Brenda McDermott, CPCU, SCLA, CIIP, SCLA, ARM, AIDA
Inflation, supply chain issues, increased catastrophic losses from climate change, and higher and higher nuclear verdicts mean that insurance carriers are facing higher loss costs and loss ratios to their premium dollar. When that happens insurance carriers must look at opportunities to reduce the costs and expenses they can control – Unallocated Loss Adjustment Expenses (ULAE) and Allocated Loss Adjustment Expenses (ALAE). With ULAE they look at reducing staff or overhead by delaying expenditure on new technology or computers or closing some offices to reduce rental and utility expenses. With ALAE they look at controlling litigation, surveillance/ sub rosa, or medical legal examination costs.
Often litigation costs are out of an insurance carrier’s control. In a highly litigious country where applicant attorneys are telling claimants on TV advertisements how insurance carriers are out to rip them off and that they will get them millions, simple cases with no disputes become litigated. This results in insurance carriers having to pay costs to defend a claim that they’ve admitted to and to help bring it to a settlement and closure. And when you can’t reach an agreement on the value of the claim or the benefits owed, then those costs increase as you prepare to defend a suit or at a hearing. The first step to avoiding litigation costs is to be sure you make timely contact with the claimant and complete a thorough timely investigation. The next is to pay what you owe and explain in plain language the rationale behind the amounts. Make sure if you deny a claim that you have a solid basis for denying it and a good chance of prevailing based on statute or case law. If you don’t then an early disputed settlement could help hold down both claim costs and litigation expenses. But there are still those cases where you can’t avoid litigating, so doing a good investigation and documenting the facts and preserving the evidence is key in mitigating settlement costs or getting a verdict that favors you in a hearing.
Surveillance/ sub rosa costs are often incurred when adjusters run out of ideas on how to get the claim headed toward settlement or conclusion. In workers compensation it is often done when the disability continues with little or no objective basis in the medical records to support the employee’s subjective complaints or the extent of their disability. Or it is used when the medical records reflect the employee or claimant doing something that is contraindicated based on their complaints or claimed limitations. You need video to refute their disability. The problem is how and when you do surveillance. You need to do your homework before you assign surveillance. Ever have a video of who you think is your claimant doing activities that show they aren’t as disabled as they claim only to find out that it isn’t them but a sibling or identical twin? You need to do some background and social media investigation or check with the employer, in a workers’ compensation case, to look at that possibility. If possible secure a photograph as well as a physical description of the claimant, including height, weight, hair color, tattoos, or other distinguishing marks. Often claim adjusters schedule surveillance around known medical or legal appointments. While it is a great opportunity to find the claimant out and about, if they are represented, they have probably already been warned by their attorney to be careful what they do around those appointments so you will likely not get any video evidence to refute their disability. This is where the background and social media investigation can provide better opportunities for surveillance. Are they on a sports league? Have they been talking about running in a 5K? Doing a charity walk or taking a trip? Those could be your opportunities to get video when they are not on guard. Surveillance needs to be monitored to ensure that it is being done when there is the greatest opportunity for success or at varying times of day and days of the week to increase the chance of observing the claimant in activities. And it needs to be monitored to know when to pull the plug if the claimant is not observed out of their house or doing anything that they claim they can’t. A claimant walking out to get their mail or rolling out their trash can is not a smoking gun to refute the disability. Not only do you need to know when to stop surveillance, you need to truly understand when it is appropriate. If you don’t have any medical or other evidence to show what the claimant is claiming they can and cannot do, or that they are totally unable to work, and you don’t have any lead as to where they may be working and getting paid cash, surveillance for surveillance’s sake is not going to provide you with anything in exchange for the cost.
A big controllable ALAE is Medical Legal/ Independent Medical Examinations aka IMEs. Just like surveillance it is critical that you do your homework. Just getting an IME because you need to for discovery, or you don’t know what else to do, is not going to yield you any benefit. You need to be sure you have all the medical records – prior medical and medical related to this injury. Read all the medical records. Look in the current records at the past medical history and the history of the claim to see if there are any references to prior injuries or surgeries. Do the records talk about an examination or diagnostic test that was done that you don’t have? Get those records. Once you have secured and reviewed all the medical records, determine what questions you need answered. Are there red flags that you want answered by a doctor? Is there evidence that their treatment isn’t related to your injury but to a prior injury? Or that the injury doesn’t fit the accident description? Do you feel that the objective findings don’t support the subjective complaints or disability? These are the things you are getting the IME for; to help get a medical opinion and answers to the questions that you have that you may not be able to obtain from the treating doctor. So, you have your medical and you know your questions or what you want an opinion about, what are your next steps to obtain a successful IME?
- Determine the medical specialty best qualified to answer your question. On some complex cases it may take more than one specialty.
- Once scheduled, organize your medical records so that they provide the best way to tell the story and help your doctor review the records. Is it chronological, or by specialty? Which method will work better for your claim and your questions?
- Prepare the IME letter to the doctor. You need to be sure that you do a good letter as the more times you have to ask the question or rephrase the question to get the answers you’re seeking, the weaker the resulting report is and the greater the chance the opinion will fall apart under cross examination.
- So, what is the key to a good IME letter?
Tell the doctor the purpose of the examination. Provide the doctor with a brief history summarizing the accident, the treatment to date and the current status. If there are key medical records behind your questions or that you feel are critical that you want them to review, be sure that examination or diagnostic note is referenced by doctor and date of service in that history. Finally, outline your questions. Remember why you set the examination. This is the portion of the letter where you can ask those key questions. Remember what I said about getting those answers the first time? Here are some tips to accomplish that:
Ask clear concise questions. If your question is more complex or multi-part, then make those parts the next separate question that references the prior one.Never ask closed end “Yes” “No” questions. Ask open-ended questions.Ask them to explain their answer or provide their medical rationale or objective medical evidence to support their answer.Be sure to ask if they don’t think a condition or treatment is related to the injury that is your claim, to explain their opinion as to the etiology of that condition.Always ask them to address if the medical treatment to date was medically reasonable and necessary and related to your injury. And if not, why not.Ask them to address if the current disability is supported by their medical findings or not.And finally, ask them to address future medical and disability/ life care needs.
Making good choices and putting in the work before you decide to incur the allocated loss adjusting expenses, and incurring the cost for the right reason will ensure that you reduce wasted ALAE and increase the benefit of the ALAE you do spend in improved results and reduced loss costs.
Brenda McDermott, CPCU, SCLA, CIIP, SCLA, ARM, AIDA is a workers’ compensation claims specialist in The Hartford’s Major Case Unit. She is a past International Rookie and Claims Professional of the Year and past International CWC Speak-Off winner. She was the 2022 Region V Insurance Professional of the Year. She has been a long-term member of IAIP and served in multiple offices at the local, state, and regional levels. A past Region V RVP she is currently serving as the Region V Marketing Director and Co-Chair on the International Marketing and Today’s Insurance Professional Committee. She is an MAL in Region V from Missouri.