Two By Fours, Rivets and Artificial Intelligence. CLM’s Construction Claims Take

While AI has penetrated awareness in the larger culture, construction companies have been delving into it themselves in recent years including using it to optimize work schedules, to improve workplace safety, and to keep a close eye on construction sites.

It wasn’t that long ago that artificial intelligence seemed the stuff of science fiction. Think of HAL, the fictional AI character in Arthur C. Clarke’s Space Odyssey series.

But the emergence of AI into the greater national consciousness, signified by the introduction in March 2023 of ChatGPT, has many people in the construction industry asking questions about the potential perils and pluses of using the technology in legal cases.

Questions and concerns about AI in the courtroom, particularly for construction cases, and much more will be addressed in a session “No Escaping Artificial Intelligence: Emerging Issues for Contractors, Carriers and Lawyers” at 1 p.m. Sept. 28 at CLM’s Construction Conference.

The round table discussion will be interactive and lively. Attendees will be encouraged to participate in discussions about the adoption of AI in varying degrees in construction-related legal cases.

The panelists will include David Zehner, founding partner of Zehner Trial Consulting, Phyllis Modin, director of senior counsel at Markel Service Inc., Stephen Henning, founding partner of Wood Smith Henning & Berman, and Jay Sever, partner at Phelps Dunbar.

Henning predicts there will be strong interest in the session, and information provided will not be limited to those involved in the construction industry.

“AI is top of mind for everyone right now,” he said. “It is the hottest issue in the legal industry as a whole. Every stakeholder in the litigation process—general counsel, risk managers, law firm leaders–are trying to get their proverbial hands around this issue. The potential for efficiency and cost savings is huge.”

Prepare for Round Tables

CLM’s round table format is intended to spur in-depth discussions, and attendees will be invited to bring up issues related to AI and its uses.

“This particular format allows participants to share thoughts and practice pointers for the group, which elevates the educational level for all. This is not four talking heads, it is interactive and informative,” Henning said.

AI also is already being used in the insurance industry in various ways including pre-assessing claims, enabling automated fraud detection in claims using data analytics, routing of initial claims and streamlining administrative processes.

So it’s clear that AI is already making an impact in various industries. And the legal industry is not going to forego the use of AI especially as “the industry is under a lot of pressure to be efficient, cost-effective and to provide consistent, strong results,” Henning said.

At its most useful, AI– or machine learning–finds patterns and deviations in data. It utilizes pattern recognition to sift through mountains of data, which can help identify potential issues or problems much faster than humans can.

Some ways in which AI could be useful tasks related to legal cases include legal research and document review, drafting legal documents, predicting case outcomes, due diligence in transactions, client interaction and support, and for spurring insights and arguments that bolster legal strategies.

“As the technology improves, there will be many ways to make case management more efficient and get improvements in outcomes,” Zehner predicts. “It’s a new tool and we will be exploring the possible ramifications of it in the session.”

Troubleshooting AI

While better case management is one potential outcome, there are glitches and challenges in AI that cannot be ignored.

One case that’s sure to be discussed, and which reflects the potential perils of using AI in the courtroom, will be a case earlier this summer of a New York attorney who used AI to prepare a court filing on behalf of a man suing an airline. Unfortunately, the AI tool invented cases that the lawyer cited in his pleadings that were not real.

“The potential is there for AI to create a documents or cite authority that are inaccurate,” Henning said. “We have to remember the technology is imperfect, and the potential for a bad product or results is real.”

Henning pointed to the New York case, which resulted in “sanctions and national embarrassment” as one that anyone in either the legal or construction industries will want to avoid.

“Citing cases which do not exist in the first instance should have been an easy task to flesh out during the document review, but that apparently never happened,” Henning said.

The Construction Industry Perspective

The panel will include different points of view for those handling construction claims including the perspective of builders who are adopting AI, a claims professional handling construction matters, a lawyer handing all aspects of construction claims through trial and a jury consultant seeing AI being implemented in jury selection.

Another where AI could be used beneficially is in making jury selection faster and more efficient and identifying jurors that would regard a construction company’s case favorably, Zehner said.

“AI could comb through social media and see everything about a potential juror and see if they’d be a good juror for your case,” he said.

Zehner said he can see AI being used to select jurors that “would be more sympathetic to the themes that are prevalent in construction cases such as identifying people who understand that when something goes wrong there are often multiple causes –not one single cause.”

Zehner said he’d like attendees to come away from the session with a better understanding of AI as a tool to be used in their legal cases.

Henning said he’d like attendees be aware of its potential pitfalls and pluses.

“I think whatever is created by AI has to be looked at with a critical eye,” he said. “I don’t think you should believe everything that it puts out there.”

Even with all the talk about AI, Henning does not expect that it will replace lawyers.

“But I do believe lawyers using AI will have an advantage in the future when it comes to drafting documents, pleadings and even in trial,” he said. “Big picture, exploration and adoption of AI will present big challenges – but also will present big opportunities for creation of efficiencies and successful outcomes.” &

The R&I Editorial Team can be reached at [email protected].

Vermont’s Future Is Golden

Challenging market conditions are driving insureds to captives. Vermont offers a reliable domicile.

By: State of Vermont | November 21, 2024

Hard markets in commercial insurance lines have been a problem for years now. Many lines don’t show signs of softening, though some, like cyber, have ebbed over the past few years.

High claims volumes and costs have caused carriers to tighten terms and conditions, introduce new exclusions and increase premiums. A variety of different risks are included in this market tightening, and it’s affecting both public and private companies.

As Sandy Bigglestone, deputy commissioner for the State of Vermont’s captive insurance division, explained, schools, churches and other nonprofits are contending carriers are “excluding sexual abuse and molestation from coverage for a lot of these types of entities. These organizations understand the risk and the public needs to have confidence the organizations are addressing the risks, so they must have the coverage.”

Though many commercial lines are affected, property has perhaps been hit the hardest. Increased claims, inaccurate property valuations and other challenges have caused insurers to tighten their books in recent years. 2024’s spate of hurricanes will likely make matters worse.

“There continues to be challenges in the commercial market,” Bigglestone said. “Some companies are coming to us with risks that they say they’ve been self-insuring on their balance sheet, and why not transfer that to a captive to receive greater benefits?”

Consistency and Stability

Sandy Bigglestone, Deputy Commissioner for the State of Vermont’s Captive Insurance Division

With the commercial insurance market so unstable, companies are turning to captives to house their exposures. Vermont, a long-time domicile, is getting increased attention because of their strong reputation and their leadership as the top domicile worldwide.

“All stakeholders enjoy the stable political and regulatory environment Vermont has to offer to operate in,” Bigglestone said.

Of course, a lot of consideration goes into deciding whether or not a captive is the right choice for a particular company. Businesses need to assess their exposures and their books to make sure they can adequately operate a captive.

There are significant advantages, however. “For low frequency, high severity risks, captives can access the reinsurance markets directly, so it’s very attractive for businesses to put a captive in place,” Bigglestone said.

And carriers are more accepting of captives as part of a broader insurance program.

“Captives are changing the relationship businesses have with commercial carriers,” Bigglestone said. “Commercial carriers are wanting to see companies with skin in the game; therefore, the relationships have evolved to be less transactional and more strategic.”

Balancing Bureaucracy

With 76 global domiciles, companies have a lot of options when it comes to selecting a captive partner. “Captive insurance domiciles compete globally for the business,” Bigglestone said. “If you were to put all 7,000-plus captive insurance companies around the world, all in New York, it wouldn’t have the same economic impact as 700 captives in Vermont does. The captive insurance industry is very important to our state and we will continue to support it in any way we can.”

Businesses should look for domiciles that balance a need for quality regulations with a process that isn’t overly bureaucratic and is seamless for business owners to navigate.

“Companies are attracted to an environment with quality regulatory standards and a stable regulatory environment,” Bigglestone said. “Vermont sets the regulatory standard in terms of financial analysis and examinations.”

In addition to quality regulations, firms will want to seek out a domicile that is agile enough to license captive insurance companies that fit their unique needs. It is important that a domicile have firm but fair regulation and the experience to consider new ideas and implement them. Companies must consider a variety of factors when choosing a domicile and not everyone will be the right fit for every company.

“You have to consider the captive owner and the industry sector that that owner operates in, as well as the insurance risks that are going into the captive program,” Bigglestone said. “Captive laws and regulations have to have a reasonable degree of flexibility to accommodate all the varying needs of owners and then impose rules based on the merits of each captive program.”

She added that creativity is a critical part of the process: “The ability to vet concepts and ideas with trusted individuals is key to having quality standards,” Bigglestone said. “And it can make captives appealing to insureds who are tired of commercial carriers not meeting the needs of the business, and who desire more control over their insurance programs.”

“When you think about the commercial marketplace, commercial insurers are supposed to operate in each jurisdiction in a competitive manner. Commercial carriers often look the same. They sell auto coverage to anyone with a driver’s license. The rules and regulations imposed upon commercial insurance companies are designed to be more formulaic for that reason,” Bigglestone said.

“Uniform regulatory standards apply to commercial carriers for the protection of the policyholders. These are standards all insurance regulators focus on, and standards captive insurance regulators need to understand, but with a specialized focus.”

A Quality Domicile Built for the Future

A combination of experience, regulatory standards and talent make Vermont a top domicile for companies looking to form a captive. The longevity of licensing captive insurance companies for over forty years is a testament to the quality work they’ve provided in the past and will continue to provide for many years to come.

Vermont’s reputation has helped the state attract and retain top captive talent, ensuring the businesses it serves are in good hands. The state has 32 employees dedicated to captives, and their average employee retention is 15 years. The Vermont Captive Insurance Association, the largest captive insurance trade organization, also helps companies connect with professional services needed to make their captive successful.

“There’s a whole host of service providers with proven expertise right here in Vermont,” Bigglestone said.

Taken together, Vermont’s resources, expertise and talent make it a prime domicile. They’ve been on a growth trajectory over the last few years and that’s unlikely to change anytime soon. Companies can trust their captive will be in good hands when they choose Vermont.

“Vermont has always competed on quality,” Bigglestone said. “We do have a mission and that hasn’t changed in over 40 years. It’s to maintain a system, or domicile that attracts quality business to Vermont, to promote our reputation in the industry, and to uphold a regulatory framework to protect the solvency of the companies that choose to place their business here.”

To learn more, visit: www.vermontcaptive.com

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.

The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,200 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.