Confessions of a Mass Tort Claims Administrator: The 4 Biggest Mistakes I’ve Witnessed
By Maria Magalona | Consultant, Complex Claims
As a Complex Claims Consultant with Arcina Risk Group and nearly 40 years of claims experience, I’ve witnessed many defendant organizations with mass tort claims making mistakes in their approach to recovering insurance funds. It’s understandable. Many are experiencing their first mass tort situation, and the claims management process is both complex and unique within the insurance industry.
While the list of claims management mistakes is long, there are four that I see most frequently. Spotlighting these ‘Big 4’ mistakes will help you avoid the most frequent problems in managing your next mass tort claim and recover the maximum reimbursement from insurance carriers.
Mistake #1: Neglecting to, or being late in, noticing insurance carriers
As a mass tort claim defendant, you must notice all carriers who issued policies responsive to the claim brought against you. This may include your current insurance carrier as well as any known prior carriers. Do not ignore expired policies and the carriers that once provided them. Mass tort claims often span several years or decades, and there exists a reasonable probability that an expired policy will provide coverage for at least a portion of the claim. Let the carrier tell you that the policy they issued is not responsive and why.
To notify your current and prior carriers, you need to know the years of the alleged years of incident. Identify any and all carriers that provided coverage within those years. Aso, identify the timeframe of the event or ‘Date of First Exposure’ (DOFE) when noticing the carriers. You must provide the DOFE, as carriers will deny coverage whenever the date of first exposure or the timeframe cannot be proven to have happened within the coverage period.
In cases where the exposure stretches beyond the coverage period, you may still be able to recover funds from that policy. The insurer will simply prorate the claim(s) according to the coverage period. For example, a public school district may have had one insurance carrier providing coverage from 1960 to 1970 and a different carrier from 1971 to 1980. If a mass tort claim involved dates of exposure spanning 1968 to 1972, both insurance carriers would have coverage responsibility and allocate costs amongst themselves.
At Arcina, we execute this step both thoroughly and swiftly, ensuring that we notice all past and present carriers upon discovery of coverage.
Mistake #2: Not recognizing the differences between policy types
There are two major policy types that respond to mass tort claims – an occurrence policy and a claims-made policy. An occurrence policy is the most common and most flexible of the two, because it provides lifetime coverage for the incidents that occur during a policy period, no matter when you learn about the claim. Under the more restrictive claims-made policy, incidents are only covered when they both happen and are reported during the coverage period. Make sure you know which type of policy you have, as you will need to act much faster when seeking funds from a claims-made policy. Nonetheless, once you learn about the claim, report it to the carrier so you avoid any Failure to Timely Notice denials.
You should also perform a thorough search to discover if you have any excess coverage and/or coverage for punitive damages. An excess coverage policy is an additional policy layered onto the primary policy. Excess coverage serves a critical role in many mass tort claims, as defendants often find themselves on the line for damages that can reach into the tens of millions or hundreds of millions of dollars. Strangely, while U.S. courts often order payment of punitive damages on top of ordinary damages, U.S. carriers do not offer coverage for punitive damages. These are made available through the Bermuda marketplace, and you will want to check for any Bermuda-based carrier policies which your organization may have.
Through our depth and years of expertise, Arcina recognizes the differences between the various mass tort claim types and the inherent problems therein. This enables us to advise clients on proper claims management for optimum results and options when problems arise.
Mistake #3: Not reading policies and their fine print
Recognizing the terms of the policies you purchased seems like a no-brainer. Yet, a surprising number of defendants in mass tort claims cases fail to read their policies in full, particularly the fine print. Knowing all the details is the only way to avoid the unpleasant surprise of a prompt claim denial based on policy exclusions or failure to comply with its terms.
You must identify what is covered under the policy and promptly comply with the terms of the policy. If you do not comply, the carrier has a basis to deny your claim. While the standards for prejudicial effect vary by jurisdiction, most states will require you have reported under the policy in good faith to subdue a carrier’s assertion of prejudicial effect.
Clearly, it is paramount that nothing is missed when reviewing policy terms. We frequently manage complex claims that involve multiple parties across multiple jurisdictions. In these cases, there are often multiple carriers, which in turn, requires the management of multiple filing requirements and terms.
Mistake #4: Not engaging an insurance archaeologist for legacy tort claims
Legacy mass tort claims occurred many years ago. Insurance archaeologists can more effectively and cost efficiently locate historic coverage than an organization’s internal resources or a law firm. These practitioners are highly skilled in the policy discovery process and have the contacts and expertise necessary for optimizing the search results. The research can result in locating policies that could provide indemnity and reimbursement of defense fees, the latter of which can be substantial. These services are normally a fraction of the cost of a law firm.
Among insurance archaeologists, Arcina’s seasoned team is an industry leader having researched policies for decades; who understand the nuances of insurance policy construction and its evolution over the years (think Travelers’ policy numbering convention in the 1970s vs the 1990s). As a result, we manage complicated legacy claims with ease – everything from asbestos and talc to opioids across the entire healthcare supply chain, to misconduct by religious institutions and unsuitable player protection by sports organizations.
Clients specifically turn to Arcina because of our credentials, experience, policy knowledge and relationships with insurance markets. We produce results throughout the claims management process and aim to secure the greatest reimbursement for clients.