Tag Archives: attorneys

Breaking the Cycle of Litigation in WC

I recently shared an article discussing the fact that the workers’ compensation system is not functioning as designed, with some key data points that show just how badly the industry is missing the mark when it comes to litigation. In a nutshell, workers’ comp was created to reduce the need for litigation, and yet it has become a highly litigious market. This translates to enormous, unnecessary costs for companies while not benefiting the injured worker.

Before we get into addressing the problem, we need to determine how it became a problem to begin with. Why do workers feel the need to hire a lawyer? I engaged in a little informal research on the matter. I found a number of common trends in the reasons attorneys say they were hired to represent injured workers:

1. Insurance company denied claims.
2. Insurance company denied a treatment.
3. Injured worker was afraid he/she wasn’t going to get needs met (mostly referencing necessary care or financial impact).
4. Injured worker was afraid he/she would lose a job.
5. Injured worker wasn’t sure how to get what he/she needed.
6. Friend/coworker told the worker that he/she needed to get an attorney after being injured.
7. Lack of communication from carrier/employer/TPA.
8. Overbearing communication from carrier/employer/TPA.

The first two seem obvious. People rarely like to be told no — that is a trait we all develop early in life and tend to keep over the years. Beyond denials of claims when a case is righteous and defensible, there will be battles to be fought over compensability and reasonable, necessary care.

See also: The State of Workers’ Compensation  

The next three all have the common thread of fear. Reducing fear and anxiety should be a central goal of claims operations and employers. Effective communication is essential to eliminating these issues.

Reason #6 can best be mitigated by addressing the other reasons better and improving the overall brand of our industry.

That brings us to the last two. One says not enough hand-holding, and the other says excessive hand-holding. Although these seem contradictory, they are essentially the same thing; we aren’t engaging the individual how the person wants to be engaged. For example, as a former marine and athlete, I have had my share of injuries and know how to manage my care and recovery. Just stay out of my way, and I will be back on my feet faster than my doctor could predict. But, another person with a different life experience would be just the opposite. I don’t want you to call me all the time, but if you don’t reach out to the other person (and often) you have a problem. The combination of these points shows that a one-size-fits-all approach to engaging claimants can cause (expensive) problems.

We Need to Make Changes

I’d make the case that state legislatures need to be engaged; we were promised protection from litigation and ended up with a system that facilitates it instead. Unfortunately, there is not a quick fix, and we need to address the aspects within our control to stop the bleeding where we can.

Attorneys are not within our control, although we may wish they were. I don’t begrudge the attorneys — they are doing their job, and everyone has a right to do their jobs to the best of their abilities. But we are making their job easier by making simple and addressable mistakes.

Inserting lawyers into the claims process translates to thousands of dollars in unnecessary costs. We should know (or at least honestly believe) that injured workers don’t want to go the legal route unless they feel they have no other options. So now, what can we do about it? I would suggest we need to take action in three areas.

First, take steps to reduce the perceived need for litigation. This should include leveraging new capabilities in artificial intelligence (AI) that can assess risk of litigation as well as provide new insights into claimant sentiment. Using these types of signals to drive the way you engage injured workers will allow you to focus extra communication, hand-holding and empathy on the claims that need it without adding excessive claims handling costs to all your claims or “over communicating” when too much communication is bad.

Second, when the fight does occur, use intelligent processes for picking the right attorney. AI and business intelligence solutions can help identify not only the attorneys with the best overall results but also which is the right attorney for this instance. Benchmark your panel of attorneys in the same manner an outcomes-based network benchmarks physician performance as a first step, and then develop the nuanced approach to claimant-matching over time.

Third, develop more sophisticated “fight-or-flight” signals using predictive analytics so that you know what the likely costs/outcomes are if you cooperate, settle or draw a hard litigation line when the fight starts. Excessive litigation occurs when it’s easy and profitable to litigate, so the harder and less profitable we make it the fewer “excessive” cases we will see over time.

In summary, I refuse to believe injured workers are typically looking to score big with a vicious lawsuit directed at their employer or claims company. I am not saying it doesn’t happen, just that there is no way that that is the behavior driving the costs and the bad outcomes, and it certainly is not that common in research to date. Most people just want to be treated fairly and get better.

See also: Workers’ Comp: the Best of Both Worlds  

While I am not the first person to make this case, what is new are the technology options that unlock the capabilities to make a change. Most AI and machine learning models are still early in their sophistication and application, but the tools do exist to make more informed decisions and drive processes and engagements that can change the game. But first, we need to devote our resolve to tackle this issue head-on; we need to make the commitment to integrate and experiment with new approaches to how we address the underlying causes that are 100% within our control.

As first published in WorkCompWire.

The Two Must-Haves for Employment Practices Liability Insurance

If you own or manage an organization and have not experienced an employee claim, count yourself lucky—and know that the chances are very good that your luck will change.

Many employers purchase Employment Practices Liability Insurance (EPLI) because general business insurance policies exclude employment-related claims for issues such as discrimination, harassment and wrongful termination.  Many EPLI policies do not, however, cover commonly asserted claims such as wage and hour violations or statutory penalties. The issues are complicated enough that decisions on EPLI require the assistance of two experts: a knowledgeable and trusted insurance broker and an experienced employment defense attorney. The insurance broker will guide you through the various policy options available and provide a wealth of risk-management information.  The defense attorney will advise on the real-world impact a particular policy will have when an employment claim arises.

If you purchase EPLI, you should prepare for employment claims before they are even asserted, by following these steps:

  • Select Defense Counsel in Advance. If you already use trusted employment law counsel, your carrier may allow you to designate your chosen law firm at the time the policy is purchased or renewed.  Some policies allow the insured to select its own counsel without such pre-designation.  Asking the right questions of your broker and specifying at the outset the employment lawyer you want is the best way to ensure that you get the defense counsel of your choice.  
  • Train Staff on Claims Recognition. Train key personnel to recognize a “claim” as it is defined under the EPLI policy.  What constitutes a “claim” is generally defined broadly.  A “claim” may even include pre-lawsuit claims, such as a discrimination complaint filed at a governmental agency like the California Department of Fair Employment and Housing.  Even a “demand” letter from a threatening employee or lawyer may constitute a claim.  As policies change from year to year, the definition of a claim may also change.  Key personnel should know what to do when a potential claim is spotted, including the who, what and when of communicating with the insurance broker or carrier.
  • Develop Protocol for Receipt and Processing of Claims. It is a good idea to have a specific person designated to whom all “claims” are promptly forwarded. The protocol should also include things such as identifying the name of the employee who received the claim and the date, time and how the claim was received.  It is critical to ensure that a potentially covered claim is properly and quickly processed. Communication problems can arise inside organizations because finance and operations executives, who were involved in buying the EPLI policy, tend to be knowledgeable about the terms of the EPLI policy, while human resources personnel tend to be the first to know that a claim has been filed.
  • Be Thoughtful and Precise in “Tendering” Claims to the Carrier. Once a claim arises, carefully consider the requirements in the policy for tendering the claim.  This may involve discussions with legal counsel regarding the pros and cons of tendering a particular claim at all and will definitely include advice on how and what to communicate with the carrier. Careful consideration cannot result in much delay.  EPLI policies typically require very prompt communication of claims and potential claims.  Follow carefully the means and timing of “tendering,” i.e., providing written notice to the carrier, as stated in the policy.   A copy of the lawsuit, administrative charge or “demand” letter should accompany the tender.  Follow up to ensure that the carrier has received the claim and accepted it.

    As a general rule, attorneys' fees and costs incurred to defend a tendered claim may not “count” against the insured's retention (deductible) until the date of tender.   If you incur attorneys’ fees and costs before the claim is tendered to the carrier, your company will likely have to pay those fees plus the full amount of the retention.  Worse yet, if a claim is not tendered in the manner and time frame required by the policy, the claim may be denied.  

The great majority of employers in California should at least seriously consider the addition of an EPLI policy, but not just any policy will do.  Without the expert guidance of a knowledgeable broker and employment counsel, you might be shelling out premium dollars that do not effectively achieve your risk-management objectives.  Once you have a policy, the development of effective protocols for handling claims is essential.  Those protocols will ensure that claims are not denied and that they are positioned to be effectively defended.

Surviving the Loss of Your Home

I lost my home in the 1991 firestorm in Oakland, CA. With wildfires now destroying others’ homes in California, my heart goes out to the homeowners whose homes are damaged or destroyed by fire or other disasters, to the firefighters and to others who have risked and are risking their lives. I also feel for the communities that will experience the devastating aftermath.

While I am an attorney who specializes in handling insurance claims for policyholders, the loss of my home showed me the stresses and challenges of handling my claim with my insurer, as well as those facing many other Oakland firestorm survivors whom I assisted with their claims.

Those whose homes are damaged or destroyed will face many challenges in the coming days and months — temporary shelter, replacement of necessary items, disruption of their lives caused by having to relocate, and the repair and rebuilding of their lives and homes.  I would like to offer some professional as well as personal advice in the hope I can be of some assistance.

Likely, none of you have read your homeowners insurance policies previously.  I am embarrassed to say that I had not read mine prior to the Oakland firestorm, and I am, as they say, in the business.  Do not be surprised when you attempt to read your policies if you have difficulty understanding them, despite their claims of being written in “plain English” or “easy to read” format.  Even professionals do not agree on every policy interpretation, and no one is born with an innate understanding of insurance or how to pursue their personal insurance claim.

Your homeowners policies provide a few basic coverages for your home, other structures, additional living expenses, and personal property.  Initially, you will want to focus on obtaining an advance from your insurer to cover immediate necessities, including food and lodging.  Most insurers involved in a catastrophic loss will readily issue advances from your contents and additional living expense coverages, usually in the $5,000-$15,000 range.  In fact, many insurers will set up local catastrophic loss command centers to handle requests in your community.  The easiest way to communicate or locate your insurer is to contact your insurance agent or broker.

Additional living expense coverage covers your expenses when you are dislocated from your residence as a result of its being destroyed or rendered uninhabitable.  This coverage is usually limited by a dollar limit or a maximum time. Such coverage typically covers either your actual out-of-pocket expenses, such as increased meal costs, increased cost of commuting from a different location, cost of temporary residence, etc., or the reasonable rental value of your former residence.  Most insureds opt for the latter method of determining their additional expense coverage as it is simpler, less time consuming to document and usually yields a greater dollar recovery.

You will need to immediately replace certain essential items, such as toiletries and clothes.  Most insurers will give you an advance on your contents claim with no specific proof of loss other than proof that your home was damaged or destroyed.  As time progresses, you will be required to document your loss on an itemized basis.  Most of you will have replacement cost coverage, which means you will, upon proof of replacement, be entitled to the cost of replacing lost items up to the limits shown in your policy.  For items that you do not immediately replace, the insurer usually will pay you “actual cash” value for those items.

This means that the insurer will determine the replacement cost of the item and then depreciate it for use, age or obsolescence.  If you subsequently replace the item, you can then send the insurer a copy of the receipt and receive the difference between what you were paid by the insurer shortly after the loss and what you spent to replace it.

A frequently asked question is:  What is the replacement cost of an item that is no longer made?  You are entitled to replace such items, subject to your contents limits, with items of like kind and quality.

Eventually, you will be dealing with the cost of repairing or replacing your home.  The first item you will likely have to deal with is removal of debris.  Almost all policies provide coverage for debris removal as either a percentage of the limits for the house or in addition to the limits for replacement of your house.

Next, the insurer and you will be working on determining the cost of rebuilding your former home.  Many of you will have a form of replacement cost coverage that will give you the replacement cost of your home up to some percentage in excess of your stated policy limits.  Such an increase in coverage is typically 125% of stated limits.  Additionally, most of you will have coverage for other structures, such as detached garages, decks and fences, with an additional coverage limit, usually referred to as “other structures” coverage.  Many of you will also have coverage for code upgrades, although such coverages will also have limits.  You will likely have coverage for landscaping.  Even if you had native or natural landscaping, you are entitled to have it replaced subject to the terms of your policy.

An issue that many of us dealt with in the Oakland firestorm is that policies that provide replacement cost coverage usually require you to replace the structure before you are fully compensated, although you are provided some monies on an actual cash value basis in the interim. This posed a significant challenge for those who were less affluent, because they were financially incapable of fronting the monies necessary to complete their homes.  After some negotiations and with considerable help from the then Insurance Commissioner, now U.S. Congressman, John Garamendi, the insurers agreed to either finance reconstruction costs as building progressed or advanced funds.  Most insurers will reach similar agreements in response to the current situation.

Some of you may not wish to rebuild, but may wish to relocate.  There are many considerations that go into such a decision, and it can only be made by you in the best interests of you and your family.  At the time of the Oakland firestorm, most insurance policies required that you rebuild your homes at their current sites.  However, most insurers waived this requirement, and now most policies no longer have these requirements.  If you wish to relocate, let your insurer know as soon as possible.  Even if the policy requires building on your lot, most insurers will waive that requirement as you will be in temporary quarters for a shorter time, which decreases the amount they have to pay in additional living expenses.  Most insurers are ecstatic if the insured wishes to relocate, as it decreases the amount they ultimately have to pay.  If you choose such an option, the insurer still pays you the cost of rebuilding/replacing your former home.  You will also retain title to your lot and can sell it later.

I was asked by many homeowners in the Oakland firestorm and in subsequent disasters whether they need to hire an attorney.  This is my response:  1) most homeowners insurance claims are resolved over a period of time through negotiation and with assistance from claims adjusters and contractors; and 2) most insurers are helpful and sympathetic to their insureds and will make every effort to guide insureds through the process.  However, for most homeowners, their home and its contents are their largest and most important investments.  Consequently, it is advisable to consult with an attorney who specializes in handling insurance matters to make sure that you avail yourself of all benefits you are entitled to under your policy.  Additionally, if you feel at any time you are not being fairly treated by your insurer you should either consult with an insurance coverage attorney or seek assistance from your state's Department of Insurance.

When the Oakland firestorm destroyed my home, I had two daughters: Katy, then 6, and Noelle, who was just shy of her 3rd birthday.  My now-former husband and I were lawyers, and, heck, we were insurance coverage lawyers.  We knew we could handle our claim and the situation.  We relocated our family within a week into temporary housing and shortly thereafter went into contract to purchase a new home.  We had no idea what lay ahead.

Replacing even the bare necessities was a huge project.  We were shopping both days of every weekend and almost every evening.  I wanted to keep my oldest in her school and my youngest in her preschool, so I drove a long commute from our temporary housing every morning and evening.  When I wasn’t driving, I was working on the claim or shopping to replace basic necessities.  My youngest cried every night and begged to go home.  Even though we knew how to handle an insurance claim, it was physically and emotionally exhausting.

About a month after the fire, my older daughter came home with a flyer inviting all firestorm survivors to a special day at Marine World hosted by the Oakland, Berkeley and Piedmont fire departments.  I indicated that we probably wouldn’t be able to go because we needed to go shopping for “stuff” for our soon-to-be new home.  Within an hour, Katy had organized Noelle into a joint protest.  They let their father and me have it.  They told us we had become the “no fun” family.  They were tired of not doing anything.  They missed their friends, who now lived away from them, and they missed us.

They were right!  From that day forward, we made sure that we had family day every weekend.  We went to the event at Marine World and reconnected with other relocated friends.  Katy and Noelle got to play with their friends.  We learned to be nicer to each other.  We also learned that not everything had to get done on a certain schedule, and sometimes it was better if it didn’t get done at all.  We learned that we had gotten the most important things out of the fire: ourselves.  We also learned that only those things that had memories attached were truly important, for anything else could be replaced.  None of us has ever placed the same importance on possessions.  For a long time, I resisted replacing many items, as I simply did not want as many things, and frankly still don’t.  Most importantly, we learned the importance of family and community and that we could survive a major loss in our lives and be the better for it.