A proactive approach to reducing claims litigation

Those in claims management agree on one thing — litigation, or even attorney representation, leads to greater claims and expense costs than would otherwise occur. And in Workers' Compensation circles, an attorney may actually reduce the employee's compensation rather than add to it.

This may occur because:

The statutory benefits are clear and cannot be increased for any reason, and an attorney receiving these benefits reduces the amount of money remaining for the employee,
The claimant's attorney is inexperienced in Workers' Compensation and may settle for less than the adjuster would have otherwise settled.

The reduced payment to the employee or a liability claimant may also occur because claimants may try to negotiate a settlement themselves initially but hire an attorney later in the process. If the claimants eventually pay the attorney a percentage of the full settlement rather than just a percentage of the incremental award created by the attorney's involvement, then the claimant's financial outcome is reduced.

This does not mean there is no place for claimants to obtain legal representation. Some insurers, third-party administrators and companies have inadequately or improperly managed claims, causing some claimants or plaintiff's attorneys to view insurers negatively. Some claims are appropriately denied and a claimant's disagreement with the denial will lead to legal representation.

Confusing process

Employees or claimants with bodily injury claims may seek legal representation, especially if they fear they do not understand enough about the process to effectively present their case and negotiate a settlement themselves. Those in the claims arena understand what is needed to present a claim, but it is a confusing process for anyone who has not been trained in claims management.

This uncertainty in an employee's or claimant's mind is a frequent reason for the involvement of plaintiff's attorneys. They focus on fears that the insurance companies are just out to make more money, inferring that they will settle for less than they should, and that they have big pockets. They will also throw out alleged examples of big awards or settlements they have reached without clarifying whether the award or settlement was really an increase over what the claimant would have received anyway. This is precisely why it is important to address the claimant's concerns and fears.

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insurance adjuster and clients

While nothing new to seasoned adjusters, these actions reduce a claimant's uncertainty about a claim. (Photo: iStock)

The “I wills”

It's important to start with some basic assumptions and commitments, which I refer to as the “I wills.”

I will:

Deal honestly and ethically with everyone involved in this claim.
Treat everyone with respect.
Promptly contact all parties involved in a claim within one workday of assignment.
Initiate the investigation at the time of first contact, follow through on additional investigation that may be required, and reach an early decision of acceptance, denial or compromise.
Notify the claimant as soon as I have made a decision about accepting compensability or liability, regardless of the decision.
Inform the claimant of the information and proof that is needed to consider all aspects of their accepted claim.
Provide the claimant with information from objective third parties that confirms what they need and why (e.g., SCHIP 111 rules for the claimant's social security number, WC statutes regarding benefits and administrative requirements).
Respond to phone calls or e-mails within one working day of my receipt.
Keep the claimants informed of my progress throughout the claim and of any additional information they need to provide based on changes in their condition or treatment.
Evaluate all settlement components and make a verbal offer promptly upon receipt of the necessary documentation.

While many will look at this list and think there is nothing new here, I fully agree. However, a review of claims audits over the last several years reveals that claims handling has become more of a process-driven function with little communication and relationship-building. This results in increased uncertainty by the claimant, leading to more representation and eventually, more litigation.

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How the “I wills” reduce claimants' fears

The following chart includes actions or omissions that feed claimants' fears and how the “I wills” help reduce those fears. This requires returning to a more communicative approach that helps develop rapport with the claimants and reach resolutions that may be more satisfactory for everyone. Since dealing honestly and ethically with all parties and treating them with respect should be core values in all claims operations, those particular “I wills” are not specifically included in this table. The actions or inactions described in this table that increase the claimant's fears have been observed or inferred from claims audits.

Following the “I wills” may have an even greater impact on improving the outcomes of liability claims managed by or on behalf of public entities. Most public entities have a code or statutory requirement that automobile liability or various types of general liability claims must be filed within a specified time from the loss on a particular form and/or with specific information.

Increasing claimant's fears

In some cases public entities or their claims administrators delay taking any action even when there is significant injury and exposure and they have knowledge of the incident. They wait until the required form has been received by the legal department or the department identified in the code and the form and content are confirmed by the legal department.

While they have met the letter of the statute, they have delayed working on the claim, increasing the claimant's fears. This delay may lead to attorney involvement and increased costs.

The “I wills” are not new, but are becoming harder to incorporate into claims management because of industry automation. While these activities are useful tools in managing claims, they do not take the place of the effective communication and relationship building that often create better outcomes.

Gary Jennings, CPCU, ARM, is the principal consultant at Strategic Claims Direction LLC. He may be reached at [email protected].

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