Young Lawyers
January 1999 Vol. 43, No. 4
Statements or expressions of opinion or comments appearing herein are those of
the editors or contributors, and not necessarily those of the association or section.
Contents
* Have you always wanted to be a published writer?
* Investing with an expert in today's volatile market
* Counseling insurance producers on the potential perils of insurance check-up programs
Have you always wanted to be a published writer?
Well, here's your chance. The YLD Council is accepting articles for publication in the YLD newsletter. Turn a law school paper into an interesting article, discuss recent case law or a practice tip, talk about the case you just took to jury trial, write a book review, interview an outstanding attorney or judge. . .
Submit your article to the editor, Sumner Bourne at 411 Hamilton Blvd., Suite 1600, Peoria, IL 61602. Please do not send faxed copies, and include the article on disk if possible. The Editorial Staff will review your work, and if accepted, it will be published in the newsletter which is received by 11,000 young lawyers.
Investing with an expert in today's volatile market
By Celia G. Gamrath*
I recently spoke to Jane G. Doyle, a financial advisor and retirement planning specialist with Morgan Stanley Dean Witter, to discuss investment strategies for young lawyers in today's volatile market. Here is some of what Jane had to say.
Jane advised that patience is required for any investment strategy, but especially for investing in the stock market. However, before young professionals go jumping into the market, there are other strategies we should consider.
For starters, Jane emphasized the importance of taking advantage of our employers' 401k plans. Since many of us are now in the highest tax bracket, we need to find a way to reduce income taxes. A 401k does exactly that. Every dollar we invest in a 401k reduces our taxable income. It also lets us take advantage of matching contributions by employers in many cases. For those who have not taken advantage of 401k plans, now is the time to do so, and max them out. As with all investments, the sooner we start, the better.
Jane also advised that before investing in the stock market, conservative investors should keep a nest egg in the amount of three to six months of living expenses, depending on job stability. A nest egg may be started in a money market account or a savings account. Money market yields usually have higher interest rates but often are uninsured by the FDIC. According to Jane, would-be investors should also pay off their credit cards as soon as possible since most credit cards charge interest between 17% and 23%.
After meeting these suggested preliminaries, it's time to put money in the market. Jane suggests that young lawyers pick two mutual funds to invest in and put a fixed amount of money in the funds every month. This is known as dollar-cost averaging. Dollar-cost averaging allows investors to take advantage of the highs and lows of a fluctuating market, instead of trying to time the market.
In playing the market, Jane ascribes to these three commandments: (1) think long-term and demonstrate patience in the market; (2) buy quality stocks and mutual funds and let them ride, regardless of fluctuating price levels; and (3) diversify your portfolio with bonds, cash, and stock investments. Bonds act as the anchor in a portfolio and are a conservative investment. Municipal bonds are also federally tax-exempt. Cash held in a money market account lends liquidity to a portfolio so that cash is available to seize opportunities and cover emergencies. Finally, stocks are used to build wealth, but in turn add greater risk to a portfolio. In order to minimize such risk, Jane suggests investing no more than 5% of our assets in a single stock, and spreading investments over five quality stocks in a single category of stock (e.g., blue chip). That way, if one of the five stocks dramatically drops, the other investments could limit the loss.
With the recent market correction, now may be a good time to break into the market. Jane suggests finding a good quality stock to invest in, pick a price point that you are willing to buy in at, and be ready and able to purchase the stock when it hits that price. Before investing in mutual funds, Jane recommends reading Morningstar or Lipper, which are unaffected by advertising and give information about stocks and mutual funds, fund managers, and performance levels. Of course, check with your broker too, who will help design an investment strategy tailored to your needs and capabilities.
In summary, the key to investing is to do it now, as soon as possible. The younger we are, the greater our opportunity to build wealth and earn compounded interest. Also, we should think in terms of tax deferral as an important and easy investment. After that, we should focus on building wealth in the market. For more information on investment strategies and making money in today's volatile market, call Jane G. Doyle of Morgan Stanley Dean Witter at (312) 984-4770 or (800) 488-4280.
*Celia G. Gamrath is an associate of Schiller, DuCanto and Fleck in Chicago, She concentrates in family law, matrimonial law, and appeals.
Counseling insurance producers on the potential
perils of insurance check-up programs
By Christopher J. Ondrula, Esq.
In recent years insurance producers seeking to maintain and/or increase business may unknowingly be placing themselves in a risky situation. The culprit is the insurance check-up programs (ICP) being instituted not only by captive producers but also by independent insurance brokers. The ICPs involve a producer meeting with the insured to review the adequacy of the insured's coverage in light of their specific circumstances and the recommendation of appropriate changes that are designed to better serve the insured. Conflicting case law in Illinois on this subject may add to the confusion.
The perceived risk of the ICP was greatly diminished by the 1990 Third District appellate decision in Shults v. Griffin Ins. Agency, 193 Ill.App.3d 453 (1990). In Shults, the plaintiff was involved in an automobile accident with an uninsured motorist. The plaintiff received numerous injuries, including a broken hip. At the time of the accident, plaintiff's parents had insurance on the car involved in the accident and, as a member of their household, the plaintiff was also covered under the policy. The policy provided liability coverage of $500,000 per accident and uninsured motorist (UM) coverage of $30,000 per accident.
Plaintiff sued both the insurance company and the producer for their alleged negligence. Plaintiff alleged that the producer had a duty to advise his parents of all facts and information so as to enable them to purchase a policy in such maximum amounts as were reasonable for the persons to be covered by that policy. Plaintiff further alleged that the producer breached his duty by failing to inform his parents that the maximum possible UM coverage is the same as the liability coverage, in this case, $500,000.
The appellate court cited to long-standing Illinois case law that places a particular burden on an insurance producer to exercise competence and skill when he procures insurance for a client. Likewise the court reasoned that the producer would be responsible to the insured for any loss resulting from his failure to competently perform his duties. The court held, however, that any such liability that could be levied against the producer would be limited to the wishes and requirements of the insured. A producer cannot be found liable if he acts in good faith and with reasonable care and diligence to place the insurance in compliance with those instructions.
In Shults, the plaintiff acknowledged that insurance was procured. He asserted, however, that the producer breached his fiduciary duty by allowing such a large disparity between the liability coverage ($500,000) and the UM coverage ($30,000) to exist.
In affirming the trial court's dismissal of the plaintiff's claim the appellate court in Shults relied on the Illinois Insurance Code, 215 ILCS 5/143(a). Specifically the court ruled that the code mandates that every insurer inform its insureds upon the issuance of a policy that the insured may purchase UM coverage in an amount up to the limits of the liability coverage. If the insured does not avail herself to the additional coverage the insurer is not required to make the offer on subsequent renewals.
In view of the legislative enactments the appellate court was unwilling to place an additional burden on the insurance producer requiring him to duplicate the insurer's obligation to advise clients of the possible UM/UIM coverage. Accordingly, the court ruled that a producer has no duty to advise its insureds of possible increased UM/UIM coverage and that the failure to do so does not breach the fiduciary relationship.
The ruling in Shults, however, may have provided both insurers and their producers with a false sense of security regarding appropriate interaction with their insureds with regard to the UM/UIM issue. For instance, Shults arguably provided complete immunity to producers for their failure to identify the different amounts of UM/UIM coverage available to the insured. This, of course, severely reduced, if not eliminated, the perceived need to discuss the UM/UIM issue with clients. More importantly, reliance on the "don't ask, don't tell" policy reduced insurer and producer sensitivity to the impact voluntary ICPs could have on the UM/UIM holding in Shults.
For instance, prior to January 1988, State Farm developed its own version of the ICP. The purpose of that program was to review the adequacy of an insured's coverage and recommend changes that better served the insured. As the saying goes, "No good deed goes unpunished." The full impact of that saying as it relates to ICPs is demonstrated by the November 1996 holding in Stefan v. State Farm, 284 Ill.App.3d 727 (1996).
In Stefan, a producer for State Farm made a number of ICs on the Stefan family. Plaintiff, Michael Stefan, testified he asked his agent "if [he] had everything he needed with respect to his automobile insurance coverage." As a result of the ICP the plaintiff obtained insurance coverage with limits of $50,000 per person for bodily injury and $100,000 per occurrence, and uninsured motorist (UM) coverage of $20,000 per person and $40,000 per occurrence. Plaintiff did not, however, have underinsured motorist (UIM) coverage.
Plaintiff, while riding his bicycle, sustained serious injuries after being hit by an automobile driven by William Sanson. Sanson was insured with bodily injury limits of $20,000 per person. Sanson's insurer settled with the plaintiff paying the entire $20,000 policy limit. However, because plaintiff did not have UIM coverage he was unable to collect an additional amount from State Farm.
As a result, plaintiff sued both State Farm and his agent under a negligence theory. Part of plaintiff's claim asserted that his agent was negligent by failing to inform him of the availability and benefits of UIM coverage, and further that his agent failed to recommend that he procure UIM coverage. Relying on the ruling in Shults, the trial court dismissed plaintiff's claims. The plaintiff appealed to the Fifth District Appellate Court.
It is important to note that in reversing the trial court's dismissal of the plaintiff's claim the appellate court did not ignore the holding in Shults. On the contrary, it endorsed that ruling, and it remains the law in Illinois. The appellate court, however, embraced a single distinction between Shults and Stefan. Specifically, the court ruled that while the State Farm producer did not have a duty to advise the plaintiff of the UM/UIM coverages, the announced purpose of the ICP resulted in a voluntary assumption of that duty by the producer. The court further ruled that the assumption of such a duty must be undertaken with "due care" and that liability can attach to the producer from the negligent performance of the voluntary undertaking.
In this case State Farm voluntarily instituted the ICP, the purpose of which was to assess the policyholder's circumstances and risks and recommend alternatives to current coverages. The court opined that the logical result of this ICP was that the insured relies on the producer's assessments and recommendations regarding coverage. Accordingly, the court concluded that the ICP, voluntarily undertaken by the producer, must be done non-negligently and, therefore, may result in liability to both the insurer and producer if the actions taken or recommendations made were done so in a negligent fashion. Liability is to be determined on a case-by-case basis.
Accordingly, when counseling insurers or insurance producers, one must convey that the implementation of an ICP, while making business sense, is not without its perils, and must not be entered into lightly. It must also be communicated, however, that there is no need to abandon the implementation or maintenance of such a program. Either of two simple alternatives, in effect, nullify the holding in Stefan.
First, when conducting an ICP with a client, a producer should simply have a written topic list which includes a discussion of UM/UIM coverages. After the discussion is complete, the client could initial the topic list indicating the discussion took place and proceed with the remainder of the presentation.
Alternatively, the producer could provided her client with a one to two page written document explaining UM/UIM coverages that are available and how they affect overall coverage under the policy.
Either of these simple tactics not only satisfy the holding in the Stefan case but also increases client confidence in the producer's abilities and may, in fact, result in increased premiums due to increased coverage. As another old saying goes, "an ounce of prevention is worth a pound of cure."
Christopher J. Ondrula is associated with the law firm of Tribler Orpett & Crone, P.C., in Chicago. Mr. Ondrula's practice is primarily devoted to the defense of general tort claims including professional liability, premises liability and product liability claims. He is a member of the American Bar Association, as well as the Illinois State and Chicago Bar Associations. He is also a member of the Western Loss Association and the Blue Goose International. He has also co-authored an article with Mitchell Orpett entitled "Health Care Quality Improvement Act." Mr. Ondrula earned his bachelor's degree from Miami University of Ohio and his juris doctor from Valparaiso University.
By Thomas W. Burkart
A free and civilized society depends for its survival on the peaceful, nonbarbaric resolution of disputes before impartial, unbiased tribunals. Therefore, a free society as well as its citizens are best served by an ethical, morally sound and conscientious corps of legal professionals. Integrity, honor and duty are thus paramount in the proper pursuit of a career in law.
Integrity. Never fear the truth, nor speak a lie. Never fear to ask additional questions of an unpaid witness. Above all, never fear to seek the truth wherever it may lie, even if it appears detrimental to your client. Never deceive. The deceived is usually smart enough to discover your treachery.
Honor. When you first begin, your reputation is like a new shining suit of armor. With each incidence of deceit, untrustworthiness or other excuse, a chink of that armor suit is loosened. Before long, if you are not diligent, it becomes easier to make an excuse than to preserve the truth. As each chink is loosened, the armor weakens and soon you stand defenseless and dishonored. Preserve your honor and reputation.
Duty. Your commitment is to work within and preserve a civilized justice system, in short, to preserve freedom. Service to this calling is difficult. Always remember, however, that without those who commit themselves to this profession, people would resort to the tyranny of "might makes right," anarchy would prevail, and freedom would surely fail. The fervor of this commitment must be constantly renewed. Apply zeal, diligence and faithful effort toward each client's case and thereby fulfill your duty to your client and our free society.
INTEGRITY. HONOR. DUTY. You may lose a lot of things in your legal career, but above all else, never lose these three and you will be successful.
Minutes of division council meeting
Saturday, November 14, 1998
Pheasant Run, St. Charles, IL
Members present: Meredith Ritchie, Chair, Devon Bruce, Vice-Chair, Thomas Killoren, Secretary, Paul Bach, Sumner Bourne, Laninya Cason, Paul Chanan, Franco Coladipietro, Angela Coumas, Francesco DiVito, John Doak, Celia Gamrath, Robert Gambrath, Ruth Gudino, Victoria Mangosing, Kirsten Olson, Valerie Perera, David Reinhard, James Scott, Donald Shriver, Kristine Tuttle. Member absent: James Elson (aa), Matthew Dudley, Doris Ealey, Ryan Henderson (aa), David Herman, Edward Jarot, Eileen Kahn, Annemarie Kill (aa), Julia McConnahay (aa), Richard Megley, Craig Reeves (aa), Michael Scotti, Timothy Zollinger (aa).
1. Call to Order – Meredith Ritchie, Chair
2. Minutes of the October 17, 1998 meeting.
The minutes of the last meeting were approved.
3. YLD Programs
A. Law Day 1999 Coumas, Gudino
B. Education Committee – Perera, Herman
Valerie Perera discussed the Bridge the Gap Program with the council. Ritchie addressed the importance of the YLD Council in attending the Bridge the Gap Program and afterward answering questions of the admittees.
C. Community Service
1) "Law on the Road" – R. Gamrath, Herman
Rob Gamrath described his work with the Law on the Road Program. Rob is in the process of applying for an American Bar Association grant. There was some significant discussion regarding the grant and how the money would be spent. Board Liaison Farace expressed interest in increasing the grant request to $2,000. Angela Coumas moved and Celia Gamrath seconded the increase in the grant request to $2,000.
2) Children's Assistance Program
Coladipietro
a) Greater Chicago Food Depository
b) Grundy County
Franco Coladipietro discussed this program with the members. Franco introduced the manner in which Lance Pederson, State's Attorney for Grundy County, was soliciting money for the Children's Room in the Grundy County Courthouse. Various members of the council stressed that the money should be earmarked for durable items. The council approved $1,000 for the Grundy County State's Attorney's Office. Franco Coladipietro and Frank DiVito also mentioned the party at Emmit's on December 4, 1998. This party will be raising funds and toys for the Children's Assistance Program. It was duly noted that the party had no affiliation with the ISBA in any way, shape or form.
c) Midyear Meeting – Ritchie
With regards to the Midyear Meeting, a sign up sheet was passed regarding the Christmas tree. Not all of the slots were filled.
3) Service to Seniors – Coumas,
McConnahay
Angela Coumas is working on a Service to Seniors proposal, which was due by Tuesday, November 17, 1998. Angela will present the proposal to anyone interested at the next meeting. The grant, essentially, is for our members to visit various nursing homes and render legal advice to senior citizens.
D. Social Committee – Coumas, Gudino
1) Local Bars – Reeves, Cason, Tuttle
Meredith Ritchie noted the overwhelming success at the meeting in Peoria. James Scott and Laninya Cason indicated that in their area, they have just started a YLD Program.
2) YLD Council Dinner on Friday, December 11, 1998
It was noted that many of the YLD members do not attend the Supreme Court Dinner, which is also being held on Friday, December 11th. Meredith Ritchie and others introduced the idea of having a dinner for YLD members and their respective guests. Angela Coumas is gathering information about the potential restaurants, including Riva, The Hudson Club, etc. A tentative count of the number of people who would be interested in attending was taken and it yielded approximately 15 people. Angela indicated that the base price would be approximately $30. Angela Coumas and Ruth Gudino will arrange the logistics of the dinner.
4. YLD Liaisons
A. Law Student Committee – Kill
It was noted that we registered 24 new law student members at the Big Chill Event. This is a tremendous success.
B. YLD on the Internet – Bourne
Nothing has changed and Sumner Bourne will update us on the changes with regard to the YLD page.
5. Young Lawyers Leadership Conference