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Home » Archives for June 2010

Archives for June 2010

Exclusive Remedy Doctrine – Two Views From Two States

June 29, 2010 By JL Risk Management Consultants

Two Views From Two States-Exclusive Remedy Doctrine

I received a note today on the Workers Compensation Exclusive Remedy Doctrine to ask if there are any recent updates. The last two that I have seen are from Connecticut and West Virginia.

Picture Of Supreme Court Exclusive Remedy Doctrine With Gavel

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A recent CT decision ruled that the Exclusive Remedy Doctrine should be held in place for Workers Comp cases. A correctional facility worker had sued ACE as the Third Party Administrator and the State of CT for breach of contract and unfair dealing when his psych benefits were determined to be palliative. ACE would not approve any more treatment.

The CT WC court ruled on a summary judgement citing the Exclusive Remedy Doctrine. When the plaintiff appealed, the Appellate Court also ruled for ACE citing the Exclusive Remedy Doctrine. Daniel D’Amico vs. ACE Financial Solutions Inc. et al. 

The Appellate Court’s decision is the type that will not spike the advisory rates set by NCCI. That decision saved the employers in CT millions in premiums.

Graphic Of Hands Heart Shape Exclusive Remedy Doctrine Sunset Background

StockUnlimited

The other side of the coin is a decision that will indirectly affect West Virginia’s Workers Comp policyholders for possibly years to come. The case involved an issue of race and that the plaintiffs were denied the right to sue under the Human Rights Act if the Doctrine of Exclusive Remedy were to be followed. This decision sent shockwaves through the West Virginia insurance industry. While this is not a Workers Compensation case, the case could be used as a springboard for eroding the Doctrine in the future.

According to the June 25th issue of The Insurance Journal Southeast Edition. “The insurance industry was surprised by the decision, according to Jill Bentz, an attorney with Dinsmore & Shohl LLP in Charleston who is also president of the West Virginia Insurance Federation. She said insurers are concerned it will lead to an explosion of lawsuits and drive up insurance costs, as was happening before the Legislature enacted reforms in 2005.

Bentz said third-party suits were costing insurers in the state more than $160 million a year five years ago and discouraging other private insurers from entering the state. According to Bentz, in 2005 the Legislature eliminated private third-party causes of action from the courts, moving them instead under the jurisdiction of the state insurance commissioner.

Cupped Hands Exclusive Remedy Doctrine Presenting Dollars

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“Without a doubt the Legislature and Governor intended to prohibit these suits,” Bentz said, claiming the most recent court decision ignores this history. “Now five years later, we have an unraveling of that effort.”

Bentz said she expects insurers will seek a legislative remedy as they did in 2005.

My concern is that West Virginia already has a group of court decisions in the Workers Compensation area that have pierced the exclusive remedy veil. This case could easily be used as a basis to attempt to sue the Workers Comp carrier, TPA, or adjuster directly. Decisions such as these will never allow a free and open market in WV that Governor Manchin and Insurance Commissioner Cline have worked so hard to preserve. The legislative remedy may be the best method to prevent insurance carriers and TPA’s from starting to reduce or cease writing Workers Comp coverage in the state.

©J&L Risk Management Inc Copyright Notice

Filed Under: Exclusive Remedy Tagged With: Daniel D’Amico, Human Rights Act, Jill Bentz, Shohl LLP

Exclusive Remedy Doctrine in Workers Compensation

June 29, 2010 By JL Risk Management Consultants

Term Of The Day – Exclusive Remedy Doctrine

The Exclusive Remedy Doctrine makes Workers Compensation claims a no-fault process.

The Workers Compensation insurance provided by an employer will cover the employee no matter who is at fault or even if the incident was purely an accidental occurrence.   An injured employee’s benefits may be decreased if they did not used a supplied safety device.   The reductions are extremely rare. 

Graphic Of Law Book Exclusive Remedy Doctrine With Magnifying Glass

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The no-fault keeps the employer from denying the claim if it was the employee’s fault. The employer benefits as the employee cannot sue the employer if they were negligent for some reason.

Employees and their attorneys have tried to pierce this veil of no-fault insurance coverage and sue the employer as if the accident was covered by liability insurance. The courts have stuck to the spirit of the doctrine for the most part.

An insurance carrier cannot write business in a state where lawsuits are allowed that circumvent the Workers Comp insurance structure. The insurance carrier does not collect premium as if liability suits would be allowed against their insureds. There have been a few incidences where a liability suit can be brought against an insured even if the accident was covered by Workers Compensation.

The reaction of many carriers is to immediately cease writing coverage in that state or to increase premiums dramatically.

Recently, the West Virginia Supreme Court has allowed such a lawsuit. I am not sure if this would counteract all of the good work that Governor Manchin and the WV Department of Insurance have done to provide a free and open market for Workers Comp insurance.

2019 Update – The courts have allowed a few challenges to Exclusive Remedy.  The doctrine stood the test of time and now keeps the jurisdiction of an industrial accident in the workers’ compensation courts.   

2021 update – with the new rush of COVID-10 claims, the Exclusive Remedy doctrine of workers comp will likely be challenged numerous times in the future.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Exclusive Remedy Tagged With: brought against, negligent, occurrence

Cherry Picking – Is The Practice Legal In Workers Compensation?

June 28, 2010 By JL Risk Management Consultants

What is Cherry Picking in Workers Comp?

Cherry picking is one of the old terms in insurance coverage including Workers Compensation. This very overused term can have a negative or positive connotation depending upon the audience and the writer’s or speaker’s intention.

Picture Of Cherry Picking With Mirror

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This situation occurs when an insurance carrier seeks to have better than normal underwriting results by offering the very safe companies policies while not covering the normally safe or less than safe employers in a given state or region. Often, the carrier may heavily under-price the coverage to get the safe business.

Cherry picking may also occur when a carrier writes very unsafe companies while charging an extremely high premium as the coverage may not be available elsewhere for a certain employer. This is an uncommon occurrence unless the regular insurance marketplace is not writing coverage for certain employers (with certain classification codes.)

There has been a decades-long running debate on whether this practice is just good underwriting or that it throws off the marketplace for a certain group of cherry-picked employers.

I posted a blog recently on Travelers’ aggressive underwriting in West Virginia. I have not really seen anything that looks like cherry picking as they are writing almost all employers with varying classification codes and E-Mods.

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: debate, elsewhere

West Virginia Workers Comp – Travelers Dominant Carrier

June 28, 2010 By JL Risk Management Consultants

Travelers West Virginia Workers Comp

The State of West Virginia added in a new major player to its workers comp market.  I have read a number of recent articles concerning the loss of insureds by Brickstreet over the past few months. Brickstreet had been the monopolistic carrier for West Virginia Workers Compensation (including governmental agencies) for the last three years.

Picture of Travelers West Virginia Workers With Garden Background

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Before Brickstreet started writing policies, West Virginia was a monopolistic state for Workers Comp. Their fund was in terrible shape. After examining their fund numbers, I would say no one person or entity was to blame for their Workers Comp crisis. This same situation happened in other monopolistic states – the market needed to be a free open market.

The marketplace in West Virginia is now wide open as of July 1 for all carriers that have registered to write coverage in the state. Surprisingly, I had not picked Travelers as being one of the dominant carriers in the state.  I had predicted that AIG would be the dominant carrier as of now due to the carrier’s experience with coal companies. 

Tip Of Pen West Virginia Workers Writing On Paper

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I had predicted they and other Workers Compensation insurance companies would take a wait and see attitude towards writing business there. I had picked two main carriers that I had thought would price coverage lower to get their foot in the door. I admit I was wrong.

Travelers is willing to write the Workers Comp coverage to almost all industries at last year’s renewal price. This is usually cheaper than all other bidders. Aggressive underwriting in a state is not necessarily a gamble. However, it can backfire on a carrier if they are just wholesale writing coverage for every business. Travelers may be heavily pursuing certain industries. I do not think they are “cherry-picking” certain accounts. See Today’s Worker’s Comp Term Of The Day for more on cherry-picking.

©J&L Risk Management Inc Copyright Notice

Filed Under: Travelers West Virginia Tagged With: cherry-picking, crisis

Unit Stat Date Article Caused Confusion – Better Explanation

June 27, 2010 By JL Risk Management Consultants

Prior Unit Stat Date Article Caused Confusion

I may have some caused confusion on my last Unit Stat date article on the most important day in Workers Comp. From the emails that I received, I may not have been as clear as I should have been on the Unit Stat date.

Increasing Graph on Caused Confusion with people on Unit State Date Article

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The Unit Stat date is six months later than the last date of your previous Workers Comp policy. I had used January 1 in the examples to fit the description of the most important day in Workers Comp – June 30th.

The easiest way to find your company’s Unit Stat date is by adding six months to your policy renewal date. If your policy’s renewal date is in the middle of the month ( Example – March 14th) then your Unit Stat Date would be September 13th. Your Unit Stat date does not have to be at the beginning or the ending of the month.

As I mentioned in a previous post, you need to have a plan on how to monitor and negotiate your company’s reserves before the Unit Stat date. The initial process must start right after your policy renewal to affect your NEXT YEARS’ E-Mod.

Businesswoman Caused Confusion Working With Colleagues

StockUnlimited

If you start to monitor and negotiate your company’s reserves within three months of your Unit Stat date you are not going to have much success as the process will take at least 6 – 9 months. It is not that easy to accomplish as most Workers Comp insurance adjusters are not used to having their reserves questioned.

At no time was I referring to a claim performance audit. This is a totally different audit that scores the adjuster’s effectiveness on a random sampling of the files. I hope that this clears up some of the confusion concerning my last few posts on the Workers Compensation insurance cycle.

©J&L Risk Management Inc Copyright Notice

Filed Under: unit stat date Tagged With: negotiate, six months

Guaranteed Cost Is Safest Yet Most Expensive Workers Comp Coverage

June 24, 2010 By JL Risk Management Consultants

Term of the Day – Guaranteed Cost

A guaranteed cost plan is the most predictable type of insurance policy. In these policies, the premium is a fixed cost based on the final audited payroll, manual rates, and any applicable pricing programs. It is not subject to adjustment due to losses that occur during the policy term- instead premiums are charged on a prospective basis.

The usual Experience Rating Period does not count the most recently policy year.  The period comes from the second, third, and fourth policies in the past.  (Retrospective).   

Picture of Guaranteed Cost with Drawing of Umbrella

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A rate is agreed on when the policy is created and is multiplied by the exposure base to yield the premium. The only variable affecting premium that should change between policy inception and audit is payroll. If the exposure base, for example: sales, is more or less than expected at the policy’s creation, the premium will be adjusted accordingly. Loss experience does not affect the premium.

A guaranteed cost plan transfers your risk to an insurance carrier. You pay a fixed rate for your term of coverage, but get no immediate reward for good risk management efforts or results.

Compared to other ways to insure for workers’ injuries, guaranteed cost has the least variability.   However, other coverages may suffice at a cheaper rate. 

2019 Update – California recently published a study that shows a  self-insured 21% savings when compared to a guaranteed cost program.   One of the self-insurance concerns is that a company is large enough to bear the direct cost of any major or a spate of accidents.   

©J&L Risk Management Inc Copyright Notice

Filed Under: Guaranteed Cost Tagged With: exposure base, prospective

Indemnity Claim – Workers Comp

June 23, 2010 By JL Risk Management Consultants

Term Of The Day – Indemnity Claim

Graphic Of Hand Indemnity Claim With Piggy Bank

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An Indemnity Claim is a part of insurance contracts in which the insurer agrees to cover the cost of losses suffered by the insured. These claims included medical payments and payment for lost time by the injured worker, including lost weekly wages and permanency.

Most insurance contracts use Indemnity Claims, except personal accident and life insurance policies. In most of the claims, the injured party will have claimed more than three days of total or partial disability.

NCCI says that Temporary Total Disability indemnity benefits are provided to injured workers to replace wages, and other specified costs like vocational rehab, while the injured party recovers from a work-related injury or illness and is not able to work. The claim lasts the number of compensated days of lost wages. The current average TTD duration is 125 days.

This part of a Workers Comp claim is much more controllable in most instances than the medical portion of the claim.  Twenty years ago, the medical portion of a WC claim was less than the indemnity claim.   Now the indemnity benefits are 40% or less of a claim’s total value.   The reduction in the % comes from medical inflation,

©J&L Risk Management Inc Copyright Notice

Filed Under: Indemnity Claim Tagged With: contract, permanency, vocational rehab, wages

Final Workers Comp Answer For Two Prior Related Articles

June 23, 2010 By JL Risk Management Consultants

The Final Workers Comp Answer = 6 months after policy expiration

This is the Final Workers Comp answer for when a policy expires.  Last week and yesterday I posted on the importance of June 30th if your Workers Comp policy expires on 12/31 or 1/1. Why is June 30th important for those policies and what date is very important for your Worker Compensation policies?

Woman final workers comp answer thinking

Wikimedia Commons – Xuan Zheng

The Workers Comp Experience Rating Cycle is a double-delayed cycle. One main aspect of the delay is that all of the rating bureaus allow six months for the insurance carrier to change the reserves on your loss run.

When agents and claims staff want to do reviews right before your policy expires, they are seriously wasting your time.

Six months after your policy expires is when the Total Incurred (Paid + Reserves) from the Workers Compensation loss runs are calculated for your E-Mod/X-Mod. However, you cannot wait until two weeks before the six month period ends to start working on this project.

You must have a schedule to follow that starts much earlier. It does take some time to review your claim loss runs and then negotiate any type of reserve reductions or file closings.

We have devised our own loss run review schedule for each of our clients.

©J&L Risk Management Inc Copyright Notice

Filed Under: unit stat date Tagged With: double-delayed cycle, final answer, project

Hybrid Premium Audits Good Bad Points With Technology Assistance

June 22, 2010 By JL Risk Management Consultants

Hybrid Premium Audits May Become Future of Audits (Almost)

Most Hybrid Premium Audits on a Workers Comp policy are when the insurance company auditor asks for the material required to perform the audit without visiting the client’s business. As the Internet has made the flow of information much easier, hybrid audits can take many forms.

Graphic Of Hands Hybrid Premium Audits With Gold Coins

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They are becoming more popular as a cost cutting measure for the insurance carriers to save on travel and personnel costs. Hybrid Premium Audits may become more popular over the next few years.  The advancements in technology such as PDF’s reduce the size of an emailed document.  

A Premium Auditor performing a hybrid premium audit may request a scan of all the required material be emailed to them for review. There is basically no cost to the insurance carrier or employer if all documents are scanned.

One of the concerns over this type of audit is the insured employers have to send data outside the company versus a physical audit.  Many states require an in-person physical audit.  The hybrid audit may not suffice due to that rule.   Some employers have favored this type of audit to reduce the stress of a physical audit. 

One area to make sure that remains constant throughout a hybrid premium audit is your company has to appear accurately on paper.  The documentation has to show that for instance, a certain work performs certain job duties the same as if the premium auditor had performed an in-person physical audit.  

Lately, one area of concern consists of subcontractors and staffing agency supplied temporary employees.  The premium auditor has to know without a doubt that these subcontractors and temp employees are not your company’s responsibility for workers compensation coverage. 

As time passes,  we shall see the success/failure of using hybrid premium audits.    

©J&L Risk Management Inc Copyright Notice

Filed Under: hybrid, Premium audit Tagged With: PDF, physical audit

Workers Comp and June 30th – What Is The Big Deal?

June 22, 2010 By JL Risk Management Consultants

Workers Comp and June 30th Critical Relationship

I had posted the question last week on why June 30th is such an important day in the Workers Comp insurance cycle. The answer has two parts. Thanks for all the email inquiries everyone sent in last week.

Picture Of Hand June 30th With Insurance Cycle Graphic

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The largest percentage of Workers Compensation policies renew on January 1st of each year. June 30th is six months after that date. What happens in the six months after your last policy expires? If you do not know, you need to mark the date on your business calendar. Less than 1% of the companies we have as clients knew the importance of that six-month period.

Check out my next post for the final answer.    Not give to much away – but the date is the Unit Statistical date. This is of those under-the-radar terms that employers need to discover as much as possible on this critical date and its functions.  Understanding that date helps in understanding the Workers Compensation rating cycle by the rate bureaus. 

June 30th at 11:59 pm is the drop dead date and time to peg your claims to your Experience Modification Factor.  Your starting policy date has little to do with your E-Mod. 

©J&L Risk Management Inc Copyright Notice

Filed Under: unit stat date Tagged With: inquiries, percentage, policy

What Is The Jones Act In Workers Compensation?

June 21, 2010 By JL Risk Management Consultants

Jones Act – Workers Comp Concern

The Jones Act, or Merchant Marine Act of 1920, was passed due to concerns about the legal protection of the Merchant Marine. Prior to the Jones Act, sailors who were injured on the job had few options for receiving damages. Now, injured seamen can seek compensation for injuries resulting from the negligence of their employers or co-workers during their employment on a vessel.

Graphic Of Jones Act Ship

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These benefits are known as “maintenance and cure” and any sailor who is injured at sea is entitled to them. “Maintenance” is a daily allowance paid to the injured party, usually $10-$40 a day. This is intended to cover food and shelter the seaman would have received aboard the vessel. “Cure” is the employer’s obligation to provide the injured party with appropriate medical care, hospitalization and rehabilitation. Sailors can also sue for damages if their injuries were caused by negligence on the part of the ship’s owner. Death benefits will also be awarded if a sailor is killed on the job.

Anyone who spends at least 30% of his or her time on a Merchant Marine vessel can qualify for the Jones Act, including the Captain.

 

©J&L Risk Management Inc Copyright Notice

Filed Under: Jones Act Tagged With: legal protection, Merchant Marine

Hartford Pays $72 Million Fine For Exactly What – Administration Fee

June 19, 2010 By JL Risk Management Consultants

Hartford Basically Pays Each Claimant

Graphic Of Hartford In Location Spot

StockUnlimited

Hartford pays $72 million penalty for an Annuity administrative charge. The Hartford was recently assessed a huge fine. I was surprised to see why the company was fined. It was for basically setting up settlement annuities (including Workers Comp) and charging a 15% administration fee from their own life insurance company. After reading a few of the articles, I came to the conclusion that all annuities made Hartford a 15% profit from the claimants.

The Hartford is basically going to pay each claimant a $3,250 check. My main question would be what profit was made from this versus the fine. Annuities are a great way to settle any type of insurance claim where the claimant wanted to make sure they would receive a lifetime benefit. I always liked shifting the administrative burden of paying lifetime checks to a company that specializes in paying timely benefits.

The other part of an annuity is that you are purchasing a payment instrument at a discounted present value. The provider of the annuity knows that the future value of money is less than what money is worth today. I really do not understand what the 15% fee was for as Hartford would still have made a large profit on playing the spread between the annuity purchase price and what they would have actually had to pay out over time.

©J&L Risk Management Inc Copyright Notice

Filed Under: Hartford Annuity Fine Tagged With: annuities, assessment, burden

Sliding Scale Dividend Plans Are Loss Sensitive Policies

June 18, 2010 By JL Risk Management Consultants

Sliding Scale Dividend Plans Definition

In workers comp insurance, Sliding Scale Dividend Plans are established to return a portion of the premium to the policyholder if the losses are better than expected and a dividend is declared. This is a type of Loss-Sensitive Policy.   Loss sensitive policies have been know to dramatically increase premiums in certain cases.

Workers assembling rebar Sliding Scale Dividend Plans for water plan

Wikimedia Commons – Tomas Castelazo

In a sliding scale plan, the size of the dividend slides up or down according to the loss experience (incurred losses/premium paid). This amount is returned to the insured business after the policy expires.

Sliding Scale Dividends are very state-specific. Dividends are not guaranteed and are paid based on the ratio the final audited premium has to the total incurred losses of the insured for the policy period.

These plans an be variable.   

A policy year dividend depends on your earned premium and your loss ratio during that year.  The dividend grows as your premium increases and your loss ratio declines.    The formula might look something like this:

Dividend = final audited premium / loss ratio   

 NCCI has created its own table for dividend plans.  The table is behind a paywall.   Therefore, I cannot provide it here.  

Each state has very specific rules on this type of plan.

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: declines, losses

Short Rate Penalty Expensive Choice To Change Policies Mid-Term

June 17, 2010 By JL Risk Management Consultants

The Short Rate Penalty Eliminates Policy Hopping

A workers comp insurance policy may be cancelled before the end of the policy period, but not without penalty. Most policies require a short rate penalty when a policyholder requests cancellation.

Picture of Policies File Concept short rate penalty Insurance Policy

(c) 123rf.com

The amount of the penalty is determined by a table of factors and will be steep in the early days of the policy, gradually tapering off the closer the policy gets to the expiration date.

For example, if you have a one-year policy and you cancel after six months, the short rate penalty allows the company to maintain more than one-half of the annual premium. Policies are required to clearly describe any cancellation penalties.

The penalty keeps employers from jumping from policy to policy especially after a spate of accidents or one large serious accident.  The penalty also lessens the risk for insurance carriers if they have to cover accidents with less premium due to the employer switching insurance companies.  

Employers  often request another insurance carrier after a disputed premium audit.   Unfortunately, the premium audit cycle begins just after renewal.  The insured may be locked into another year to avoid the short rate penalty. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Short Rate Penalty Tagged With: expiration, penalty, requests cancellation

Federalization Of Workers Compensation – Starts Now – Warning

June 15, 2010 By JL Risk Management Consultants

The Federalization Of Workers Compensation

I had coined the phrase Federalization of Workers Comp a few months ago. I was told that I was a tea leaves reader; black swan proponent; and other choice terms. No one would believe me when I warned the new Healthcare Legislation would be the start of the feds controlling Workers Comp. I had one fellow blogger post a blog that Workers Comp would never be federalized – period.

Graphic Of Healthcare Federalization Icon

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Well, it is now here. Senator Robert Byrd (WV) included language in the Senate measure passed last month that would make it easier for miners to receive benefits through the national black lung program. Currently, miners must prove that black lung significantly contributed to their disability. Byrd’s provision would instruct administrative law judges to presume that miners with 15 or more years in the mines who are suffering from a totally disabling lung disease would qualify for benefits unless there’s evidence they don’t have the disease or that it came from somewhere other than the mine.

The provision would also automatically allow a surviving spouse to continue receiving benefits after a miner’s death rather than having to reapply, a process that can take years.

Judges Chair Federalization In Court Room

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I am not saying that this was bad legislation. I am just pointing out this was FEDERAL LEGISLATION, not state legislation. This is not going to be the last foray by Congress to insert its powers into what should be left alone to be administered by the states.

The CMS’s Medicare Set-aside rules are not far behind. I had read in John Gelman’s blog the CMS may consider their rules as having no statute of limitations.

What happened to the Workers Comp rates for coal mine related companies? The NCCI was going to revise the advisory rates for coal companies in West Virginia and the insurance carriers were going to revise their rates. As of the time of this post, I think the revisions have been delayed.

©J&L Risk Management Inc Copyright Notice

Filed Under: Work Comp Federalization Tagged With: administrative law, Byrd's provision, CMS

Is Employer’s Liability Really Needed in Workers Comp?

June 15, 2010 By JL Risk Management Consultants

Employer’s Liability Part B on Policies

Employer’s Liability Insurance is an additional part of Workers Comp Insurance policies.  While Workers Comp Insurance is designed to cover your employee’s medical and disability expenses, Employer’s Liability Insurance protects your company against lawsuits due to work-related injuries.

Graphic Of Employer’s Liability With Umbrella

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Employer’s Liability Insurance covers work-related injuries not covered under the Worker’s Compensation portion of your policy. This coverage applies to your employees and to you as an employer.

Worker’s Comp Insurance and Employer’s Liability Insurance make up two parts of insurance required by law in most states. Worker’s Comp Insurance is required by regulation in most states when you have W2 employees.

Lawsuits against your company can come from the employee, his or her family members, relatives and third parties. Should an employee claim that his or her injury was caused by your company’s negligence or failure to provide a safe workplace, this insurance will protect your business from liabilities and eliminate the need for litigation. However, under this insurance, your company will not be protected against claims like wrongful dismissal or sexual discrimination.

You as an employer are liable if your employee suffers an injury due to something work-related. Injured employees are guaranteed awards from an employer for medical costs and some percentage of lost wages. This policy is intended to protect your company against any claims from injured employees.

©J&L Risk Management Inc Copyright Notice

Filed Under: Employer's Liability Insurance Tagged With: disability, expenses

Disfigurement Benefits – How Are They Calculated?

June 14, 2010 By JL Risk Management Consultants

Term of the Day – Disfigurement Benefits

Most disfigurement benefits are for those who have suffered a work-related injury to the head or neck, resulting in a permanent loss of specific bodily functions, scarring and/or disfigurement. The scars must be located on the face or neck. This can result from either a cut or burn, or be from a surgical scar from a work-related injury.

Woman With Disfigurement Benefits Face Acid Attack Victim

Wikipedia – Sand Paper

The benefits for disfigurement can only be claimed for the neck or head. A person may have significant scarring to other parts of their body, but it is not compensable under Workers Comp. Even if a worker is not disabled from the injury, they may still be able to collect benefits.

Benefits are given in a one-time payment and in addition to other payments, like medical bills and lost wages. The payment will depend on the severity and location of the disfigurement, and the state the injury took place in.

For example, this is North Carolina’s benefit outline: Disfigurement and Damage to Other Organs: If the injury leaves facial or head scars that seriously disfigure the person, or causes the loss or permanent injury to an important organ of the body, the employee may be awarded additional compensation not to exceed $20,000.00. The maximum payable for serious bodily disfigurement is $10,000.00. No compensation is allowed for scars where the employee is paid for loss or partial loss of use of the same member. The employee is also entitled to payment for disfigurement due to the loss or crowning of permanent teeth.

Man Holding Disfigurement Benefits Calculator With Scientific Icons

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To claim disfigurement benefits, the injured person must be able to prove that the injury causing the scar was work-related. They must also give proper notice of the injury within the requirement of the Workers Compensation Act. It must also be proven that the scarring or disfigurement is permanent; usually someone with scarring or disfigurement after six months is eligible.

©J&L Risk Management Inc Copyright Notice

Filed Under: Disfigurement Benefits Tagged With: crowning, work-related

D Ratio On My Experience Rating Sheets – What Is It?

June 13, 2010 By JL Risk Management Consultants

Term Of The Day – D Ratio

A D Ratio is a variable used in a workers compensation experience rating plan. It is applied to the expected losses to determine what percentage of those expected losses are to be considered as primary losses within the rating formula.

Once discovered, the D-Ratio is the ratio of primary expected losses to the total expected losses for any certain classification code. It is then used on a workers compensation experience modification factor (emod) worksheet.

Table of of Expected Loss Rates D Ratio Experience Rating Plan

(c) wcirb.com

The D-Ratio is important because the experience rating formula splits injury cost between a primary amount and the remainder. Because primary losses are given more weight in determining the experience rating modification than are excess losses,it is an important factor to determine.

One can think of the Excess Losses as the discounted losses beyond a split point.  A split point

D-Ratios are produced by a rating bureau and published in that bureau’s experience rating plan manual. Each one varies by state and classification code.

The ratio cannot necessarily be disputed as they are attached to the associated Classification Code.  The ratio is calculated from a set of actuarial formulas used by each state rating bureau, WCIRB, or NCCI.

©J&L Risk Management Inc Copyright Notice

Filed Under: d-ratio Tagged With: Expected Losses, manual

Is Pharmacy Benefit Management Useful in WC?

June 9, 2010 By JL Risk Management Consultants

Term of the Day – Pharmacy Benefit Management

Pharmacy Benefit Managers (PBMs) are one of the most widely used services in the US for prescription drug administration. They are third party and contract with pharmacies to negotiate discounts and rebates with drug manufactures. Today, more than 210 million Americans receive drug benefits administered by PBMs.

Picture Of Woman Pharmacy Benefit In Store

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PBMs are responsible for processing and paying prescription drug claims and for maintaining the list of prescription drugs covered by a particular drug benefit plan. Because they have a larger pool for prescription drugs, they are able to negotiate discounts and rebates. Their services can also include things like tablet splitting and mail orders.

There are currently 60 or so PBMs in the US. Some are independently owned and others are divisions of bigger companies, chain drugs stores and managed care plans. They compete to win business by offering clients the ability to manage their drug spending and increase cost-effectiveness of their medications.

PBMs have many advantages, but each PBM uses the available services differently, depending on their client’s need. For example, PBMs monitor prescription safety across all pharmacy networks to catch potential drug interactions.

Just two days ago, CVS broke the news that they were removing Walgreen Co. from their Pharmacy Benefits Manager business, saying they had violated an existing agreement. They accuse Walgreens of seeking higher reimbursement rates when they already receive rates similar to those of other major national chains.

©J&L Risk Management Inc Copyright Notice

Filed Under: PBM Tagged With: discount, negotiate, prescription drug

Workers Comp Claims Adjuster – Defending Tough Job

June 8, 2010 By JL Risk Management Consultants

Workers Comp Claims Adjuster Can Be A Tough Job

The Workers Comp Claims Adjuster possesses a job that can be nerve wracking.  One of our services is to review files to see how the claims adjusting staff performed on a group of claims. I had recently read a LinkedIn post slamming Workers Comp claims adjusters. The poster had recommended to the other readers to challenge an adjuster by asking them to on-the-spot give an immediate answer on a claim. I see this in posts and artifices approximately twice per year.

Graphic Of Gavel Workers Comp Claims Adjuster Defense

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Asking an adjuster to discuss one file on-the-spot is the same as asking someone what they had for lunch over a month ago. We recommend that an employer establish a working relationship with their adjusters. Expecting an adjuster to not pull the file and review it before giving an answer or status is going to leave an employer disappointed.

We always recommend emailing adjusters and expecting an answer to the email within 24 business hours. This allows the Workers Compensation adjuster time to review the part of the file to give an acceptable answer. An email is very strong written documentation for the employer and the adjuster.

I wrote about this situation in a manual that I wrote on controlling Workers Comp costs.

©J&L Risk Management Inc Copyright Notice

Filed Under: claims adjuster Tagged With: readers, services

Proximate Cause – Does A Bear Smoke Pot In The Woods?

June 8, 2010 By JL Risk Management Consultants

Drugs vs. Proximate Cause

The proximate cause of an accident  may not always be that obvious in a WC claim.

One area that Workers Comp insurance companies and self insureds spend a large amount of money to deny and defend claims is when an injured employee is deemed to have alcohol or drugs in their system. Many employers, TPA, and insurance carriers have a rude awakening when the employee is awarded benefits by their respective Workers Comp Commission.

Picture Of Drugs Proximate Cause In Bottle

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I do not agree with the premise, but this happens often. Before a denial is issued the carrier, employer or TPA, the question has to be asked – Was the drug or alcohol in the employee’s system the proximate cause of the incident?

One of my first denials that was lost at an Industrial Commission hearing when an employee that was stoned on pot and fell through an open skylight into a bathtub. The file was denied and defended. The Deputy Commissioner awarded benefits as the PROXIMATE CAUSE of the accident was not due to the marijuana intoxication of the employee.

OK, back to the title of this post. Recently, in Montana, a worker at a tourist attraction was mauled by a grizzly bear while on the job. The worker had smoked pot just before beginning work. The worker had to enter a bear cage and was mauled by the bear.

The employer had denied the incident saying the employee was a volunteer and the fact that he smoked pot caused the accident. The Workers Compensation judge did not see it that way and awarded benefits. The judge also concluded that the proximate cause was not the worker having smoked pot.

©J&L Risk Management Inc Copyright Notice

Filed Under: marijuana Tagged With: proximate cause, smoked pot

Negligence In Workers Comp And Exclusive Remedy

June 8, 2010 By JL Risk Management Consultants

Term of the Day – Negligence

Picture of Man Negligence Workers Comp

123RF

The Workers Comp term for today talks about the different definitions of negligence. I was taught this definition a long time ago and it has always stuck with me. Negligence= duty owed + duty breached – contributory.

Dictionaries define it as “the failure to use reasonable care, resulting in harm to another.” It is basically used to get compensation for injuries and damages from someone who fails to protect another person from avoidable harm.

There are many different types

  • Contributory Negligence, which I used in my definition, bars the plaintiff from recovering any damages if they are found in any way to be responsible for causing their own injuries, even if the defendant was negligent as well.
  • States are either Contributory or Comparative Negligence jurisdictions. In Comparative , it is first decided how much fault each person has. The amount of damages is then portioned out between them, each paying only their ratio of fault. For example, if the plaintiff is found to be responsible for 10% of their own injuries, the defendant is required to pay the remaining 90% of the damages.

The basic definition of Workers Compensation insurance removes most negligence with a workers compensation injury.   The employer cannot say that an injured employee was contributory negligent to deny or diminish benefits.  The injured employee cannot pursue legal action outside of the Workers Comp claim against the employer – better known as exclusive remedy.   However, this does not remove possible responsible third parties from negligence. 

Update  2018 – Wisconsin just ruled that employers can be held negligent in Workers Compensation. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Negligence Tagged With: comparative negligence, definition

Is Proximate Cause Part of Workers Compensation Claim Investigation?

June 7, 2010 By JL Risk Management Consultants

Term Of The Day – Proximate Cause

The issue of Proximate Cause is one we see often in workers comp.

It is an act which sets off a natural and continuous sequence of events that prod

Graphic Of Man Proximate Cause With Foot Injured

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uces injury. It is basic cause and effect- anytime you act, you start a series of events to occur, and responsibility for an injury should be placed on the negligent act that produced the injury.

The key point in the definition is that without that act, no injury would have resulted. This is where workers comp claims get tricky. Finding the true cause of an accident can become complicated. With many of the claims in workers comp dealing with Proximate Cause, drugs and alcohol are factors.

What if someone gets hurt on the job and it is discovered that they had been drinking or had taken drugs? The claim now has to go further to discover what the proximate cause of the accident was, and if it would have still occurred if the worker had been under the influence or not.

Many states, for example Ohio, have a workers’ compensation law that says an injury is not able to be compensated when the proximate cause of the injury is the employee’s intoxication or drug use. In most cases, though, it is found that the drugs or alcohol were not the causes of the injury.

Coming up, I will write a post with a few actual cases of proximate cause.

©J&L Risk Management Inc Copyright Notice

Filed Under: Proximate Cause Tagged With: intoxication, sequence

Governor Crist Vetoes Bill for Controlling Costs in Workers Comp

June 5, 2010 By JL Risk Management Consultants

Governor Crist Vetoes Workers Comp Bill

I wrote a post a few days ago on the recent veto of a promising Workers Comp bill by Florida’s Governor Crist. While he signed off on bills that would improve the Florida Department of Health and extend a controversial Medicaid managed-care pilot program, he vetoed the bill aimed at controlling costs in Workers Comp.

Picture Of Governor Crist With USA Flag At The Back

Wikimedia Commons – United States House of Representatives

In my last post, I wrote primarily about the limitation of prepackaged drugs that the bill would have ensured, but it also addressed so many other issues dealing with worker’s comp and state risk management.

Florida’s Chief Financial Office Alex Sink, who implemented recommendations to strengthen the state’s risk management program, released a statement Friday saying, “This legislation was an important step in holding state agencies accountable and reducing workers’ compensation costs, and I am very disappointed that Governor Crist chose today to favor special interests instead of Florida taxpayers.”

Key elements of the bill, HB 5603, included establishing return-to-work programs for certain state agencies, basing premiums on actual loss experience, and enabling the Division of Risk Management with the responsibility to evaluate state agencies’ risk management programs as well as recommend corrective authority. It also contained a provision to cut short the increasing costs of prescription drugs in the workers’ comp program.

Hand Pointing Governor Crist At Risk Management Icon

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“The bill would have helped control state risk management expenses and employers’ workers comp costs,” the Governor said in his Friday veto message, “but the bill could also result in numerous unintended consequences that could adversely impact injured workers.”

He didn’t mention what exactly these “unintended consequences” were, however. And if he doesn’t start giving some reasoning behind his veto, I will safely say that he has severely hurt the entire state of Florida’s businesses. Following another sneaking suspicion of mine, I will be looking into if Florida doctors who have special interests in prepackaging drugs have given the Governor campaign money.

©J&L Risk Management Inc Copyright Notice

Filed Under: Governor Crist Veto Tagged With: chief, department of health

Federal Terrorism Risk Insurance Act (TRIA) Cause Extra Premiums?

June 3, 2010 By JL Risk Management Consultants

Federal Terrorism Risk Insurance Act

The Federal Terrorism Risk Insurance Act appeared on Workers Comp policies since 2003. .Since the September 11 terrorist attacks, there has been a lot of concern over whether the insurance industry would continue to provide insurance for losses due to terrorism. So in 2002, congress enacted the Terrorism Risk Insurance Act.

Picture of USA Federal Terrorism Risk Insurance Capitol

Wikimedia Commons – Martin Falbisoner

It was intended to limit the liability insurance carriers are exposed to in the event of a major terrorist attack. The act provides a federal backstop for acts of terrorism resulting in at least $5 million in losses and certified by the US Treasury secretary as an insured loss. The act primarily covers property and casualty insurance other than worker’s compensation and requires the federal government to pay 90% of the cost of an attack by foreign terrorists after losses are greater than $10 billion, up to a total of $100 billion.

The act was reauthorized in 2007, extending the plan until December 31, 2014. The update also requires that losses exceed $100 million. The definition of “act of terrorism” was also revised, removing the requirement that the act of terrorism be committed by an individual acting of behalf of any foreign person or foreign interest.

©J&L Risk Management Inc Copyright Notice

Filed Under: Federal Terrorism Risk Insurance Act Tagged With: property and casualty, terrorism, treasury

Is The ARAP Considered A Penalty For Unsafe Employers?

June 2, 2010 By JL Risk Management Consultants

ARAP – Workers Comp Definition 

ARAP charge appears on many policies. Over the past decade, various states have approved a new premium surcharge known as ARAP, Assigned Risk Adjustment Program. Massachusetts is an exception and here it stands for All Risk Adjustment Factor.  The charging structure is very similar.

Graphic Of Risk Management ARAP Cycle Chart

StockUnlimited

The factor is based on data from the experience modification computation and is applied to premiums, after the experience modification. This compounds the surcharge from the combined experience modification/ARAP.

Its purpose is to apply an additional premium to assigned risk policies with unusually high loss severity. The Assigned Risk Adjustment Program formula compares actual severity to expected severity. 

Unlike the experience modifier, it is not a credit and debit plan. It can range from 1.00 (no surcharge) to 1.49 (49% surcharge). In some states, caps are placed on the maximum  and in any approved states, the best an employer can expect is no surcharge.

An employer can find the surcharge on their list of policy charges.  The charge will also appear on the final premium audit bill the employer receives at the end of the premium audit process.  

The ARAP can be considered a penalty of sorts for unsafe employers. 

©J&L Risk Management Inc Copyright Notice

Filed Under: ARAP, Assigned Risk Plans Tagged With: computation, data, Massachusetts

Florida Has Workers Comp Improvements Vetoed

June 2, 2010 By JL Risk Management Consultants

Improvements Vetoed  – Workers Comp In Florida

Workers Comp improvements vetoed in the Sunshine State. There has been quite a large amount of buzz in the Workers Compensation world in reference to Governor Crist’s veto of what looked to be a great piece of legislation for businesses in Florida. The bill was a conglomeration of numerous non-invasive cost-cutting measures for Workers Comp.

Picture Of Governor Charlie Crist Improvements Vetoed USA Flag At The Back

Wikimedia Commons – United States House of Representatives

The main topic was the prepackaged drugs provided by physicians would have been banned. Sadly, there were many more aspects of the legislation that would have saved Florida millions in Workers Comp payouts over the next few years. 

One of the better studies performed on prepackaged drugs was released n January 2005. The California Workers’ Compensation Institute (CWCI) released an interesting cost analysis compiled of repackaged drugs. The analysis evaluated a total 246,906 prescriptions with 30.5 percent represented by repackaged drugs and 69.5 percent comprised of pharmacy-based medications. Although repackaged drugs consisted of only 30 percent of the sample size they represented over 51 percent of the total paid amount.
 
The same study also included a price comparison of three common repackaged drugs with pharmacy fee schedule and on-line pharmacy costs. In each of the three examples the repackaged drug contained significantly higher costs. Without further cost analysis of prepackaged drugs, comparing reimbursement rates with multi-state fee schedules, it is difficult to determine if these findings represent a unique observation. If nothing more, the study heightens concerns that prepackaged drugs may lead to increased pharmacy costs.
 
I will cover some of the other Workers Comp savings that were in the bill next time.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: Governor Crist Veto Tagged With: conglomeration, invasive, study heightens

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James J Moore
Raleigh, NC, United States

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:
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