As a result of the murder of George Floyd and numerous other recent incidents, our country has been forced to address the pervasiveness of racism. Such racially charged events have opened up a significant national conversation that the insurance industry, among others, should take an active part in. Insurance companies now have a timely opportunity to scrutinize their internal systems and procedures — which have historically created racial inequality with respect to working with minority attorneys — and eliminate such barriers forever. In particular, it is time for the insurance industry to courageously confront the implicit biases that are perpetuated by its approved panel counsel lists.
Historically, the insurance industry has made a yeoman’s effort to combat racial inequality in the legal community. Several years ago, several large companies endorsed the American Bar Association’s Resolution 113, which called for providers of legal services to expand and create opportunities at all levels of responsibility for diverse attorneys, to assist in the facilitation of opportunities for diverse attorneys, and to direct a greater percentage of the legal services they purchase, both currently and in the future, to diverse attorneys. The Resolution encouraged new and significant steps toward building greater transparency and accountability relating to diversity. It inspired companies to aim higher and build a legal profession that reflected the populations that they serve.
Unfortunately, of the 114 companies that have endorsed ABA Resolution 113, only 6 were insurance companies – 3 life insurance companies and 3 property and casualty companies. Such a small percentage of participation by the insurance industry shows how the insurance industry, as a whole, has not made significant strides to improve work relations with minority attorneys. An important part of the problem is the industry’s adherence to its approved panel counsel lists when directing its legal services to outside counsel.
Another attempt to encourage insurance companies to improve their efforts on retaining diverse outside counsel came at the hands of several states’ Departments of Insurance. In 2011, California, which has the largest insurance industry in the nation with $310 billion in buying power, established the Insurance Diversity Initiative (“IDI”) focusing on the collection of diversity data amongst the state’s top insurance companies. From 2012 to 2016 alone, IDI insurers reported a 70% increase in spending with California diverse businesses.
With the success of the initiative, the California Department of Insurance connected with four other states (Oregon, Washington, New York and Minnesota) and the District of Columbia to expand the IDI nationally in 2016. This new program became known as the Multistate Insurance Diversity Survey Initiative (“MIDS”) and encouraged economic opportunities, board governance diversity, and increased procurement from the nation’s now $1.84 trillion insurance industry.
On September 5, 2019, the State of California passed Senate Bill 534 reauthorizing the State to collect diversity data from California insurance companies. Unfortunately, the new survey only requires insurers with sales in California to submit a report. Like the ABA Resolution 113, only a handful of states participated in MIDS.
Despite such outside influences, insurance companies, overall, have been reluctant to address the proverbial elephant in their offices — their internal systems and procedures that proliferate racial inequality with respect to their use of outside legal services providers. Insurance companies’ continued insistence on using and relying upon their approved panel counsel lists reinforces a barrier of racial inequality to minority attorneys.
Insurance companies, like many other corporations, began using approved panel counsel lists to limit the number of law firms that would perform legal services for them. Oftentimes, insurance companies maintain these lists for years and seldom add new law firms to them. Instead, insurance companies have been contracting their lists, further draining the pool of attorneys that they will provide work. However, when constructing their lists, insurance companies failed to realize that minority attorneys were inadequately represented in the legal profession. Thus, these lists rarely contained minority attorneys.
In effect, the lists have had the unfortunate consequence of perpetuating historic inequality by shutting out minority attorneys from the opportunity to work with insurance companies. All too often, minority attorneys are either not put on the approved panel counsel lists or aren’t given the opportunity to be added to the lists because of the companies’ contraction of same. (See the ABA article "Uninvited: Preferred Counsel Lists and How They Limit Minority- and Women-Owned Law Firms’ Access to Legal Work," by Emery Harlan, Joel Stern, Martin P. Greene, and Sheryl Axelrod. Consequently, insurance companies’ approved panel counsel lists have created a concatenation of events that has made it difficult, if not impossible, for minority attorneys to break into insurance companies’ good graces. These lists have effectively barred minority attorneys from ever working with insurance companies further perpetuating racial inequality.
Often, longstanding systemic exclusion is the most difficult form of bias to confront. The current maintainers of the system may not have been the ones to found it. The current beneficiaries of the system may have no animus toward those excluded. Current leadership may struggle with how to implement positive change without impugning their predecessors or organizations, as a whole.
This is precisely why it is now time for insurance companies to reverse injustices perpetuated against minority suppliers of legal services. This national moment allows an unprecedented opportunity for them to revamp their corporate philosophy regarding their approved panel counsel lists. Changing systemic racism in the insurance industry must start from the top and then be driven top-down. A culture among the powers that be within insurance companies must be developed to address diversity and inequality and to revise their approved panel counsel lists to include minority attorneys in the industry — and subsequently employ those attorneys to work with the insurance companies. The results will be a pool of service providers with indispensable experience and undeniable value as well as continuation of companies' respective diversity and inclusion initiatives.
Gordon K. Walton is a Chicago insurance coverage and risk management attorney.