September 18, 2018

Archives for February 2013

Br’er Rabbit Asks, “Do you REALLY Need to Reserve those Coverage Rights?”

Reaching back into childhood memories, you may recall the stories of Br’er Rabbit. He constantly outwitted Br’er Fox and Br’er Bear. In one fable, Br’er Fox catches Br’er Rabbit.  The latter begs his arch enemy NOT to toss him into the briar patch, full-well knowing that the briar patch is the rabbit’s best escape outlet. The dim-witted fox falls for it and Br’er Rabbit again evades capture.

Briar patch scenarios play themselves out in insurance claims on coverage issues and tussles over choice of counsel.  Specifically, sometimes adjusters may feel goaded by an insured’s hand-picked attorney into reserving coverage rights.  Savvy policyholders and their would-be lawyers are often aware that, once an insurance company reserves coverage rights, the policyholder then may be entitled to separate defense counsel of its choice, to be paid for by the insurance company.

These are often Dream Assignments for the insured’s preferred lawyer. Invariably, it seems like the insured’s counsel is much more expensive than the panel counsel that the carriers prefer. They may be white shoe, silk stocking law firms that bill at multiples of two to three times “normal” rates for insurance defense work. In fact, not only do many of these firms not do insurance defense work, but they pride themselves on the fact that they do not have to “stoop” to do insurance defense work, which they may view as the ghetto of the legal servuces industry.  .

Under the guise of being thorough, turning over every rock and stone, getting every conceivable duck in a row, these firms may rack up huge bills . . . which they happily send along to the insurance company to pay. All the while, they can beat their chests and posture to the policyholder, “We are doing our utmost to defend you, our client!”

In some cases, the adjuster may consider what is the lesser evil: risking waiver of a policy/coverage defense or opening the gates for the Huns to rape, plunder and pillage when it comes to legal fee billing on case.

In some instances, the coverage issue involved may be somewhat a long shot. For example, some plaintiffs throw punitive damage allegations in with the kitchen sink, not because there is any credible threat of punitive damages, but simply because that is their habit.

In other cases, the adjuster may notice a potential late notice coverage defense.  This may be due to the late reporting of the loss from the insured to the insurer. In the real world, prevailing on a late notice coverage defense is often an uphill battle, particularly if the case is in a jurisdiction that demands that the insurance company demonstrate prejudice from the delay.

These are just two examples of where there may be textbook bases for reserving coverage rights, but in the long run they may be moot or long shots in terms of presenting viable coverage defenses.  Yes, theoretically you may technically have some question about coverage.  In  reality, prevailing on those questions may be very remote.

Therefore, in some cases the bigger threat may be the hemorrhaging of costs on the expense side.  This flows from relinquishing the ability to control legal expenses. If an insured-appointed defense firm enters the fray, you may lose the ability to manage the transaction cists — read “legal fees” — on the claim.  This risk may be more imminent than the threat of waiving a coverage defense which, may be shaky anyway.

The point here is not to ignore viable coverage defenses.  The point is that, there may be cases where an adjuster consciously decides to forgo reserving rights on “squishy” coverage issues to preserve the right to control the defense and deprive the policyholder and its preferred counsel — eagerly waiting in the wings to jump in — from being able to drive a Sherman tank through the Cumis-type situation and grab the keys to the bank vault.

… or to the briar patch.

Brer Rabbit

Winter Weather Reveals Chilling Risk and Claim Issues

Harsh weather and snowy conditions produce their own claim fallout. Liability hazards from slip and fall accidents accentuate with accumulation of ice, snow and slippery surfaces. People who slip and fall on ice and snow may assert bodily injury claims and allege negligence by property owners failing to clear their property of ice and snow.

Many of these slip and fall claims may culminate in lawsuits, claim files and the need for accident investigations by adjusters. Plaintiffs may allege that the property owner failed to shovel or removed snow, failed to treat or sprinkle walking surfaces with de-icing compound or other substances that would enhance traction.

Even if some of these slip and fall claims are deemed non-meritorious, they will consume significant time, resources and legal expenses to defend.

Large retailers who have parking lots and walkways maybe target defendants in such situations. Injured persons may presume that these entities with vast financial resources also have extensive insurance coverage and high liability limits. This may embolden plaintiffs to pursue premises liability slip and fall claims against big-box stores such as Wal-Mart, Best Buy, etc.

The irony is that many of these big box retailers contract with snow removal services in the off-season. Often, a condition for getting the snow removal contract is that the vendor agree to defend, indemnify and/or hold harmless the large retailer in the event of a bodily injury liability claim. As part of this agreement, the snow removal company may also be required to carry a certain healthy minimum limit of premises liability insurance that includes coverage for completed operations, snow removal, etc. The cost tab for this may run as high as $200,000 a year in insurance premium.

While some plaintiffs make believe that they are suing the big-box retailer, in truth the cost is being borne by a small mom-and-pop snowplow service.

What do you find to be the most challenging part of handling premises liability claims from ice and snow?  Share here or offline at kevin@kevinquinley.com

Icy Walkway


8 Steps to Tame Upcoming Premium Hikes

Like clockwork, predictions abound regarding a hardening of the insurance market.  Such forecasts are as inevitable as death and taxes.  (Eventually, the prediction HAS to be right.)

In some ways, though, the insurance market that commercial buyers must worry about is the one that applies to its own coverage.  A rising tide lifts — or lowers — all boats.  A hardening market may raise insurance prices in general.  Some firms may find their own particular market hardening due to their recent loss history or because of the market niche in which they operate (e.g., pharmaceuticals, football helmet makers, day care operators, etc.)

If the risk manager or person in charge of insurance senses that insurance price hikes are coming, what can they do to cushion the blow and counteract the effects?  Here are 8 steps:

1.  Be candid and transparent about loss history.  If you have a rough patch of recent losses, acknowledge this.  Prepare talking points as to why this is an anomaly, not a harbinger of future loss patterns. Don’t think that the insurer will be unaware of your loss picture, as virtually every application for insurance coverage will ask you to recap your claim and loss historyNo need to sugarcoat reality.

2.  Document for underwriters the actions your company has taken to mitigate the exposure, going forward.  Address the baggage of claims history by demonstrating the specific operational steps that you have taken to render a future recurrence unlikely or impossible. Maybne you have instituted a new fleet car safety program to prevent auto accidents.  Maybe a redesign of your warehouse will lower your on-the-job injuries.  Perhaps a troublesome product line that drove prior liability losses has been discontinued.  You can’t change what happened in the past. All you can do is learn from it.   Institute steps to prevent its recurrence. Implement safeguards to cushion its impact, and make a cogent case to future insurers as to how you have learned from the past.

3.  Show loyalty with long-term relationships.  If possible, try to stay with the same insurance company unless there is a compelling reason to leave.   This can be a hard sell when there is a temptation to chase the lowest quote and to show the bosses how much money you have saved the company in insurance coverage.  Perhaps there are compelling reasons to leave, either due to price, coverage form or unsatisfactory claim service. Barring such features, however, you may be better off trying to cultivate a long-term relationship with an insurance carrier. This, however, should not blind you to better deals which may be out there in the marketplace.

4.  Test the waters and be willing to shop around.  This may sound contradictory to the preceding recommendation. Loyalty must be tempered, however, by an awareness of market conditions. It should not blind buyers or risk managers to the occasional need to test the waters and see if a better deal is out there. A better deal is not necessarily always a lower price, although that can be part of the equation. A “better deal” might be broader coverage or service enhancements.

5.  Seek an “early read” from incumbent insurers regarding price expectations.  Don’t wait until just before your insurance renewal date to get an idea of pricing. Ninety to 120 days before your renewal date, you or your insurance broker should approach your underwriters. Ask them for a preliminary, nonbinding sense as to what you should expect in the way of pricing trends. This preliminary signal may give you the ability and time to make a fully informed and reasoned decision as to whether you want to test the waters elsewhere or plan to stay with the incumbent.  If you fall into the usual rhythm and cycle of renewals, finding out only very close to your renewal date, it will be too late.

6.  Prepare the boss and upper management.  This is particularly true if you expect a material increase in the cost of your insurance coverage, whether it is overall or by line of coverage. Get out in front of this. In a non-alarmist way, communicate to the boss and the board the likelihood of price increases, the reasons and factors behind such increases, and what you as the risk manager or insurance buyer are doing to mitigate those anticipated increases. Never surprise the boss, whether it’s with regard to a project going off-track or a significant increase in the budget line item, such as insurance coverage.

7.  Develop relationships with underwriters before you get “in the crucible.”  Although insurance pricing is often a function of various quantitative data, relationships matter and can assist in obtaining concessions on price, coverage for service. Strive to identify the underwriters. Develop relationships with them well in advance of the hurried atmosphere of impending doom. Be proactive and get to know the underwriters long prior to the renewal date.  The time to cultivate a good working relationship with key underwriters is not when your renewal date is right on top of you. Dig your well before you’re thirsty!

8.  Consider higher retentions to offset rate and premium increases. Many times, premium and rate increases are inevitable. The only question is how much more you’re going to pay. One way to stem the impact of these increases is to consider stepping up to higher retention. By this, I mean a higher deductible. Often, the higher deductible you’re willing to shoulder, the lower your rate per thousand dollars of coverage. Consider this and ponder the trade-off. Make sure your management team buys into this strategy. Stepping up to higher deductibles on property insurance policies and self-insured retentions on liability policies can often be an effective way of managing the cost of insurance in a hardening market.

What other tips and tactics have you found useful in blunting anticipated premium increases?  Share your thoughts here!

 

 

DIY Claims Cookbook Aims to Empower Unrepresented Auto Claimants

Review of: Auto Accident Personal Injury Insurance Claim: How to Evaluate and Settle Your Loss by Dan Baldyga, 2003, 136 pp., PB, www.1stbooksw.com

DIY — Do It Yourself — is popular these days.  There is even a DIY channel on cable TV.  Home improvement projects are fertile ground when it comes to DIY.  Fewer, though, might undertake to become their own claims adjuster after being in an automobile collision.  Many people understandably find the insurance claims process forbidding and frustrating.

To the attempted rescue comes author Dan Baldyga in his book, Auto Accident Personal Injury Insurance Claim.  Though I have been in the insurance claims business for 30+ years, I had never heard of this book.  I only became aware of it recently in connection with consulting as an expert witness on a litigated insurance bad faith dispute.

Baldyga’s book is essentially a do-it-yourself guide for consumers who are willing to roll up their sleeves and try to handle their own automobile insurance claim. The context here is one of relatively modest injuries. The author, who claims to be a former insurance adjuster and who does not have a law degree, offers a “BASE” formula for unrepresented claimants and policyholders to use in negotiating with their insurance company for settlements. This formula is a multiple of the medical bills and damages quantified by the policy holder. The author hopes to create a level playing field between the unrepresented consumer and the insurance adjuster. (By unrepresented, we mean somebody who has not hired an attorney to handle their insurance claim.)

Baldyga clearly believes that he can empower consumers to handle their own insurance claims and to reach a satisfactory resolution.

Those of us in the insurance claim field may take sharp exception to is formulaic approach, which he calls by the acronym — “BASE” approach. It gives a Low range value, Core value, Mean value and Premium value for an injury claim. These involve multiplying special damages by factors of two, three, three-point-five and four.

“BASE” is an acronym that stands for Baldyga’s Auto accident Settlement Evaluation.

Adjusters may feel the BASE approach is base, and may be loath to confess that they utilize any formula, including but not limited to the “three times the specials” yardstick. For one thing, why should special damages for diagnostic tests like laboratory work, x-rays or other radiology imaging be multiplied by two, three or four times?

Second, using such the formula arguably encourages patients to seek overtreatment and excessive treatment in order to goose up their special damages. Tons of physical therapy.  “Heavy” bills for endless chiropractic care.  Etc.

Third, a formula does not take into account situations of overtreatment or thorny causation questions where there may arise fairly debatable issues as to whether the special damages are due to an auto accident or due to the natural progression of a pre-existing medical condition.

Liability factors may also be less than clear-cut, warranting some discounting off the multiplication formula.

These factors may undercut the utility and validity of formulaic approaches or any presumption that there is proportionality between medical bills and the true value of the claim. In some cases that may be correct. In other cases, it may be a foundation built on quicksand.

To his credit, Baldyga does not demonize insurance adjusters. He maintains the most claims adjusters are reasonably fair and are not out to victimize honest claimants. By and large, he finds that they (adjusters) are professionals and he believes that they’re always looking for ways to finalize a case, not looking for ways to deny claims. As he states, “Contrary to public opinion most adjusters don’t stay up nights attempting to create new ways to resist the payment of a claim.”  He recommends that disgruntled consumers and policyholders keep their cool and not unload on claims adjusters.

Baldyga maintains that he has a lifetime of experience in the field of motor vehicle accidents, personal injury and compensation. Personal injury attorneys may wince at this book since, if it has its intended effect, it will result in fewer cases going to attorneys.

Four intrepid consumers who want a guidebook and cookbook for navigating the automobile car insurance process, Baldyga’s book may provide a handy reference guide. It’s advice may rankle claims adjusters in its fundamental formulaic approach, however.

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