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Symposium 2016

Industry Spotlight:
Elaine Caprio Brady, The Complete Reinsurance Executive

by ~ Bill Erickson (Email) (Web Site)

Malcolm Gladwell's latest book "The Outliers" posits that professional success comes from the combination of raw talent and thousands of hours of hard work. Elaine Caprio Brady, Vice President and Manager of Ceded Reinsurance Operations of Liberty Mutual Group, proves the theory. Naturally bright and a quick thinker, Elaine has a gift for cutting through complex reinsurance questions and identifying key issues. But that quick thinking alone didn't get her where she is today. Years of education, training and practice, in the law and the business of reinsurance have brought Elaine to the pinnacle of the industry.

MReBA is pleased to feature Elaine Caprio Brady in the Industry Spotlight. Elaine was kind enough to give MReBA Cover Notes an interview and share her story with us.

A Focused Career

Elaine can count at least five other attorneys in her extended family. Her uncle Frank Caprio is a Rhode Island judge and has a private practice. Three of her cousins are lawyers as well as her sister Cathy. Even her father Tony attended law school after enjoying a successful career as a high school principal. "I never had an 'ah-ha moment' where I suddenly knew I wanted to go to law school. Law school was more of a family calling that I pursued." Elaine graduated from Suffolk University Law School cum laude and went straight to work for Liberty Mutual. In fact, Elaine started with Liberty in a clerk position while she was still in law school. The attraction to the insurance industry was again something of a family tradition. Elaine's mother Bernadette had worked for Allendale Mutual in Johnston, Rhode Island.

After graduating from law school, Elaine took a position at Liberty as Assistant Counsel with the litigation group in the home office in Boston. Elaine rose through the ranks and in 1994 was hand-picked to join the newly created Environmental Department. For ten years, Elaine continued to hone her skills, analyzing and managing high exposure environmental coverage claims, reinsurance recoveries and Liberty's outside counsel. Then in 2004, Elaine became the first Liberty Mutual lawyer whose entire practice was devoted to reinsurance issues. She provided reinsurance legal advice to all of Liberty Mutual's four strategic business units. Elaine provided counsel on reinsurance programs and disputes, credit issues, contract language, and the management of outside counsel and arbitration. After three years, Elaine's in-depth knowledge of reinsurance contract language and its interpretation made her the perfect candidate to run Liberty Mutual's Home Office reinsurance operations and in February 2007, Elaine was promoted to the position of Vice President and Manager of Ceded Reinsurance Operations.

Elaine has devoted her career to the study of insurance and reinsurance. The depth and range of her expertise came through in our conversation. Indeed, Elaine moves easily from discussing reinsurance law to the business of reinsurance to the art of managing reinsurance disputes and outside counsel.

The Business of Reinsurance

Liberty Mutual's Chairman, President, and CEO, Edmund F. Kelly has publicly stated that Liberty Mutual's number one priority in the current economic environment is the protection of capital. Elaine's role is critical to this mission. "My unit's mission is to protect Liberty Mutual by understanding the opportunities and risks in our changing businesses and by providing the best risk management strategies and services. While our goal is to retain tolerable risk to make best use of our capital, the purchase of a carefully structured reinsurance program can be one of the most effective ways to protect capital." Liberty is not alone as it faces the challenges that exist in the reinsurance world today. "All companies have the same wish list: desired capacity from a diversified group of highly rated, well-capitalized reinsurers who pay reinsurance claims promptly. My unit has worked diligently to closely monitor our list of approved reinsurers, standardize our contract wording group-wide in facultative and treaty contracts, and diversify our reinsurance purchases by issuing property catastrophe bonds and utilizing industry loss warranty covers."

Commitment to the Industry

As a Vice President of the ARIAS-U.S. Board of Directors, Elaine works hard to achieve the association's mission to develop and certify world-class arbitrators who are well equipped to resolve reinsurance and insurance disputes. To that end, Elaine stresses that arbitrator and umpire training should include education on a wide breadth of issues including an in-depth understanding of the arbitration process, current industry issues and claims, new reinsurance contract wording, and ethics. Elaine volunteers that reinsurance arbitration can be expensive, perhaps as expensive as litigation. However, Elaine emphasizes "arbitration still has the dual benefit of being confidential and decided by a panel of industry experts who can both understand and analyze the complex issues presented in reinsurance disputes." What makes a good arbitrator? Elaine says, "A good arbitrator is decisive, persuasive, practical, thoughtful and brings a well-rounded view of the insurance and/or reinsurance industry to the dispute." Having worked in reinsurance both as legal counsel and a business person, she recognizes that an understanding of the business interests of the parties is paramount. In-house people have developed this understanding through years of experience. Elaine offers insights for law firm lawyers who want to become certified arbitrators: "When outside lawyers go into training to become arbitrators or umpires they need to retrain themselves as if they were going in-house and recognize the business objectives of both parties to the conflict." Elaine suggests that outside counsel would also benefit from learning the client's business objectives when handling reinsurance disputes as advocates. Developing lawyers need to understand the big picture. "Flexibility and seeing shades of gray are measures of success that young lawyers do not understand." As important as business acumen is, Elaine is quick to note that her legal training was a huge advantage when she moved into the business side of the operations. She not only brought her understanding of the law to her office, but also years of practical experience. Elaine has the experience to see problems before they happen and fix them before they cause damage.

Dispute Avoidance and Resolution

When asked how to best avoid reinsurance disputes, Elaine says "First, there must be a meeting of the minds regarding what the parties are trying to accomplish in the reinsurance agreement. Second, there must be clear and unambiguous wording in the agreement reflecting that meeting of the minds." No one can argue with that, and Elaine works hard to make sure that both criteria are met on Liberty agreements. So how does Elaine approach reinsurance disputes that can't be avoided? Like a good lawyer, she answers "That depends on the dispute." "Some disputes are more black and white while others might involve issues that are more difficult to understand. But in every case it is critical to understand the other party's position." Elaine believes in the devil's advocate approach. "Read all of the principal documents, interview all potential key witnesses, understand all of the issues that the other party is raising, and ask 'would those resonate with an arbitration panel.' I'm not saying that we should compromise all disputes, but neither am I saying we should arbitrate them all. Outside counsel should be sure to talk to all of the potential witnesses. Some of the people who negotiated the agreement may not be available. Some of the people may tell a story that is very different from the attorney's interpretation of the documents. Outside counsel cannot forget to include the client in the development of the theory of the claim and the overall strategy. That can be a costly mistake."

Elaine mentions some of the other key mistakes that outside counsel may make in handling reinsurance disputes. "The worst mistake is not keeping in touch with the company. The second is failing to keep the company's goals in mind. Outside counsel needs to be sensitive to economic realities. Are they spending more money defending the claim than it's worth? How are they affecting the relationship between the parties to the dispute? And what will be the precedential impact of the strategy that they have created? All of these problems can be cured by close communication with the client." Elaine recognizes there are two sides to the attorney-client relationship. "The company has to have the right person in touch with the attorney. It's just as important for the person managing the litigation to understand the company's goals as it is for the outside attorney to learn those goals. It always makes sense, from time to time, for the outside counsel to meet with the whole company team to discuss the strategy and status of the case."

Elaine points out that the management of the litigation is also an area where outside counsel can be more thoughtful. "Outside counsel may add one, two or even three timekeepers to a file without discussing the added personnel. When the claim manager discovers the involvement of new people by reading the bill, outside counsel has not done their job." Elaine says good management starts at the outset of the case. "Budgets and staff assignments, developed upfront, are critical to avoid misunderstandings down the road. The budgets can always be updated if there should be a change in circumstances, but the client wants to be informed of any change in direction. Successful counsel are those who are diligent, responsive, adjust the strategy as they go, and keep us involved in every aspect of the case."

Ways to Control the Cost of Dispute Resolution

Elaine would like to see more people use the ARIAS-U.S. or other streamlined processes to resolve reinsurance disputes. The ARIAS-U.S. Newer Arbitrator Program was developed for disputes valued between $250,000 and $1,000,000. The details of this Program can be found at www.ARIAS-US.org. For smaller disputes up to $250,000, the Program proposes the use of a single neutral newer arbitrator and a hearing to take place within three months. For disputes up to $1,000,000, the Program proposes a panel comprised of two newer arbitrators, an experienced umpire, and a six-month timetable up to the hearing.

Mediation can also successfully be used to resolve certain disputes, but Elaine does not favor the inclusion of a mediation clause in reinsurance agreements. "Reasonable parties can always agree of their own accord to mediate a dispute. Mediation is more likely to be successful when the strength of each side's positions is relatively equal. Lop-sided disputes do not make good matters for mediation. In addition, if mediation were required in reinsurance contracts before every arbitration, the mediation could be used by a party to lengthen the time it takes to resolve the dispute."

The Personal Side

Elaine's busy schedule doesn't stop at the office. As she rose through the ranks of Liberty Mutual, she was also raising two children who are now both teenagers. Elaine's son Andrew, 15, just finished his freshman year at St. John Prep. Andrew won four scholastic awards last year in Latin, Social Studies, Math and English and is one of only 13 who won four awards in a single year out of a class of approximately 300. Elaine's daughter Ashton, 12, is entering seventh grade. An aspiring actress and singer, she has performed in plays in the Lynnfield Public Schools. Ashton's most recent success was in the role of Little Ti Moune in the Lynnfield Middle School play, "Once On This Island" and she is now trying out for the part of Eliza Doolittle in "My Fair Lady" at the Stoneham Theatre. Both Andrew and Ashton are avid skiers, and play basketball and soccer. It seems like Elaine's children are well on their way to putting in their "thousands of hours."

Elaine Caprio Brady is an outstanding leader of the reinsurance bar. The Massachusetts Reinsurance Bar Association is proud to include Elaine Caprio Brady in its membership. If you would like to discuss the issues raised in this article, you can call Elaine at (617) 574-5923, or e-mail her at Elaine.CaprioBrady@LibertyMutual.com.

Bill Erickson may be reached at wnerickson@rkmc.com.


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