When I was the litigation manager for a Fortune 500 company, the insurance company settled a claim I planned to fight. Heck, I WAS fighting it, and had recently retained an expert for an internal evaluation, so how could they settle that claim without my agreement? Simple – it wasn’t in the account instructions!
Not sure what “account instructions” are? You are not alone.
Also known as claim service instructions, account handling instructions, or special account claim instructions, this document is the agreement between the insured and the field adjusters at the insurer’s branch for both litigated and unlitigated matters. These instructions are disseminated to all branch offices across the country and specify how your claims will be handled and who is responsible for each element of claims handling such as selection of counsel, settlement of claims and waiver of liens. The ASI includes information about how claims are handled in every line of insurance including workers’ compensation, products liability and automobile insurance.
Put It in Writing
While a company can actively negotiate for items it believes important, the carrier’s approach may run counter to the company’s approach. The carrier may seek to define as few issues as possible in writing, relying instead on the existence of their “best practices,” reassuring the company certain key items will be done as a matter of course.
In general, the more risk a company has retained, the more control the insurer will relinquish. In a guaranteed cost program, for example, the insurer will relinquish almost no control because the risk is borne by the insurer. In a loss sensitive program with a very large deductible (e.g., $500,000 - 2,000,000+) most companies can negotiate for virtually unlimited control, almost what they would have if they were self-insured. When determining how much authority you wish to retain, consider your staffing needs, and make the ASI flexible enough to change authority levels if necessary.
Key account instructions to negotiate for are settlement authority, choice of defense counsel, waiver of subrogation and liens, and the establishment of procedures to review the status of claims on a frequent basis.
The more input the company wants, the lower the settlement threshold given to the insurance company should be. For example, a company wants to be actively involved in decision making they can state “the company retains settlement authority for all workers’ compensation claims over $5,000 and every products liability claims.” There is a world of difference between an insurer having to “consult” its insured and having to obtain its “consent” prior to settling a claim. If the insurer agrees to “consult” its client prior to settlement, the client does not have the power to alter the course of the claim.
From a company’s perspective, a settlement decision can impact well beyond bottom-line considerations. Injudicious settlements can affect a company’s labor policy, its workers’ compensation practices, the reputation of its products and its susceptibility to future claims.
The Right to Choose Counsel
The company needs to negotiate for the right to select legal counsel in any case where the exposure is within the company’s retention level. Often, in-house counsel wish to use lawyers previously used on similar claims, but cannot do so unless the outside lawyer is on the carrier’s “approved list.” The right to “select” counsel is different from the right to “suggest” or to “be consulted on” the selection of counsel. Although carriers have strict criteria for attorneys on the “authorized approved list of attorneys,” the insured may have business reasons for using an attorney not on the list. Sometimes the attorneys who defend the insured are in-house law firms on the insurer’s payroll who will defend only the narrow “insured” issue. For example, in a workers’ compensation claim the defense attorney may seek to extinguish all future liability and obtain a voluntary resignation of the employee rather than only the narrow issue of whether the injury was work-related.
Also include the right to request and select private investigators and have the right to specify the type of investigation. There is a big difference between an “activities check” and a “sub-rosa investigation.” The company will want to review all investigation reports and videos. You may also want a virtual internet analysis done for any claim that has specific red flags. Indemnity checks should not be automatically deposited to a claimant’s bank account until the claim is at PPD because the claimant does not have to sign the fraud endorsement on the back of the check.
A company may request all settlements over, say, $10,000 be considered for structured settlement, and may reserve the right to select a structured settlement company of its choice or to obtain competing bids from financially sound structured settlement companies. One insurer had an “authorized list” containing the name of only one structured settlement company -- owned by the insurer.
All claims should be paid “without prejudice” in those states where possible, and the carrier should file for extensions of this status whenever possible. Companies should also request their carriers reference the Central Index Bureau, an insurance industry- maintained database, on all claims every 6 months, to determine if a prior claim was filed.
Specify return to work program specifics, continuation of pay and integration with short-term and long-term disability, referral to telephonic and field case management nurse services, job locater services, and MSA compliance services. Specify that all claims should be considered for second injury fund potential and in third-party suits, liens can not be waived without the company’s consent. Be it 30, 60 or 90 days, the frequency of reporting requirements should be dependent on claims volume and availability of internal company staff to rapidly respond to all requests for authority from the carrier.
Furthermore, the company should be notified sufficiently in advance of all hearings and conciliations so its representative may attend the hearings. Also, the litigation manager should be consulted before appeals are filed and should retain the right to determine whether an appeal is warranted.
Reviews Can Be the Best Medicine
There are several things a company may want to include in its ASI to facilitate the involvement of a medical director. The company should reserve the right to request copies of selected medical records be transferred to and reviewed by the medical director before scheduling of IMEs. (Independent Medical Review). In some cases, the MD sends a cover letter to the IME physician to establish appropriate parameters and ask pointed medical questions for the physician to consider during the course of the IME.
The company also reserves the right to refer all lost-time and complex medical cases to those in charge of medical disability management within 24 to 48 hours, and it should receive copies of all medical disability management reports. Functional capacity evaluations are recommended in all cases prior to IMEs, unless the Medical Director recommends otherwise. As soon as maximum medical improvement is reached, the claimant is to be referred for impairment rating review.
On the procedural side, the company conducts file audits of all claims every three months in local carrier offices. The carrier provides the entire file for this review focusing on claim resolution strategies. Incredibly, one carrier came to a file audit without the files; bringing only file summaries and medical report summaries, which were not adequate.
All litigated claims should be considered for alternative dispute resolution. The company retains the right to request copies of all file materials, including medical reports, necessary for business purposes. The insured should retain the option to change, revise or amend the ASI with 30-days written notice. Request the ASI in a narrative format, rather than in an unreadable computer printout.
Before changing carriers due to dissatisfaction, re-read the ASI to see if your company’s expectations are delineated. Most insurance carriers will rise to the level of service that is demanded, but many companies simply do not know what to request or how to use the ASI document to convey expectations.
If you need help negotiating account instructions, feel free to contact the author at RShafer@ReduceYourWorkersComp.com or call 860-553-6604. For more information and tools, see www.reduceyourworkerscomp.com/lower-reduce-workers-comp-costs.php.
Rebecca Shafer, JD, President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, health care, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. She developed the workers compensation consulting practices for the two largest insurance brokers in the world. She is on the Workers’ Compensation Law Practice Executive Committee and is a frequent speak and writer about workers’ compensation cost containment. She can be contacted at: RShafer@reduceyourworkerscomp.com or 860-553-6604.
© 2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. Reprinted with permission.