Mr. Schroeder also litigates products liability, personal injury, employment, fraternity liability and commercial disputes nationally and internationally.

Mr. Schroeder has been admitted to practice in California. His office is in Walnut Creek, California, which is in the San Francisco Bay Area. His firm also has an office in San Diego, and provides its clients with statewide representation.

MO: What advice would you give to our readers when it comes to choosing a home insurance policy? What specific aspects do customers tend to overlook that can create issues when it comes to making a claim later down the line?

Paul: Policy limits are always important. Most carriers offer “replacement value” coverage. However, there can still be a limit. When a home is a total loss those limits may be insufficient. Homeowners should ask their broker if they have sufficient coverage in the event of a total loss and make sure to increase those limits if the answer is “no.” This is also important because the broker can be liable if the homeowner asks the question and is told “yes” when the answer is really “no.”

Limits for specific items are also important. For example, most standard homeowners policies only provide very limited coverage for expensive items like jewelry, watches and artwork. Limits might be as low as $3,000 aggregate with a limit of $1,000 per item. This is inadequate for many middle class people who might own an engagement ring, a nice watch and a couple of other pieces of gemstone jewelry. I advise clients to tell their insurance broker what they own to make sure they have adequate coverage. The same goes for artwork. The one of a kind watercolor of the Maui sunset you splurged on may not be covered if you don’t tell your insurance broker about it.

Home based businesses are another trap for the unwary. Most homeowners policies have a business pursuits exclusion. Hence, if a liability arises from your home based business, whether on or off your property, your homeowners policy may not cover you. This is another important topic to discuss with your broker.

Clients need to be aware that many homeowners policies do not cover natural disasters, such as earthquakes or floods. Special coverage needs to be purchased. Here in California, a statute provides that where an earthquake is the proximate cause of a loss, your homeowners policy does not provide coverage for the loss, even if the damage can also be attributed to some other cause which might be covered.

Flood insurance is another area of risk for homeowners. If you buy a house in a flood zone, mortgage lenders will require the homeowner to purchase flood insurance, usually through the National Flood Insurance Program. The NFIP provides only $250,000 in coverage for single family homes plus an additional $100,000 for personal belongings. Depending on where you live, this may be insufficient to repair your home.

The answer to all these questions is to have a detailed discussion with your insurance broker. This should insure you have adequate coverage and understand what is not covered. At a minimum, if the insurance broker does not sell you the right insurance, there may be a claim against the broker’s malpractice policy in the event of an uncovered claim.

MO: What are some of the most common homeowner association related issues that you encounter?

Paul: Our firm represents a number of homeowners’ associations, usually in litigation against their insurance companies and in litigation brought by current and former owners against the association. The big issues for us in these situations are insurance companies refusing to cover claims and homeowners disagreeing with the association’s board over interpretation of the CC&Rs.

On the former issue, a major concern is when to tender claims to the carrier. Many policies issued to our clients are “claims made” policies. This means they only cover claims made during the policy period. The word “Claim” is a term that is usually defined by the policy. Some of these policies are also “claims-made and reported” policies where the claims must be made and reported within the policy period. Associations frequently do not realize that a letter from a homeowner, or her lawyer, depending on the language of the policy, may constitute a claim under their insurance policy. Months later, when a lawsuit is actually served, the insurance policy or the reporting period may have expired. Even if the association has a new policy (or a renewal of the prior policy), this may result in a loss of policy benefits. We advise our clients to proceed with caution and tender anything that sounds like there might be litigation in the future to their insurers.

On the issue of claims brought by homeowners and former homeowners against the Association, some claims cannot be avoided. The best way to minimize their frequency is to ensure that all CC&Rs and other rules are enforced uniformly and fairly. Most courts will defer to the judgment of the board where it acts consistently over time and the rule or procedure does not otherwise violate public policy (such as a rule restricting sales to certain races or religions).

MO: What advice would you give someone in high school contemplating a career in law?

Paul: Law is a great career. You work with intelligent people in an intellectually stimulating environment. You learn new things all the time. In my practice I have learned how car dealerships run, how a product made in China makes its way to a store here in the US, how to legally promote alcohol sales, how not to load a dumpster onto a garbage truck and how electricity flows through the human body. Every day at work is a chance to learn something new. It is also a chance to help clients navigate the (usually) unfamiliar waters of the legal system. Every day there is a chance to learn something from someone, and teach somebody something. I highly recommend it as a career.

Becoming a lawyer requires perseverance. You have to graduate from college, be accepted to law school, graduate from law school and pass the bar exam. Studying for and passing the California bar is the hardest thing I’ve ever done.

Where you attend college and law school matters. When hiring summer associates, law clerks and new lawyers, law firms look at where you went to college, where you are attending law school and the grades you are getting. In some professions all that matters is earning the degree, but landing a good job out of law school is easier when you are in the top quarter of your class from a top law school. You certainly can be successful without being at the top of your class at Harvard Law School, but the better you do the more options you have. The tighter the economy, the truer this becomes.

MO: How have you managed to win the trust and respect of large companies who choose your firm to advise and represent them, despite being a smaller firm?

Paul: Personal service, attention to detail, efficiency. When clients hire our firm, their matter doesn’t get shuffled off to a low level associate who needs to bill as many hours as possible. While my partners and I work collaboratively, clients know when they hire our firm they will generally be working with the partner they hired or a very experienced associate. Our associates have over fifteen years of experience and have been with the firm for over eight years. This helps clients build confidence, knowing their matters will be handled by experienced people they know and who know their businesses at the partner and associate levels.

As a small firm that provides personal service to its clients, we also pay attention to the details better than larger firms. I remember the intricacies of my clients’ businesses, and the details of how we’ve handled situations (both litigated and non-litigated) in the past. This reduces the amount of time the client has to spend educating us about their businesses and history. It also ensures that we provide consistent information from matter to matter. This is particularly important in litigated matters. As an attorney, you never want to have the opposing party ask your client a question, have him give an answer, and have the opposition show you how he answered the same question in a previous matter differently.

Larger firms often don’t have that institutional memory because the lower level associates who handle a lot of the day to day work turn over frequently. The stable work environment at our firm serves the clients particularly well because we sometimes are their institutional memory. If the clients have employee turnover, we may be the only ones who know the history.

Knowing our client’s history, we are also able to take our clients’ broader needs into consideration. Large firms, because of their frequent turnover and network of associates, junior partners, senior partners and managing partners, or firms hired for one specific project, often do not focus on a company’s broader issues, such as regulatory compliance, and relationships with vendors, customers and employees. Instead, they focus only on how to “win” a particular issue, without thinking about whether a small victory will create bigger problems in the future. As a small firm with stable employees, we never forget the big picture. We work this way with all our clients, even new ones, because our goal is to build a long term relationship and ensure that our clients get great service.

Being smaller, we also operate more efficiently than a larger operation. There are not several layers of reporting between the lawyer doing the work and the client. We have lower operating costs. This allows us to offer hourly rates that are substantially lower than what large firms charge.

MO: Can insurance coverage issues be resolved prior to mediation?

Paul: Of course. We typically start an insurance dispute with a letter to the carrier or its attorney. This frequently starts a dialogue which allows us to resolve a coverage dispute without filing a lawsuit. Sometimes it takes filing a lawsuit to get the carrier’s attention, but even then, cases can be resolved early.

Your readers should understand that mediation is a voluntary process. Even if there is a lawsuit, it is not required to go through mediation. Many cases do not. We try and resolve cases without going to mediation because it is very expensive. Good mediators typically charge over $500 per hour. Frequently, we know the lawyers for the insurance carriers and are able to settle cases without mediation.

 

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