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Actuarial Malpractice: How Bad Things Happen to Good Actuaries Casualty Actuarial Society Disney World - June 19, 2007 PowerPoint Presentation
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Actuarial Malpractice: How Bad Things Happen to Good Actuaries Casualty Actuarial Society Disney World - June 19, 2007. Ronald M. Lepinskas Lord, Bissell & Brook 111 South Wacker Drive Chicago, Illinois (312) 443-0475 rlepinskas@lordbissell.com. Why Fear The Courts?. Years to Resolve

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Actuarial Malpractice: How Bad Things Happen to Good ActuariesCasualty Actuarial Society Disney World - June 19, 2007

Ronald M. Lepinskas

Lord, Bissell & Brook

111 South Wacker Drive

Chicago, Illinois

(312) 443-0475

rlepinskas@lordbissell.com

why fear the courts
Why Fear The Courts?
  • Years to Resolve
    • Immediate Dismissal, Summary Judgment, Trial
  • Expensive, Embarrassing, Emotional
  • Justice or Extortion?
    • They Can’t Handle the Truth!
could i really be sued
Could I Really Be Sued?
  • Fraud
    • Intentional, Material Misrepresentation
    • “Upon information & belief, [your name] helped conceal”
  • Negligent Misrepresentation
    • Negligent, Material Misrepresentation, Duty
    • Lay Ignorance: “What’s a Reserve?”
  • Conspiracy / Aiding & Abetting
  • Breach of Engagement Agreement
  • Embezzlement / Conversion
unfairly you may become
Unfairly, You May Become:
  • An auditor / fraud detector
    • But ASOP 23 (Data Quality): “This standard does not recommend that the actuary audit data.”
  • A lawyer
    • But ASOP 34 (Plan Benefits in DR Actions): actuaries “should avoid the unauthorized practice of law”
  • A member of management
ken lay thanks for the memories
Ken Lay, Thanks for the Memories
  • 50 lawsuits reported: 1971 - 2001
  • More since then
  • S&P Report
    • Casualty Actuaries have “an abysmal track record” of “signing off on reserves that turn out to be wildly inaccurate”; they are guilty of either “naiveté or knavery.”
  • “In the post-Enron era, big-dog advisors should pay when things go wrong….”
red flags
Red Flags
  • Financial trouble
  • Unsophisticated / litigious
  • Changing actuaries / auditors
  • Promises / pressure
  • “We’ve sped up paying claims”
  • “We’ve taken steps which will lower ALAE”
  • “We’ve re-underwritten our book; our new business is better”
  • “We need your opinion right now; we’ll get you data later”
in hindsight all is clear
In Hindsight, All Is Clear
  • Teetering Company
    • Acquisitions, Accounting Gimmickry, Aggressive Reinsurance, Reserves On Low End of Range
  • Excuses, Excuses, Excuses
    • Turnover, Computer Problems, “Misplaced” Records
  • Politics / Pushy Management
lessons from the courtroom
Lessons from the Courtroom
  • Dumb “Helpful” Letter to Client
  • Wrongly-Worded Bills
  • Implying False Precision
    • Point Estimates
  • Failing to Caveat
    • Reliance
  • Unwritten Regulatory “Waivers”
inoculate yourself
Inoculate Yourself
  • Client Screening
  • Document Work & Management Reps
  • Don’t Be Rushed
  • Don’t Be Unorthodox
  • Avoid “Harmless” Conflict of Interest
  • Seek Effective Peer Review
you will be judged by
You Will Be Judged By
  • Your Words
  • Your Document Gaps
  • Your Drafts
  • Your Decision Whether to Go To Auditor, Audit Comm., Board, DOI
  • Your Appearance of Independence
  • Your Policies & Manuals