What’s Happening with Claims in COVID-19
The social work profession is truly a noble one that is founded on service, integrity, and clinical expertise. At times, it can be a stressful and very dangerous occupation. The nation is grateful for what you do, thank you!
There are two broad contexts that you should be aware of in today’s professional liability insurance market. The first is the macro context that deals with rate hikes and risks. The second is the micro context that deals with claims adjudication.
First, let’s take a look at the macro context. We are well aware that premium rate hikes started occurring in late 2018, and are continuing in this hard market into all of 2021 and beyond. It was reported by the P&C trade magazine Rough Notes, (November 2020 issue), that according to Arch Insurance Company that COVID-19 is one of the most challenging risks facing professional liability insurers. Regardless of occupational class, insurance carriers who cover a wide range of classes are more at risk from catastrophic environmental losses, medical malpractice losses, and property losses, and they spread these losses across all its insured classes in a sort of broad-brush approach.
For example, a carrier who provides professional liability coverage to a social worker practitioner has a far lower risk than insuring a nursing home, even though both provide social work services. Nevertheless, the actuaries at the insurer spread the losses out among the entire risk pool covered category in a broad-brush approach, which includes medical malpractice, commercial package, and commercial auto liability and property risks. Therefore, premium rates spiral upwards for everybody. Basically, the low-risk social workers get dragged into the high-risk pool which impacts the entire loss reserve pool.
COVID-19 has caused an economic recession and a very low-interest-rate environment. Interest rates and interest income on future loss reserves are essential for maintaining healthy growth to pay for future loss reserves. Rough Notes, (November 2020) reports from USG Insurance Services, a leading national brokerage, that carriers are using a nibble technique to water down policies by substituting small sub-limits into their general liability and professional liability policies. Shaving down future claims payments is a way to protect profits at the expense of the insureds who effectively lose some coverage.
What does this mean to you as an NASW Risk Retention Group insured?
The NASW Risk Retention Group had zero rate hikes in over 40 years, nor do we anticipate any rate hikes on any of the NASW Risk Retention Group insurance lines, and we will continue with the NASW member discounts. We shall also maintain the comprehensive benefits in all our insurance policies and not lower limits or sub-limits for any policy perils. This is a distinct industry differential advantage that helps our policyholders.
Let’s take a look at the micro context. Referring to the primary data that we collect on our own business, we see first-hand from our (NASW Risk Retention Group) primary claims data records over the past 8 years, that since the start of COVID-19 restrictions in March 2020, the reported claims cases have dropped by half, and sometimes more than half depending on the month. Likewise, we see a large increase in open claims and a drop off in closed claims which is a natural consequence of the blockage at the front end of the claims adjudication pipeline. The drop off in reported claims can be caused by many factors such as decreases in cases in general, fewer patient session cases that pose a risk, more teletherapy which reduces client physical contact, and timing of claims, (ie: backlog due to closed courts and closed licensing boards).
Here is a very brief overview of the NASW Risk Retention Group claims side of the business. Claims adjudication is like a pipeline. Normally claims incidents are reported by the insured and evaluated as a possible eligible claim within the scope of the policy coverage. The most frequent professional liability claims categories are medical records requests, depositions, trial testimony, subpoenas, and a variety of claims that fall under the broad label of dissatisfaction with service. The majority of the eligible claims typically produce a state licensing board complaint. A few of the eligible claims result in lawsuits.
COVID-19 caused the closing of state licensing boards and civil courts for many months, depending on the state, some are still recovering. Historically, our experience has shown that state licensing boards normally require on average 8 to 15 months to resolve a case. With COVID-19 delays, we are now looking at years. Our normal historical experience has shown that lawsuits can last for 5 or 6 years. Some lawsuits are dismissed in 6 to 10 months, but most protract in court for many years in a normal environment.
This COVID-19 induced sudden blockage from the nationwide closure and lockdown has clogged up the claims adjudication pipeline and caused a growing backlog. The backlog piled up in the court docket and the state licensing board pile of complaints grew. Courts are still not fully open. The state licensing boards were closed for months and required several months to move to online alternatives such as ZOOM, Skype, or other online channels. The blockage required over 6 months to get caught up to a near-normal pace but not yet recovered from the backlog, and still, some states lag behind. Most courts in the nation are open on a limited basis, however, hearings and depositions are considered too important to be held on Zoom, Skype, or remote channels because the attorneys cannot gain a full understanding or complete impression of the individuals being examined, so the pace remains extremely slow. Restoration back to a normal adjudication pace in both the courts and the licensing boards depends on vaccine distribution and each state’s lockdown rules.
We do not expect any return to near normalcy adjudication pace in any states until after June 2021, and most probably much longer. Some states may require a year or more just to resume the historical pace. The backlog impact will be felt for three years or more across the nation. Courts have made statute of limitations extensions, but that will not speed up the adjudication process. The extensions merely preserve legal rights and standing.
What does this mean to you as an NASW Risk Retention Group insured?
We recommend that you maintain clear and accurate client records documentation so that you will understand the meaning of the text in future years. Preserve the records in such a way that you can account for each case clearly. Regularly brush up on and review those incidents that you believe may become licensing board complaints or lawsuits. It will be several years until you are expected to act on them, or maybe not at all. The insurance industry as well as the legal profession in general, have found that as time passes, litigants’ tempers subside, and many claims that might result in a lawsuit or licensing board complaint today, will evaporate and disappear in the future.
Thank you for all that you do as first responders and as ongoing behavioral health and social work providers. It is truly a noble profession needed now more than ever. Good luck and stay healthy!