Edition #111
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Here's your Friday Five:

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Three developments caught our attention this week...

• Insurance operators spend their careers covering everyone else. Their own E&O shield is the one starting to crack, and the same gap runs through every MGA and insurtech in the market.
• A denied $27,000 fire claim ended in a $92 million bad-faith verdict. Great Lakes Insurance is now suing its own trial lawyers for sitting silent while it happened.
• Two nine-figure bad-faith awards landed in a single year. One from a jury, one from a statute. The carriers behind both believed they were on solid ground.

The cracks forming in the E&O shield

Summary

Insurance operators spend their careers covering everyone else. Their own shield is the one starting to crack.

Munich Re warned in March that most E&O wordings have not kept pace with what insurance professionals actually do. The job has grown past placing coverage. Carriers, MGAs, and insurtechs now interpret complex policy language, advise on emerging risks, build rating models, handle sensitive client data, and step in during claims. Yet many E&O policies still define "professional services" the way they did a decade ago, built for pure distribution.

The distance between what an operator does and what the policy says it does is where the next wave of claims lands.

So what?

That distance is getting wider, not narrower.

Six pressures are stacking on it at once.

• Soft pricing, harder losses. Financial and professional lines have softened. Margins thin out just as defense and settlement costs climb. That backdrop makes every other pressure on this list worse.
• Social inflation. Bigger verdicts and broader liability theories make it easier to argue an underwriting or claims decision was unreasonable. That argument is the core of an E&O claim.
• What you do versus what your policy covers. Advisory work, data handling, and claims support now fall outside the narrow wordings written for pure placement.
• Growth-pressure shortcuts. Under strain to justify valuations and prove capacity, operators over-promise on AI or under-price risk. Classic misrepresentation setup.
• Cyber and digital-process liability. When underwriting or claims run on automated workflows, plaintiffs argue system design is itself a professional service, and a flaw is negligence.
• Regulatory standard of care. As supervisors publish clearer rules on conduct, AI oversight, and complaint handling, plaintiffs lift that bar straight into negligence claims. Once the regulator writes a standard, the plaintiff's lawyer borrows it.

For MGAs and insurtechs the risk is sharpest. So much of the daily work now reads as professional judgment. Read your own "professional services" definition against the work your operation performs day to day. What to watch for: a definition built around "insurance placement and related services" that stops short of advisory work, data handling, claims support, or technology-enabled distribution. If the wording doesn't match the work, fix it before someone else finds the seam.

Source: LION Intelligence

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When a $27K claim becomes a $92 million verdict

Summary

Great Lakes Insurance SE is suing its own defense firm. The story behind that should hold every claims executive's attention.

On April 9, 2026, the carrier filed a negligence complaint against Tulsa-based Doerner, Saunders, Daniel & Anderson and its managing partner in the Northern District of Oklahoma. The underlying dispute started with a roughly $27,000 fire claim filed in 2019 by a property owner. Great Lakes denied it. The insured sued for bad faith in Cherokee County, and after a three-day trial the jury returned $65 million in actual damages and $27.4 million in punitive damages. More than $92 million total on a claim that started near $27,000.

Great Lakes settled before judgment was entered, then turned on its panel counsel.

The LION Lens

What happened — The complaint alleges opposing counsel ran a voir dire well beyond Oklahoma rules, addressing jurors by first name more than 200 times and steering the panel toward a maximum verdict. Defense counsel, according to the filing, made no objection (source: Insurance Business). The firm has not yet responded.

Why it matters — The alleged failures are about silence, not strategy. The court had barred any mention of punitive damages in phase one. Defense counsel, according to the filing, still did not object when opposing counsel urged the jury to "hit them where it hurts."

Practical implications — Great Lakes raised these points in post-trial motions. The response was predictable. The errors were not preserved. No objection had been made when it counted.

So what?

Low-dollar denials with bad optics are where bad-faith risk concentrates.

As a general rule, a small fire loss with a sympathetic insured and a plaintiff-friendly venue is the kind of file that warrants early escalation, not a flat denial that hands a plaintiff's lawyer the narrative. In the courtroom, as alleged in the complaint, the profile compounded. A sympathetic local plaintiff against a foreign carrier cast as the outsider, in front of a jury courted by name. You can map that venue risk in advance. After the verdict, the math gets worse. An award at this scale runs past any stated policy limit. That over-limit piece concentrates at the primary and low-excess layers of a carrier's own program. A $92 million verdict would exhaust most standalone primary E&O towers and push deep into excess. Rating agencies watch reserve adequacy when a peer takes a hit at this level.

The governance question is direct: does your organization set written performance standards for the outside firms that defend your claims? The objections never raised and the records never preserved cost more than the loud mistakes. To be precise on what this case is: the underlying suit was a bad-faith action against Great Lakes. This malpractice complaint alleges negligence by the lawyers who defended it. The carrier is not accused of professional failure here. Its defense counsel is.

The LION POV

Here's how we're advising clients:

• Escalate small claims with bad optics early. A $27,000 denial with a sympathetic insured in a tough venue deserves a second look. Do it before the file becomes a bad-faith exhibit.
• Set written trial standards for outside counsel before you assign the file. Cover objections at jury selection, enforcement of pretrial rulings, and keeping the record clean in real time. Brief them on the venue and the story they will face.
• Confirm where your own tower picks up an over-limit loss. Know where bad-faith defense costs sit in your program and which layers carry them.

Source: Insurance Business

Want to discuss how claims governance affects your bad-faith risk? Book a 1:1 call with our team for a confidential review.

Bad faith in 2026: a national map worth previewing

Summary

The $92 million Oklahoma verdict was not a one-off. It sits inside a national picture splitting along state lines.

We take it apart in our next Wednesday Intelligence. Florida, Georgia, and Louisiana have passed carrier-friendly reforms that narrow bad-faith risk. Massachusetts, New York, and Nevada are pushing the other way with plaintiff-side verdicts and new statutes. The counterpart to Oklahoma sits in Massachusetts. In December 2025, in Peerless Insurance Company v. Rooney, a Suffolk Superior Court justice ordered three Liberty Mutual entities to pay $90.9 million for unfair claim settlement practices. The state's mandatory doubling rule was applied to the full $45 million verdict, not the policy limit.

In a multiplier state, the limit stops being the ceiling.

So what?

Two nine-figure awards in one year, from opposite mechanics, confirm the same thing. Where a claim sits matters as much as what the policy says.

Oklahoma's number came from a jury. Massachusetts' came from a statute that caps almost nothing once liability is reasonably clear. AI in claims handling is the next front. In Estate of Lokken v. UnitedHealth Group (D. Minn., No. 23-CV-3514), a federal court ordered the insurer to open its denial algorithm to discovery after plaintiffs alleged no meaningful human review. Florida's HB 527, which would mandate human review of denials, passed the House unanimously this session before dying in the Senate. New York's S166 would create a private right to sue for bad faith in a state that has never had one. The governance question for every carrier and MGA using AI in claims: do you have a documented policy that would survive these disclosure and review requirements today? The deep dive maps the states where your programs carry the most risk. Read it before renewal.

Source: LION Specialty Wednesday Intelligence, forthcoming; Massachusetts Lawyers Weekly

The Bottom Line

One thread runs through all three.

Operators are buying E&O protection that may not match the work they actually do. A single mishandled claim can run past the policy limit and into capital. And the bad-faith map shows the legal system widening that over-limit risk state by state. Treating any one of these as a market cycle to wait out is the most expensive bet on the board.

In Case You Missed It!

This week's edition covers the cracks forming in the shield that protects insurance operators. Our Six-Line Silent AI Audit series covers the coverage gaps AI creates inside your own program. All three parts are live.

Part 1: D&O and EPLI, where "wrongful act" definitions assume a human decided. Part 2: E&O and Cyber, where the liability boundary for AI-assisted advice is unsettled and deepfake wire fraud falls between coverage sections. Part 3: the full audit framework across Fiduciary and Crime/FI Bond, plus the governance docs leading FI writers are asking for at renewal.

Read Part 1 here, or listen to the audio version here.

Read Part 2 here, or listen to the audio version here.

Read Part 3 here, or listen to the audio version here.

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Stay Covered Out There Y'all,

FLIP

Founder and Managing Partner LION Specialty

P.S. Next week's Wednesday Intelligence goes deep on the bad-faith map, state by state, including where your programs carry the most risk. Comment MAP and we'll make sure you get it the moment it drops.

P.S.S. Nothing in this briefing is legal advice. Court decisions, pending bills, and reform statutes referenced here are summarized for general intelligence, do not reflect the current or complete status of any proceeding, and are subject to change. Consult qualified counsel on any specific matter.