By John V. D'Alusio
Related Coverage Return-to-Work Challenges (12/01/11) Recalling the Crisis of 1991 (11/01/11) Learning from History (12/01/11) Assessing OSHA's Effectiveness (10/15/11) Back Injuries Become Epidemic (10/01/11) The insurance industry finds itself in an unusual situation of late: low premium levels and low interest rates. Normally, when premiums are low, interest rates are high and visa versa. The insurance industry looks to obtain a profit on premiums or interest rates for their capital, or both. But over the last several years of turmoil in the economy, the industry has found itself in an unenviable position. Although pressure is starting to yield slowly increasing premiums, it is safe to say that premium levels are far below what combined ratios in various lines would yield in "normal" economic times.
As a result of exceedingly low interest rates, open reserves are now anathema. For many insurance carriers and employers, it is desirable to resolve the claims and have the reserves closed. This is particularly true in the workers' compensation line of insurance where the combined loss ratio has been deteriorating over the last several years. However, settlements in the workers' comp area can be anything but easy.
Workers Compensation claims have often been characterized as the claims with the "longest tail" (besides toxic tort cases). Comp is the most highly regulated of all lines of insurance. Workers' comp coverage is statutory and, in the vast majority of instances, mandatory. State laws dictate the claims and litigation process, the amount of benefit payments, the manner in which way medical care is assigned and maintained, and the way that claims may be formally settled.
As any claims person (or employer) will tell you, the only good claim is a closed claim. That's a wonderful maxim, but far more difficult to realize in the world of workers' comp, particularly with long-term claims. In these cases, one is often faced with dreadful combinations of employee entrenched disability syndrome, an employer who does not want the injured employee back, workers experiencing prolonged pain (fibromyalgia or otherwise) involving extended opioid use, hostility of the injured worker toward the employer and an overall adversarial situation that would try the patience of Mother Teresa. So what is one to do to make these claims "go away" at the right price in an expeditious fashion?
A Precision Decision
The objective of the Claims Department is to resolve every case as soon as possible, subject to sound analysis. The key is recognizing the proper moment to initiate settlement discussions. Premature settlement initiatives can result in inflated demands and drive additional treatment, while tardy settlement strategy consequences often result in lost opportunities and higher resolution costs.
Of course, there is no workers' comp law that mandates claim settlement. Some jurisdictions even statutorily prohibit settling future medical exposure. There is always the option of simply continuing to pay benefits and ongoing medical care. But if one is trying to negotiate a settlement in indemnity and medical, or either, there are some things that must be taken into consideration.
The items that, at minimum, should be delineated on every case before making a decision to pursue settlement include:
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