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Workers Comp Reserve Reviews And Subrogation – Three Concerns

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Workers Comp Reserve Reviews And Subrogation

Our Workers Comp Reserve reviews uncover many concerns on claims handling.  Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. In Workers Compensation, we often see three different areas of subrogation that should be of concern to employers.

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First, we sometimes find in our file reviews for employers that there was likely a third party that was or at least was partially responsible for the Workers Comp accident.

As the file adjusting for Workers Comp claims has become more specialized, insurance carriers and TPA’s have sometimes not trained their claims adjusting staff in the steps to pursuing subrogation.

We do often see that the adjusters have pursued subrogation properly if there was an auto accident involved with the claim.

The second area of concern is that when subrogation funds have been received by an insurance carrier or TPA, there is sometimes no procedure on how to handle these funds inside of the Workers Compensation file. This is an area that may not exist in most claims manuals.

The third area of concern is when subrogation funds have been received and credited to the file. We do see in premium audits for employers that the adjustment of the total incurred was never reported back to the NCCI or State Rating Bureau. This can have a great effect on an employer’s E-Mod/X-Mod if the subrogation recovery was significant. As up to 45 months of data go into the E-Mod, a subrogation recovery must be credited on the day of receipt to the file and the correction reported to the NCCI or State Rating Bureau immediately.

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I am not saying that this situation exists in all the files that we see. However, it is of a large enough concern that all employers should monitor if the recovered funds did make it to their E-Mod or X-Mod.

Further note – The X-Mod is the same as the E-Mod. The Experience Modification Factor is called the X-Mod in California.

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James Moore

Raleigh, NC, United States

About The Author...

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:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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