“Certainly the Sarbanes-Oxley Act, GLBA, and changes in the FRCP alerted companies to develop better internal controls to guard privacy and prevent and detect fraud,” said Gary Corcoran, systems manager at Central Insurance. “GLBA requires all financial institutions to design, implement, and maintain safeguards to protect customer information. This provision applies to insureds, claimants, agents, and employees. In the same way, HIPAA gave our industry guidelines to ensure that an individual's health information is properly protected,” Corcoran added.

From a claim perspective, whether a carrier is large or small, it still has to figure out which documents should be preserved and which should be destroyed. Kevin Lucke, claim manager at Sublimity Insurance, understands this concept well. “We are a very small, 22-person shop,” he said. “We are guided by Oregon insurance statutes, codes, and guidelines stemming from unfair claim practices.

“In general, we hold onto claim files a minimum of seven years following their resolution,” Lucke added. “Some files are retained longer than others if their repercussions can last into the future. For example, a claim involving a minor should certainly be kept until the child's age of majority. This makes sense, whether it involves an accident at birth, medical malpractice, or even if the car carrying a newborn is sideswiped on the way home from the hospital. Pollution claims also should be kept for a long time because other cases involving a pollution source could arise as time passes.”

The document retention program at Sublimity is somewhat less formal than one that might be employed by a very large carrier. The top claim officer determines which documents to retain. The basic idea is to keep everything that is sent to you as well as copies of what you send out.

“We realize that if we can't produce a document in a trial, then the judge may wonder what else we are not producing,” said Glen Hayes, property claim manager at South Carolina Farm Bureau. “That's why the company keeps anything with a claim number. It scans and stores e-mails and even Post-It notes. In addition, it retains most files for quite some time — typically more than 20 years. The company says this approach protects it in extreme cases. For instance, if a claim is based on an accident that occurred during birth, the affected party can file a claim until one year after reaching the age of majority.

“We retain our claim file documents indefinitely,” adds Ted Wissman, senior director of claims at Celina Insurance. “When a decision to purge is made, then it is handled in accordance with both state and federal statutes.” Many insurance companies simply follow the FRCP, consult their respective state departments of insurance, or follow local statutes or codes. In neighboring North Carolina, however, Builders Insurance of Raleigh keeps its workers' compensation claims for 10 years.

Maintaining Integrity

Claim documents that convey an ageist, sexist, or racist point of view on the part of a claim professional can be deadly. Even though it may be tempting to “accidentally” burn that angry or sarcastic e-mail in haste, you should refrain from doing so. Once legal counsel determines the correspondence is a “document” and therefore could be part of discovery, it can neither be altered nor destroyed. Destroying evidence because you supposedly “needed to free up more drive space,” or “clear the files as part of an automated defragmentation operation,” will not melt an adversary's heart. It is also crucial to keep in mind that a computer itself can be deemed “discoverable.”

“Retaining claim documents, including log notes, memos to and from claimants, reports, e-mails, estimates, depositions, and so on is essential, as is ensuring their integrity,” Corcoran said. “Often the VP of claims alone has authority to modify files.” Copying files to disks or sending them via e-mail must be restricted, but photocopying and transferring paper documents to third parties can only be protected by requiring newly hired claim professionals to sign and honor nondisclosure agreements.

This last comment refers to the ongoing Renfroe/Rigsby post-Katrina lawsuit, which was filed in April 2006. In the suit, the plaintiffs accused State Farm of altering engineering reports to avoid paying claims. While working for the engineering firm representing State Farm, the Rigsby sisters copied massive amounts of files, despite having signed non-disclosure agreements, in their desire to be industry “whistleblowers.”

“I am shocked at the allegations in the recent Renfroe/Rigsby case,” said Hayes when asked to comment on the trial. “At our company, we try to be consistent in that we handle all claims in the same way. Whatever approach you take with one, you should do the same with every file.”

“Consistency is a company's biggest challenge,” said Wissman. “Most insurers have adjusters working out of their homes and out of their cars, so making sure that all of the appropriate documents are retained involves many different types of procedures. Ultimately, you validate that documents were retained through audit, but you are only as consistent as each claim file handler who adheres to the company's retention guidelines.”

A claim executive may be one of several managers on a document retention team that includes representatives from underwriting, human resources, and information technology as well as legal counsel. These people usually suggest what to keep and what to discard. Certainly any loss report form citing basic coverage elements — effective dates, policy numbers, and policy limits — must be preserved.

Don't Ignore the Obvious

Many agree that investigative work products should be retained. Examples of these include signed or recorded statements from claimants, insureds, and witnesses; interview notes; photographs; official reports issued by the police, fire-EMS, and coroner; medical records and bills; property damage estimates or repair bills; weather reports; and news articles. In addition, it is a good idea to keep copies of closing documents if the claim has in fact been closed or resolved. Investigative material, of course, will vary depending on the type of claim under consideration: a dog bite versus a collision or a product liability loss. The absence of some type of work product — or evidence that the adjuster has tried to dispose of it — could point to sloppy claim handling.

According to Eric Singer, an attorney with expertise in construction law, certain types of claims may also require special considerations. “Insurance companies will tell you that the vast majority of claims are filed within five years following completion of construction,” he said. “In actuality, claims may be filed much later, perhaps 14 or more years after the completion of construction in the state of Illinois. So, when clients or seminar attendees ask how long they should keep their records, I usually recommend that important records be maintained for 14 years, and even longer if children are likely intended users or if the projects are unusual in danger, number of probable users, or if there is something unusual about the design or the application. For instance, public buildings, sled hills, skate parks, ski resorts, and zoos all require special consideration.”

Singer continued by saying, “It has become quite common for public and private bodies to audit construction contracts in the context of both civil and criminal investigations. Particularly after Enron, even if the contract did not establish a time range to keep records, one never wants to tell the auditor — perhaps the inspector general of some agency or U.S. attorney — that the records were destroyed.”

A claim department usually defers to an information technology professional to find software vendors, imaging companies, or others who can help achieve the company's electronic archiving and retrieval goals.

“We use both outside storage locations and internal software,” Corcoran said. “We scan and index files, and our procedures not only protect claim files for possible discovery in the future, but also assist in disaster recovery and business continuity efforts.”

“Don't ignore the obvious,” Lucke added. “Companies have been burned for not date-stamping correspondence 'received.' The receipt date often triggers the entire settlement process. If that date is compromised, then, in effect, the whole claim-handling process is compromised.”

The systems side of setting up files for archival can be daunting. Fortunately, a whole industry has grown up to help with the details of electronic protection and retrieval.

Gina Schwitzgebel, assistant vice president of underwriting at Raleigh, N.C.-based Builders Mutual was tasked with organizing the scanning of documents as the organization attempted to construct a program of document retention. Schwitzgebel was courted by two major software players in the field: Columbia, S.C.-based Acrosoft and ImageWrite of Atlanta, Ga. These are among a number of companies specializing in electronic retrieval pertaining to claims. Others include Docutron Systems and Ademero Inc. Acrosoft alone has installed about 70 applications in the past year.

In with the New, Out with the Old

Challenges for the future are plentiful. New technologies will supersede old ones. No one knows which technologies will be the most appropriate for storage 20 years from now. Right now, DVD-ROMs continue to take over the storage media market, leaving CDs far behind. What should be done when legacy data created in an obsolete system becomes unintelligible on the successor systems?

We suggest that the technology side of this will take care of itself in due time. Right now, our best preemptive strike is to write clear and concise claim letters, e-mails, and reports that deserve a long life. Read your claim letters aloud; your ear will catch problems that your eyes do not.

Gerald Murphy, the dapper millionaire friend of F. Scott Fitzgerald, once remarked that “living well is the best revenge.” Perhaps making each document an example of plain English as well as of fairness in claim decisions may very well indeed be the best revenge against the ever-growing legal demands of electronic retrieval.

Gary Blake is the director of The Communication Workshop, which offers seminars about effective writing for claim professionals. He may be reached at [email protected], www.writingworkshop.com.