Claims Adjudication…Is Your Carrier E-Cubed?
The social work profession is a noble one founded on service, integrity, and clinical expertise. At times, it can be a stressful and dangerous occupation. The nation is grateful for what you do, AND SO ARE WE! Thank you!
What is “E-Cubed,” you may understandably ask?
No, it’s not a 3-D puzzle toy like the Rubik’s cube. The NASW Risk Retention Group’s (“RRG”) practice of EXCELLENT claims customer service, with insurance coverage delivered ETHICAL and EQUITABLE. The power of these three critical elements has proven to protect RRG policyholders while maintaining the lowest premiums in the industry, the most comprehensive liability insurance policies available, and the lowest claims loss history for a fiscally healthy RRG with the “Excellent” A.M. Best rating. We will discuss these three critical elements.
First, let’s broadly discuss insurance. An insurance contract is a legally binding unilateral contract between the insured (first-party) and the insurance carrier (second party) that shifts the risk of exposure arising from specific perils from the insured to the carrier. In exchange for shifting risk to the carrier under the contract, the insured pays the premium to the carrier.
Under certain circumstances, the insurance contract indemnifies the insured, and perils stated in the contract arising from a reported incident deemed an eligible claim. After that, the carrier is bound to the duty to investigate and defend any claims and lawsuits filed against the insured. The duty to defend and indemnify are two separate duties of the carrier at the heart of the liability insurance policy contract. The risk exposure translates into monetary amounts divided between indemnity, for loss and damages to a third party and the first party (insured), and expenses for the insured, primarily for legal defense.
So how do claims impact me?
Industry research shows that about 35% of small business owners experienced an incident that could have led to an insurance claim. Of that cohort, 22.2% were from a professional liability-related incident, which is far and away from the most frequent. The next highest category was employee injury at 10.6%. (Insure.com, 2021)
According to an AMA Benchmark Survey by the Division of Economic and Health Policy Research, 34% of practitioners can expect to file at least one claim during their career. The claim can be a high-frequency matter such as a State Licensing Board matter or Medical Records Request, which only requires legal fees on your behalf, or a lawsuit with high indemnity and high legal defense costs.
Claims experience in behavioral health professions indicates a .1% probability of a lawsuit for every 100,000 insureds. And 25% of the cases from that .1% are dismissed.
In other words, lawsuits are not frequent but can be severe, expensive to defend, and may result in high indemnity amounts. Claims experience history indicates that a typical high-end lawsuit averages $185,000 in indemnity and legal defense costs to settle. Some cost over $1,000,000.
One common thing among all insurance carriers is that they have a claims adjudication process, and some are better than others in many ways. The National Association of Insurance Commissioners (NAIC), NAIC Model Unfair Claims Settlement Practices Act requires insurance carriers to acknowledge receipt of claim notification within 15 days and within 21 days after receiving proof of loss from the insured to provide notice of acceptance or denial of the claim. Insurance carriers must include a denial, reference to the insurance policy contract supporting the rejection in a denial of coverage letter mailed to the insured. For your information, The RRG responds within 48 hours and typically within 24 hours of notice.
A responsible insurance carrier practices the principle of good faith “uberrima fides,” believed to be first stated in 1766 in the British House of Lords by Lord Mansfield (Carter v Boehm, 3 Burr (1905 and 1766). The duty of good faith rests with both the insured and the carrier.
The essential foundational element to enable E-Cubed in the claims adjudication process is documenting the claim based on all client case therapy and supporting files. Relate the key elements comprehensively, including the What, When, Why, and by Whom the therapy and client interaction occurred. Your client’s therapy files should always be documented, signed, and dated. The insurance regulators will audit these files, and attorneys, judges, and juries will review all the client file information if litigation is involved. The NAIC defines files as retrievable electronic files, paper files, or both.
The three key responsibilities of the claims adjudication process regarding the insured are:
- To help the RRG insured to prove the eligibility of the incident to be a claim, identify the defined peril, and identify the loss;
- To help the RRG insured understand the terms and conditions of the policy contract, including limits and sub-limits; and
- To conduct a thorough, unbiased investigation to determine third-party claims, vicarious liability, and possible subrogation to another carrier.
When filed, the liability claims adjuster represents the insurer and works directly with the insured to resolve the claim. The claims adjuster has a three-fold duty:
- The duty to the insured (first-party) is to protect the insured and defend the insured against the liability exposure from third parties arising from the tort that falls within the coverage of the policy contract;
- The duty to the claimant (third-party) is to treat the claimant fairly, and if liability does exist, to resolve the claim promptly without ignoring the duty to the insured; and
- The insurer’s duty (insurance company) is to establish that coverage exists for the loss according to the terms and conditions of the policy contract. The insured is liable to the third-party claimant and achieving the most reasonable resolution of the claim.
On many occasions, multiple insurers are involved through subrogation, depending on the nature of the claim and coverages from other policy contracts. As represented by its legal counsel on behalf of the insurer, the claims adjuster may negotiate with the third-party claimant’s attorney if a lawsuit is brought and work with other insurance companies involved. Negotiations related to a lawsuit can weave their way around a vast array of legal maneuvering that could require years to resolve even before a court trial occurs. Both sides often arrive at an out-of-court settlement, and sometimes a mediator is involved.
Skilled and effective claims adjudication includes non-sequential multi-tasking. If coverage applies, the assigned attorney and claims adjuster interview the key parties, obtain loss-related documentation and seek medical authorization release associated with the loss and damages. The interviews with key parties include insureds, claimants, witnesses, possibly other insurance carriers, and any other parties related to the case.
In conclusion, the RRG has an Excellent, Ethical, and Equitable history of proactively taking care of its insureds and the claimants who file lawsuits against the RRG’s insureds. Consistent with embodying the E-Cubed approach, the RRG utilizes an industry-leading HelpLine across the nation that immediately assists RRG insureds at no cost to the RRG insureds.
The RRG partnered with Gallagher Bassett, the nation’s leading claims adjudication company, to utilize its network of over 300 attorneys across the country who specialize in legal defense for health and social services practitioners.
As an RRG policyholder and insured, you have the power of E-Cubed.