Government Slip-and Fall Claim Illustrates Double Standard of Tort Responsibility

Fairfax County, VA – coincidentally the area that I call home – is up in arms and crying “Ouch!” from the sting of the tort system. On January 31, 2005, Richard Thaxton was walking into court after a weekend snowstorm. Though county maintenance officials had just shoveled and salted the walkways.

But they missed a spot.

Thaxton – who had just had rotator cuff surgery two months earlier – slipped, fell and reinjured himself. So he did what any red-blooded American citizen would do. He sued the County government for $300,000, plus attorneys fees.

By a 6-4 vote, the Fairfax County Board of Supervisors decided to reject a proposed $100,000 settlement recommended by an independent mediator. The County was indignant that it could be found liable for having missed a spot and asserted the defense of sovereign immunity.

I must confess that such cases leave me conflicted. On the one hand, I think that the claim is ridiculous and that the County exercised reasonable care. In the event of a large settlement or award, I – as a Fairfax County taxpayer – stand to fund such a dubious settlement.

On the other hand, ever day businesses are held to these same standards and no sense of government outrage or injustice is offended. Governments always seems indignant at having to drink from the same bitter cup that they have prepared for the rest of us to take.

Legit slip and fall claim or snow job?

Reserving Coverage Rights does NOT Equal "Bad Claim Service"!

"Quinley" is an Irish name and my descendants doubtlessly hailed from Hibernia. My Irish acted up as I scanned the results of a recent Greenwich Associates study on claim service. Perhaps I was the only reader doing a double-take recently, reading the Business Insurance article of 12/10/07, “Claims Service Quality Varies Widely: Study.” On one level, this would seem to be a dog-bites-man story. The fact that there is variation amongst claim service quality by carrier is no more surprising than, say, underwriting expertise varies by company or investment management savvy, etc. Tell me something I don’t know. This is akin to headlines reading,

"Gravity Causes Objects to Fall to the Ground"
"Stocks Vary on Return and Yields"
"Britney Enters Rehab Again"

Thank you for delivering this hard-hitting news!!

But that is not what got my Irish up.

The article quotes an anonymous construction risk manager as pointing to one piece of evidence for lamentable claim quality the fact that commercial insurers “are quick to issue reservation of rights letters on some claims.”

Say what? The innuendo here is that such letters are invariably groundless, a claim which is unsupported at best and ridiculous at worst. Sending a reservation of rights letter is not tantamount to poor claim service. In many complex construction losses, legit coverage issues abound. Insurers are justified in notifying policyholders regarding the existence of coverage questions. Courts stand ready to “nail” insurers on waiver and estoppel if they do not meticulously reserve rights. Further, many states have exacting time guidelines within which insurers must reserve rights, lest they be estopped. If they fail to reserve promptly, they may be forced to cover gray area – or even uncovered – claims. Ultimately, the costs of such claims are passed on to the insured.

Sending a reservation of rights letter is no more bad claim service than submitting a gray area claim makes one a “bad” policyholder. Doubtlessly there are instances of specious reservation of rights letters. There is also no doubt instances of farfetched coverage tenders by insureds who are “fishing” for coverage that they knew they never really had or paid for. There are doubtlessly instances of sloppy brokering which leave risk managers exposed to perils which they thought were insured.

The reflexive notion that reserving coverage rights quickly signals “bad claim service” strikes me as ridiculous. It does underscore, however, that insurers could do a better job in making sure that such letters do not rub policyholders the wrong way. For example, claim reps could give the insureds an advance heads-up by phone call to discuss and explain what they were doing and why. They could do the same with the broker. They could emphasize the time requirements they have which force them to reserve rights in the face of incomplete information. They could make the letters’ tone more conversational and less legalistic. These are ways to soften but not emasculate the import of reservation of rights letters.

If foregoing the exploration of potentially valid coverage defenses is the price of good claim service, I submit that price is too high. Claim reps should look at other ways to “sell” the reservation of rights so that insureds will not reflexively assume it represents an effort to evade coverage.

Profiles in Professionalism: Interview with a Work Comp Claims Guru

As a periodic feature, the Claims Coach this month conducts an interview with w claims and risk management guru James Moore of J&L Risk Management of Raleigh, NC. Moore is the E.F. Hutton of workers compensation – when he talks, people listen! His website and blog are packed with insights and strategies for taming your claim costs in the realm of workers compensation. You can access these at http://www.cutcompcosts.com and his blog at http://www.cutcompcosts.com/www/blog.html. Let’s hear what Jim has to say on claim audits, workers compensation claim costs and the state of the claims profession.

Quinley: In doing claim audits, are there recurring issues or problems you see with claim-handling?

Jim Moore (JM): There are two that we see the most which heavily affect the outcome of a workers compensation file. Those two are Immediate First Contact and Poor Communications. Often we see where an adjuster writes the injured employee, employer, and treating physician a form letter and then documents that there was immediate three point contact. Talking with the employer, doctor, and employee about their workers compensation claim ASAP is a great way to start the proper communications in the file.

The other related area is adjusters working the file, but not making any contacts with all of the or at least some of the parties involved. Good communication is the main job of the adjuster. If this is not done as shown by a trend by an adjuster or by a TPA/Carrier, we become very concerned.

How should claims people prepare for an audit before undergoing one?

JM: Quit stressing when they hear their files are being audited. Some file audit firms consider a very nervous adjuster as a “red flag.” There is nothing that can be done to do a “quick-fix” on the files. The one thing that I recommend is to be friendly and smile at the initial meeting. Do not EVER put the auditor on the defensive if they ask you a question. Auditors that are on the defensive tend to be more subjective in their file appraisals.

What “red flags” do you look for when doing a claim audit?

JM: We do heavy statistical analysis on the 33 areas that we look at for trends. If there is a trend by adjuster or insurance carrier, then we red flag that one area. This happens very rarely except in one area. Over-reserving or under-reserving the files is a red flag that we notice very quickly. We do stat analysis to confirm our findings. The numbers speak the loudest.

Over the years, do you sense any differences in skill among the claims profession in general? Is claim service getting better or worse?

JM: Claims adjusting has followed a definite trend. It is how the industry or a certain carrier decides on the file loads for adjusters. An overloaded adjuster cannot do the job that the insureds are relying on them to do on their files. When the industry/carrier trend is to lighten loads, the file handling improves proportionally.

For a firm looking to tame its workers compensation claim costs, what is the ONE thing they can do to deliver the greatest return on investment?

JM: Time Management training pays big dividends. Stress management seminars seem to help. The old “claims roundtable” is also a great meeting to have for adjusters to discuss difficult files. We can tell the difference on file reviews between trained and untrained adjusting staffs. The one word is training.

How do workers compensation claims people avoid getting burned out?

(JM) They must remember that they ARE NOT claims adjusters. That is their job. In other words, leave it all at work. That is the secret to surviving in claims. Forget the files when you walk out the door every evening.

In a blind taste test, can you tell much of a quality difference between TPA claim services and insurer/staff claim services? Comment, please.

JM: Yes, when we compare files where a carrier also functions as a TPA. Flat-fee files seem to receive less attention.

If there is indeed a “brain drain” of seasoned claims people retiring, how can companies counteract that trend to salvage acceptable levels of expertise?

JM: There are carriers that do a great job of training incoming recruits. They also weed-out recruits that will not make it in the adjusting world. Liberty Mutual has an outstanding training program. Training and screening will fight the brain drain.

What are employers’ biggest complaints about workers compensation claim service?

JM: It is poor communications. They often do not know what is happening on their files. I always tell employers to request online claim access as they can follow the files without having to disturb the very busy adjusters.

What is the ideal caseload for an adjuster handling lost-time workers compensation files?

JM: Oh, this is a loaded question. It depends on the state, but I would say 100 for a claims trainee, 150 – 175 for an experienced adjuster, and 200-225 for a Senior Adjuster. In my career, I have had to handle 250 files in 7 jurisdictions/states. I juggled it very well until I burned out from fighting fires.