Tag Archives: general liability

The Need to Educate on General Liability

In a perfect world, insurance buyers would understand their products just as well their insurance agents. This would save a few headaches for everyone involved, and it would probably streamline the process on all ends. However, the reality is that most business owners don’t understand the extent of the insurance products they purchase. Then again, no one should expect them to.

Insurance products are highly complex vehicles. Few business owners have the time to invest in becoming experts in the field or in the products they purchase. Even the best insurance agents spend years learning about the products they sell, many of which change frequently as the economy changes.

That being said, no business owner should simply buy a product without understanding the most important aspects regarding what it does and does not cover. In truth, a highly skilled insurance agent should never let them, either. Here’s where there can be a gap between how much insurance a business purchases and how much it actually needs, showing why educating business owners on the extent of their insurance really matters.

False Perceptions of General Liability Are Common

Many customers tend to believe their insurance covers more than it actually does. This situation could probably be applied to any insurance product, but general liability policies are often the most frequently misunderstood by buyers.

See also: What to Expect on Management Liability  

To put it simply, far too many businesses are purchasing less insurance coverage than they should. In a sense, many are taking a huge gamble, believing their risk exposure is less than what it actually is or that their preventative measures, such as employee training, can shield them from those risks. While risk prevention definitely helps, it’s ultimately far from the bulletproof shield many companies think it is. Most companies do it to help themselves get a better rate on their insurance, while maintaining the false perception that their general liability coverage protects them against a multitude of risks not actually defined in the policy.

As a company scales in size, so, too, does its likelihood of experiencing losses related to cyber liability, employee fraud, fiduciary liability, directors and officers (D&O) or workplace violence. Yet many companies seem not to realize their exposure.

This would, of course, be less troubling if companies were purchasing policies that actually covered those kind of risks. Overwhelmingly, they’re choosing to avoid those insurance products altogether. According to Chubb’s survey on private company risk, non-purchasers believed their general liability policy covered:

  • Directors and Officers Liability (65%)
  • Employment Practices Liability (60%)
  • Errors & Omissions Liability (52%)
  • Fiduciary Liability (51%)
  • Cyber Liability (39%)

Businesses aren’t failing to purchase enough liability coverage because they’re unnecessary risk takers. Most, it seems, simply have false perceptions about what their general liability will and won’t do.

A small business may think its general liability policy covers a server hack. Yet, lo and behold, when a server gets hacked and the ensuing liability claims start pouring in, that small business may quickly find itself underwater. In fact, the U.S National Cyber Security Alliance found that the 60% of small companies went out of business within six months of a cyber attack. This seems extreme, but the average cost for a small business to clean up after a hack is $690,000, according to the Ponemon Institute. How many small- or medium-sized businesses can easily absorb that kind of cost without insurance coverage? Not many.

Similarly, mid-sized companies may believe their general liability policy covers directors and officers, leaving the company with unnecessary risk exposures should an incident occur. If, for example, a company begins operating internationally and fails to effectively meet one of the federal regulations governing its industry, a general liability policy won’t help protect the company from impending lawsuits. Any directors held personally responsible may find their own personal assets at risk. Given what we learned from the Chubb survey, it’s quite likely that most directors may think they’re fine with the minimal coverage they receive from a general liability policy. A costly mistake, to be sure.

Who’s to Blame?

We’ll leave the finger pointing aside for now and settle on this: The customer is always right, but he’s not always well-informed. As every insurance agent knows, the amount of time it takes to fully understand an insurance product can be extensive. Business owners, in general, lack the time to invest in fully understanding the products they purchase. It should come as no surprise, then, that misunderstandings arise over what general liability policies actually cover and what risks they simply won’t mitigate.

See also: ISO Form Changes Commercial General Liability  

Insurance agents have a responsibility to use their knowledge to help business owners better understand and sift through those misconceptions. More needs to be done to help decision-makers understand what they are and are not getting from their insurance.

Helping businesses better understand the ins and outs of their general liability policy is a win-win all around.

Has an International Cyber War Begun?

Cyber attacks were once on the periphery of American business consciousness. That mindset changed over the past two years. A series of devastating events, including the 2014 cyber attack against Sony, catapulted cyber liability concerns from an IT department issue to a major priority for boardrooms across America. As U.S. government officials concluded that North Korea was behind the attack, many C-suite executives suddenly found themselves asking questions. Is this the start of a cyber war? Could we be the next victim? If we are, how will it affect our operations and our bottom line? Do our insurance policies cover any of these costs?

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Today, many insurance buyers look to their cyber insurance policies to fill coverage gaps that often exist in other policies. For example, a property policy may respond to physical damage from a named peril, but it will likely exclude loss for non-tangible assets as a result of a cyber attack. Similarly, a commercial general liability policy will likely provide liability coverage for causing bodily injury because of negligence but exclude coverage for liability because of a failure to secure sensitive data from hackers.

Many policyholders may be unaware that some, though not all, of these cyber policies contain specific terrorism and war exclusions. As a result, gaps in cyber insurance coverage can exist in cases like the Sony breach, where government agencies, like the FBI, conclude that a foreign government or terrorist organization is responsible for the attack.

Is a Cyber Attack “Terrorism” or “War”?

Immediately following the Sony attack, President Obama referred to it by saying, “I don’t think it was an act of war . . . but cyber vandalism.” Then, on April 1, 2015, President Obama signed the Executive Order on Cybersecurity with the goal of protecting the private sector against hackers and thereby bolstering national security. The order seeks to identify and punish individuals behind attacks, but it could also lead some to categorize an apparent hacking event or act of cyber terrorism as an “act of war.”

Changes in government definitions trickle down into coverage disputes because many policies that exclude or include “war,” “terrorism” or “cyber terrorism” either fail to define those terms or define them by referring to standard government definitions.

Government Definitions of Terrorism, Cyber Terrorism and War

THE TERRORISM RISK INSURANCE ACT (TRIA)

“Act of terrorism” is defined as any act certified by the secretary of the Treasury in concurrence with the secretary of State and the attorney general of the U.S. to be:

» an act of terrorism

» a violent act or an act that is dangerous to human life, property or infrastructure

» an act resulting in damage within the United States or Outside (on a U.S.-flagged vessel, aircraft or U.S. mission)

» an act committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population, U.S. policy or the U.S. government.

The secretary of the Treasury may not delegate his certification authority, and his decision to certify an act or not is not subject to judicial review.

DEPARTMENT OF DEFENSE (DOD)

The DOD defines “terrorism” as “the unlawful use of violence or threat of violence, often motivated by religious, political or other ideological beliefs, to instill fear and coerce governments or societies in pursuit of goals that are usually political.” The term “act of war” is understood to mean “a use of force [that may] invoke a state’s inherent right to lawful self-defense.”

DEPARTMENT OF JUSTICE (DOJ)/FEDERAL BUREAU OF INVESTIGATION (FBI)

The FBI defines “cyber terrorism” as “the premeditated, politically motivated attack against information, computer systems, computer programs and data [that] results in violence against non-combatant targets by subnational groups or clandestine agents.”

DEPARTMENT OF HOMELAND SECURITY (DHS)

The National Infrastructure Protection Center (NIPC), (formally a branch of DHS), defines “cyber terrorism” as “a criminal act perpetrated through computers resulting in violence, death and/or destruction and creating terror for the purpose of coercing a government to change its policies.”

Cyber Terrorism and the ‘Act of War’ Exclusion

Cyber policies are relatively new and manuscript products; as such, the wording varies significantly. Many policies contain a standard exclusion for “war, invasion, acts of foreign enemies, hostilities (whether war is declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, confiscation, nationalization, requisition, or destruction of, or damage to, property by or under the order of any government, public or local authority…” An attack by the Taliban, for example, would probably fit within the exclusion as an act sponsored by a “public or local authority.”

Traditionally, war exclusions were relatively narrow; they required an actual war or, at the very least, “warlike operations”; “for there to be a ‘war,’ a sovereign or quasi-sovereign must engage in hostilities.” Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1005 (2d Cir. 1974) (finding that a Jordanian terrorist group that hijacked a plane was not a de facto government for the purposes of applying the war exception).

However, the events of Sept. 11, 2001, changed the way certain events and groups were perceived and classified, ultimately leading many to label the 2014 cyber attack on Sony an “act of war.”

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Litigation surrounding the Sept. 11 attacks led directly to an expanded view of the war exclusion. For one thing, the Second Circuit Court of Appeals ruled that the attacks were an “act of war.” In re Sept. 11 Litig., 931 F. Supp. 2d 496, 512 (S.D.N.Y. 2013), an owner of a building near the site of the World Trade Center attacks sought to recover cleanup and abatement expenses for removing pulverized dust that infiltrated into the owner’s building after the collapse of the Twin Towers. He sued under the Comprehensive Environmental Response, Compensation, and Liability Act [CERCLA], which allows strict liability claims in pollution cases, but the court applied CERCLA’s “act of war” exception to strict liability.

In concluding that the attacks were an act of war, the court commented that “Al Qaeda’s leadership declared war on the United States, and organized a sophisticated, coordinated, and well-financed set of attacks intended to bring down the leading commercial and political institutions of the United States,” id. at 509, and that “as we learned in the twentieth century, and as has been true throughout history, war can take on a formal structure of armies in contrasting uniforms confronting each other on battlefields, and war can persist for years, fought by irregular, insurgent forces and capable of causing extraordinary damage,” id. at 511.

This expansion of the legal definition of “act of war” to include acts by “irregular, insurgent forces and capable of causing extraordinary damage” could lead to attacks by hacktivist groups or foreign intelligence services being considered acts of war and therefore excluded from cyber policies.

Cyber Insurance and TRIA

The Terrorism Risk Insurance Act (TRIA) is a government program designed to provide a backstop for reinsurers in the event of large terrorism-related losses (more than $100 million). There is debate over whether TRIA applies to cyber policies at all. TRIA applies to commercial property and casualty insurance coverage, but some cyber policies are written as another line of coverage, such as professional liability, which is not included in TRIA.

Even assuming that TRIA would apply to cyber insurance, for TRIA coverage to be in effect, (1) there must be losses, resulting from property damage, exceeding $100 million; and (2) they must be caused by a certified terrorism event:

(1) Property Damage: For TRIA to apply, physical property damage must occur, and what constitutes “physical damage” in the context of a cyber attack remains an open question. What we do know is that TRIA will probably not cover business interruption or reductions in business income absent some physical loss or property damage. Many cyber attacks do not involve any physical damage, which would exclude TRIA coverage.

(2) A Certified Terrorism Event: For TRIA to apply to any event, the event would need to be certified as an act of terrorism. This onerous and political certification process requires the secretary of the Treasury, secretary of State and attorney general to agree that an incident was an “act of terrorism.” Many political and economic issues factor into certifying a terrorism event, which can lead to counterintuitive results. For instance, as of the date of this publication, the April 2013 Boston Marathon bombing has not been certified as a terrorist act.

Conclusion

To ensure coverage for cyber terrorism and cyber warfare, buyers of cyber insurance will need to seek out a cyber risk insurance policy that explicitly includes this coverage in the broadest terms possible. As more insurance carriers enter the cyber insurance market, one must be wary that policy terms will vary from one policy form to the next, and some will have coverage terms superior to others.

The Dangers Lurking for Health Insurers

Heathcare is changing, creating opportunities but also dangers. Here is where healthcare is changing and why you should care in the insurance industry.

Providers. The physician you once saw and had a relationship with is now maybe a physician assistant or a nurse practitioner. Healthcare has turned care over to “mid-levels” and concentrated physician time on revenue-intense practice like surgeries or high relative-value-unit (RVU) patients such as elderly, as a reaction to the pressure on revenue and proliferation of data, The coding needs to be high for a patient to get physican attention, and the low coders, the healthy, are attended by mid-levels.

A mid-level is paid only a fraction of a physician. Makes sense? Expect care to reflect the nuance of matching. The result will be variation in diagnoses in health benefit insurance and workers’ compensation.

Isn’t there better data now? Yes, but who has time as a caregiver to be giving it thought? The ACA has driven more people to buy insurance, but that means less time per office interaction. Hospitals have bought physician practices, which now face new effectiveness expectations such as referral level and relative value unit per caregiver.

Caregivers are under enormous pressure to produce at your expense. Who can question “do no harm”?

Insurance industry. If you are a medical malpractice insurer, how does higher-deductible health insurance affect you? How does higher premium for health insurance mean you are at higher risk in offering medical malpractice? Can data be working against you?

The onus of care is now on the patient, and the patient is relying on engagement and education from anywhere it can be found. Google and the Mayo Clinic have teamed up to help by presenting search results verified by suitable medical communities, but the patient is on her own under the direction of a healthcare practice that is inundated with new patients and lots of data she can’t get to. And don’t forget that the attention is now being guided away from your physician. The standard of care has not changed, but the frequency of visits has lowered, and the time for every visit has decreased. Less care, too much data, too much patient expense and the same expectations of medical care. Not a picture of profit in medical malpractice. Maybe time to raise the price?

Workers’ compensation will get hit with increase in frequency and severity as care is slid to less dependable providers. You get what you pay for. One miss is worth a thousand hits in health. Providers are seeing patients too briefly to be always trusted, and the data…the providers are not even looking at the data. They are too busy plugging in data to appropriately spend effort on what it means.

General liability is a scarier risk as more patients mean more chaos and more visitors to the facilities. Who is watching security when the waiting room is packed up? Who is shoveling the lot? By the way, a patient fall is either medical malp-practice or general liability. Forget the $1,200 annual GL premium. Think $2,000.

Cyber liability is a huge concern as hackers get more sophisticated and the stakes in stolen health profile skyrocket.

Insurers can be venture capital. VC has figured out that there is a ton of money in health, but do they know much about health and what it does for insurers? Aetna’s CarePass was a great idea that needs to go on. Insurers should get on board with funding innovation. The VC money is slow. Technology is a VC specialty, yet health desperately needs people in play who know health. Physicians generally are not greatly interested in innovation. A tremendous opportunity is here for insurance companies to innovate with technology. Silicon Valley and insurance could team up and solve lots of issues. Now that it Google is out there, it is a great innovator in insurance. The opportunity is to bridge technology and insurance acumen. But VCs like to invest in people they know, like technology folks, so a gap indeed exists. Just saying.

Patients. High deductibles and high premiums for health insurance, combined with busy caregiving and new technology to grasp, mean the patient has a place at the healthcare table, finally, but no one to help much. It is up to the patient to take care of the patient. And your caregiver is very busy now that everyone has some kind of insurance. What a time to be finally given a place at the table.

How long of a visit does a patient get with his provider? Is it enough to rightly ascertain what is going on with a patient? Is surgery really the solution? Does chiropractic seem all that bad, Mr. Insurer? Does the caregiver get managed by how many referrals it proffers? Does the patient need to call the caregiver every time there is a stuffy head? Waiting rooms are filled, and time with the caregiver is down. Having a place at the table should mean more.

Innovators. Lots of techies are going after health care. Do they know healthcare? Not as much as you would hope. The right approach is to find innovators who get insurance and health and then parse technology. Not the other way around. Innovators look for faster capital and more knowledgeable partnership.

Make the data personalized and simple, as even caregivers cannot find time to analyze data. Health has a consumer face today, and lots of people looking for care guidance. The consumers want it simple and mobile. Anybody think insurance could be an available partnership candidate?

Healthcare vertical recombination is a major opportunity in insurance. Are you ready to lead?

New AMA Classification Of Obesity: How It Affects Workers’ Compensation And Mandatory Reporting

On June 16, 2013, the American Medical Association voted to declare obesity a disease rather than a comorbidity factor. This change in classification will affect 78 million American Adults and 12 million children. The new status for obesity means that this is now considered a medical condition that requires treatment. In fact, a recent Duke University / RTI International / Centers for Disease Control and Prevention study estimates 42 percent of U.S. adults will become obese by 2030.

According to the Medical Dictionary, obesity has been defined as a weight at least 20% above the weight corresponding to the lowest death rate for individuals of a specific height, gender, and age (ideal weight). Twenty to forty percent over ideal weight is considered mildly obese; 40-100% over ideal weight is considered moderately obese; and 100% over ideal weight is considered severely, or morbidly, obese. More recent guidelines for obesity use a measurement called BMI (body mass index) which is the individual's weight divided by their height squared times 703. BMI over 30 is considered obese.

The World Health Organization further classifies BMIs of 30.00 or higher into one of three classes of obesity:

  • Obese class I = 30.00 to 34.99
  • Obese class II = 35.00 to 39.99
  • Obese class III = 40.00 or higher

People in obese class III are considered morbidly obese. According to a 2012 Gallup Poll, 3.6% of Americans were morbidly obese in 2012.

The decision to reclassify obesity gives doctors a greater obligation to discuss with patients their weight problem and how it's affecting their health while enabling them to get reimbursed to do so.

According to the Duke University study, obesity increases the healing times of fractures, strains and sprains, and complicates surgery. According to another Duke University study that looked at the records for work-related injuries:

  • Obese workers filed twice as many comp claims.
  • Obese workers had seven times higher medical costs.
  • Obese workers lost 13 times more days of work.
  • Body parts most prone to injury for obese individuals included lower extremities, wrists or hands, and the back. Most common injuries were slips and falls, and lifting.

The U.S. Department of Health and Human Services said the costs to U.S. businesses related to obesity exceed $13 billion each year.

Furthermore, a 2011 Gallup survey found that obese employees account for a disproportionately high number of missed workdays. Also earlier National Council on Compensation Insurance (NCCI) research of workers' compensation claims found that claimants with a comorbidity code indicating obesity experience medical costs that are a multiple of what is observed for comparable non-obese claimants. The NCCI study demonstrated that claimants with a comorbidity factor indicating obesity had five times longer indemnity duration than claimants that were not identified as obese.

Prior to June 16, 2013, the ICD code for comorbidity factors for obesity in workers' was ICD-9 code 278. This is related to obesity-related medical complications, as opposed to the condition of obesity. Now the new ICD codes will indicate a disease, or condition of obesity which needs to be medically addressed. How will this affect work-related injuries?

Instead of obesity being a comorbitity issue, it can now become a secondary claim. If injured workers gain weight due to medications they are placed on as a result of their work-related injury or if an injured worker gains weight since they cannot exercise or keep fit because of their work-related injury and their BMI exceeds 30, they are considered obese and are eligible for medical industrially related treatment. In fact, the American Disability Act Amendment of 2008 allows for a broader scope of protection and the classification of obesity as a disease means that an employer needs to be cognizant that if someone has been treated for this disease for over 6 months then they would be considered protected under the American Disability Act Amendment.

Consider yet another factor: with the advent of Mandatory Reporting (January 1, 2011) by CMS that is triggered by the diagnosis (diagnosis code), the new medical condition of obesity will further make the responsible party liable for this condition and all related conditions for work-related injuries and General Liability claims with no statute of limitations. It is vital to understand that, as of January 1, 2011, Medicare has mandated all work-related and general liability injuries be reported to CMS in an electronic format. This means that CMS has the mechanism to look back and identify work comp related medical care payments made by Medicare. This is a retroactive statute and ultimately, it will be the employer and/or insurance carrier that will be held accountable.

The carrier or employer could pay the future medical cost twice — once to the claimant at settlement and later when Medicare seeks reimbursement of the medical care they paid on behalf of the claimant. This is outside the MSA criteria. The cost of this plus the impact of the workers' compensation costs as well as ADAA issues for reclassification of obesity for an employer and carrier are incalculable.

The solution is baseline testing so that only claims that arise out of the course and scope of employment (AOECOE) are accepted. If a work-related claim is not AOECOE and can be proved by objective medical evidence such as a pre- and post-assessment and there is no change from the baseline, then not only is there no workers' compensation claim, there is no OSHA-recordable claim, and no mandatory reporting issue.

A proven example of a baseline test for musculoskeletal disorders (MSD) cases is the EFA-STM program. EFA-STM Program begins by providing baseline injury testing for existing employees and new hires. The data is only interpreted when and if there is a soft tissue claim. After a claim, the injured worker is required to undergo the post-loss testing. The subsequent comparison objectively demonstrates whether or not an acute injury exists. If there is a change from the baseline site specific treatment, recommendations are made for the AOECOE condition ensuring that the injured worker receives the best care possible.

Baseline programs such as the EFA-STM ensure that the employee and employer are protected and take the sting out of the new classification by the AMA for obesity.

Don't Get Washed Away By The Medicare Set-Aside

A storm has been brewing since requirements for set asides were established in order to protect Medicare from future medical expenses from work comp and general liability claims. With the mandatory requirement that all work comp and general liability claims be reported in electronic format, CMS has the mechanism to look back and identify if they have ever made any work comp-related medical payments. Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 adds new mandatory reporting requirements for group health plan (GHP) arrangements and for Liability Insurance (including Self-Insurance), No-Fault Insurance, and Workers' Compensation. Failure to comply will subject any company to a fine of $1,000 per day and “double damages.”

While this practice has been required for many years in workers' compensation, the new mandatory reporting application to civil matters has dramatic implications. It should be noted that Medicare's status as a secondary payer under 42 U.S.C. § 1395y (b) creates the right to reimbursement, which has the potential to simultaneously impede settlement and impose a possible risk of future liability against all parties.

In the 1980s, Congress amended the Social Security Act to include the Medicare Secondary Payer Act (“MSP”), which effectively enacted Medicare liens. In 2003, the Government clarified its position that self-insured entities were also included in the Medicare Secondary Payer Act in passing the Medicare Act of 2003. The 2003 revisions altered the Medicare Secondary Payer Act to expressly include self-insured entities as “responsible” parties obligated to reimburse Medicare.

Prior to the Act, Medicare did not have an efficient mechanism to identify or evaluate instances where Medicare's liability should have been secondary to the “responsible” party (or it's insurance carrier), and could only recoup payment from insurance plans to the extent that payment had been made or could “reasonably be expected to be made promptly.”

The 2003 amendments to the MMA, found in Title III, were specifically enacted to overturn court decisions that limited the effectiveness of the Medicare Secondary Payer Act private cause of action. The amendments made it easier for injured Medicare recipients to bring these private actions on Medicare's behalf against an expanded class of entities and individuals with insurance, and they clarified when such entities and individuals must pay the Medicare beneficiary's medical expenses. The Amendments state:

All businesses, trades, and professions are deemed to have insurance, regardless of whether they carry their own risk. Any judgment or payment — including a settlement — conditioned on the recipient's compromise, waiver, or release of claims against the person or entity that commits the wrongful act (whether or not there is a determination or admission of liability) demonstrates a plan's responsibility to reimburse Medicare.

This legislation thereby expanded the possible defendants for the private cause of action to include any person or entity (including a business, trade, or profession without insurance), the entity's insurance company, and the plaintiff's self-insured employer or the third-party administrator. With these amendments it is now crystal clear that Medicare's right of reimbursement applies to almost all settlements in which Medicare payments have been made on a plaintiff's behalf. In addition, Congress applied the amendments retroactively to the original passage of the act in 1980. Court decisions since the 2003 amendments were enacted have consistently allowed the private cause of action to proceed against insurers and similar entities, including employers, who are deemed responsible for injuries. Therefore, responsible parties need to be made aware of the double exposure and how both the 2003 amendments to the Medicare Secondary Payer Act statute and the subsequent court cases expand the class of entities with direct exposure to damages.

The latest update took place very recently. On October 1, 2012, the Supreme Court declined review of a lower court's Medicare Secondary Payer decision. The important facts decided in this case (Hadden vs United States) is the fact the Supreme Court of the United States declined review of a 6th Circuit decision that upheld the government's authority under the Medicare Secondary Payer law to recover all expenses paid on behalf of a Medicare beneficiary when that beneficiary, in turn, recovers from a third party. The ruling helped define “Responsibility” under 42 U.S.C. 1395y (b)(2)(B)(ii), as that term was clarified under the 2003 amendment to the Medicare Secondary Payer Act. In this respect, the court essentially ruled that when there is a settlement, the primary plan demonstrates “responsibility” as defined under the Medicare Secondary Payer Act statute, thereby entitling Medicare to a full recovery of its claimed conditional payment amount — even if the settlement is for a compromised or reduced amount.

How will this affect employers?

One scenario is that when CMS/Medicare learns (and they will) it has been paying for work comp-related medical care, it will seek repayment from the claimant. The claimant, having spent the work comp settlement, will be unable to pay. Ultimately, it will be the employer and/or insurance carrier that will be held accountable. And should CMS have to pursue the employer in court, the amount is doubled. Unbelievably, the insured or employer could pay the future medical cost twice — once to the claimant at settlement and later when Medicare seeks reimbursement of the medical care they paid on behalf of the claimant. Legal attempts to put language in settlement agreements that the claimant agrees to be responsible for the cost of all future medical care has or will likely meet with failure because federal law will trump settlement agreements every time. Claimants, employers, and insurers are still bound by the requirements of the MSA statutes. Another scenario allows for a private cause of action to proceed against insurers and similar entities, in which there is still a potential for double costs.

Going forward, claims adjusters should have systems in place to verify compliance with the MSA requirements of CMS. However, problems may arise when you look backwards; there is no statute of limitations on compliance with the MSA requirements. CMS can review claims that were closed last year, five years ago or more for that matter to check for compliance. If CMS finds medical payments are owed, then you have 10 days to pay to avoid penalties and interest. One potential solution is baseline testing that can establish if there is an injury and if it is related to or aggravated by the date of loss.