Perfecting the Claim, Part I

Risk managers, CFOs, corporate claims managers and regional brokers all strive to increase their organization’s success rate when defending against mass tort and other complex claims. Doing so requires two critical elements: (1) adherence to the proper claims lifecycle, and (2) the experience and tools needed to optimize each lifecycle step.

All too often, the second element is overlooked. Certainly, there are many organizations that can (and do) follow the proper claims lifecycle. Yet, truly performing each step with maximum efficacy is what separates the winners from the rest of the pack.

Read on to gain a high-level view of the 5-step claims lifecycle and how performing each step in a performant manner can have a dramatic impact on coverage outcomes. 

The five steps of the mass tort claim management lifecycle occur in this order:

 

1. Review the claim and the applicable insurance 
2. Map the claim to the appropriate coverages
3. Deploy the claim
4. Track insurance carrier communications
5. Obtain insurer participation

 

Let’s take a closer look at each step.  

 

Step 1: Review the claim to identify the triggering event and potential applicable insurance

 

For any claim, the trigger is the action that causes an organization to have a loss or potential loss and to seek coverage against said loss with  specific identifiable insurance. Current insurance policies cover many claims. However, mass tort claims and class action claims tend to reference past acts that can be decades old, sometimes dating back as far as the 1940s. In these cases, defendants turn to older insurance policies to gain their desired coverage.

Organizations across nearly all industries used to rely on general liability (GL) policies before insurers started to more narrowly define – through exclusions – what they would and would not cover. Organizations protected by a GL policy (sans exclusions) are far more likely to obtain coverage today, even though the adverse event took place long ago and was just recently discovered. Another significant benefit of older GL policies is that many provide coverage for the  defense of the  lawsuit in addition to the indemnity

When reviewing current and aged policies, it is important to differentiate between ‘claims-made’ and ‘occurrence’ policies. Claims-made policies only provide coverage for incidents that occur and a claim is reported during the policy period. By contrast, occurrence policies give lifetime coverage for incidents that occur during a policy period and have no time restrictions regarding when the claim is made.   

 

Step 2: Map the claim to historical coverage

 

Understanding all the potential coverage options for a claim can present a major challenge. Many companies are, or fall within, multifarious organizations that have merged with others over the years or expanded into numerous and varied markets. So, one frequently discovers multiple insurance policies, each with its own coverages, riders and/or tails. More often, companies realize the historic policies are nowhere to be found.At this stage, it may be prudent to engage an insurance archaeologist to locate historic insurance and supplement the known available insurance assets.  Having a clear and consolidated view of the full scope of insurance coverage can dictate how an organization will respond to a claim. 

To obtain a consolidated view of historical coverage, we construct  a coverage chart. Beyond identifying each policy’s type, the coverage chart  also shows policy-specific terms and limits, solvency status and potential impairments. Solvency status reveals if the insurer is still in business, and impairments data clarifies how much value of the insurance has already been used. We then map the facts of the claim including key dates, injury, jurisdiction and damages to the available insurance coverage provisions such as dates/term, bodily injury and any exclusions. 

In reviewing the image below, it is clear that the coverage chart  provides two major benefits: assurance that nothing gets missed and the basis for preparing the defendant advocacy plan (see subsequent lifecycle steps). 

 

Step 3: Deploy the claim

 

Once evidence of historical policies has been uncovered and mapped, the next step is to deploy the claim. And wIth mass tort, there may be many claims.This requires that the defendant organization (or its representative) notify the appropriate insurance carrier(s) regarding the claim(s). When it comes to legacy claims, insurers often have dedicated personnel to handle them. 

Upon notifying the  insurer(s), the tricky work of advocacy really begins. Here, the defendant’s representative advocates for the defendant/insured and manages their obligations related to the claim. This is where insurance industry relationships prevail. A well-connected and highly knowledgeable advocate oversees the claim from inception to closure, all while driving accountability and optimum results. 

 

Step 4: Track carrier acknowledgements & responses

 

Following Step 3, the defendant organization and its representatives need to track acknowledgements and responses from the insurance carriers. These quickly impact one’s understanding of the coverage chart against  each insurer’s coverage position – ‘covered’ or ‘denied’.

This step may sound simple, but is often where the ball gets dropped. Many organizations and the firms that represent them are not equipped with the right combination of in-house tools, technical resources and claims expertise to properly manage the onslaught of responses. Proper oversight in this step of the claims lifecycle requires vigilance at many levels, including: 

 

• Claims data collection
• Aggregate limits erosion
• Processing of defense costs and indemnity payments
• Insurer billings

 

In complex cases or cases involving multiple policies, having junior staff members armed only with email and Excel spreadsheets leads to poor advocacy results. 

 

Step 5: Communicate with carriers to obtain insurer participation

 

This final step flows from everything the defendant’s representative does in the first four steps of mass tort claim management. Here, the defendant representative responds to an insurance carrier’s investigative needs in order to obtain insurance participation. Oftentimes, the advocate must demonstrate that the facts of the claim fit the coverage. This involves sharing factual evidence beyond insurance records – items that can help the insurer with its investigation.  

 

Experienced hands manage each claims lifecycle step better

 

By breaking down the mass tort claim management process into five lifecycle steps, an organization will be better prepared to defend itself against a claim when the time arrives. That said, mass tort claims often expose organizations to millions, even billions of dollars of losses. That is why we recommend that your organization seek the advice of experts with decades of experience across industries who are fluent in each step of the claims lifecycle and can deliver the highest ROI in almost all cases.  

In part II of this series, we will take a closer look at how Arcina approaches these five steps on behalf of our clients and how this approach saves them time, money and yields successful results. 

If you have questions about your own claims management needs, we would be happy to speak with you. Get to know the professionals at Arcina Risk Group by setting up a free consult with one of our team members.