PLUS Conference

Three Pain Points

Practitioners urge the professional liability markets to throw off an 'antiquated mindset.'
By: | November 2, 2015 • 9 min read

From dealing with multi-million dollar claims by private equity funds to assessing the risk profiles of telehealth providers, professional liability (PL) underwriters and practitioners across a broad spectrum of sectors have plenty to ponder.

Ahead of this year’s Professional Liability Underwriting Society’s (PLUS) annual conference in Dallas, we asked a selection of PL experts to outline the key issues in their respective fields.

Cyber Cover: To Buy or Not
to Buy?

Sarah Stephens, partner and head of cyber, technology, and media E&O at broker JLT, is on a panel discussion entitled “When David Fells Goliath — Small Companies’ Role in Large Breaches,” which explores the threat that inferior IT networks of vendors, service providers and other counterparties can pose to larger, seemingly more secure organizations.


According to Stephens, PL practitioners need to be aware of the resource pressure on small vendors, while navigating a “web of interconnectedness” in both the liability and insurance arrangements of the various companies in the technology supply chain.

While large companies’ cyber insurance policies tend to cover them for expenses and third-party liability resulting from another vendor’s error or omission, small tech vendors are often required to buy tech PL liability insurance under their contract with larger vendors.

Stephens said it is important that practitioners help these vendors establish exactly what is and isn’t covered under their own policies, and whether procuring additional cover is necessary — particularly as in some cases, a small vendor may require tech PL cover with limits that far exceed the size of their own business.

Sarah Stephens partner and head of cyber, technology, and media E&O at JLT

Sarah Stephens
Partner and head of cyber, technology, and media E&O at JLT

“A vendor whose revenues are $5 million may, for example, provide niche services to a larger vendor and be handling the personal data of millions of retail customers,” Stephens said.

“It can be a real challenge for a broker to go to the market on behalf of a company whose revenues are $5 million and requests $20 million professional liability cover, but the exposure is real. This is the cost and reality of doing business if you are a small tech vendor.

“If I were a large company drafting the insurance requirements for my vendors, do I want PL coverage or do I want cyber coverage, or do I need both? And is it acceptable to request PL that includes cyber coverage?” Stephens asked.

“I think more education is needed as you don’t want to be requiring companies to buy cyber policies when they already have that coverage under a tech PL policy. A better understanding of the coverage and how people buy it will drive efficiencies for both large and small vendors.”

A broader industry challenge, Stephens said, is the overlap where third-party cyber liability coverage meets PL. With some doubting underwriters’ pricing sustainability, modelling and claims-paying ability, Stephens noted there has been a flight to quality cyber carriers with enough capital to pay large limit claims without being scared away from the risk or making knee-jerk price hikes.


“From a practitioner’s point of view, my focus is to help insureds choose a market that will be there in five or 10 years and will be relatively consistent rather than reacting unreasonably to inevitable claims in the market,” she said.

According to Stephens, the nature of a company’s business should probably determine whether they choose stand-alone cyber insurance. It makes little sense, she said, for tech/IT companies to buy stand-alone cyber coverage as cyber risk runs through all of their professional risks, while other sectors with long-established PL histories may be advised to buy separate cyber policies — not least for the valuable crisis response services that usually come as standard with this coverage.

Stephens also raised the question of whether simply not having a cyber exclusion in a PL policy (as opposed to affirmative language outlining specific cyber risk triggers) offers assurance of coverage.

“Some companies choose to rely on the breadth of silence in the PL contract; others aren’t comfortable with that uncertainty as they don’t want to have to litigate a claim, so they opt for a separate cyber policy,” she said.

Financial E&O: A Volatile Subprime Legacy

According to lawyer James Skarzynski, principal of Skarzynski Black and president of PLUS, there is also an overlap at the intersection between cyber policies and D&O coverage. Skarzynski focuses primarily on D&O and E&O in the financial sector — a segment experiencing some of the most volatile and expensive PL claims.

“There are still some fairly significant subprime credit losses being litigated and it is taking time for practitioners to sort through all the issues,” he said.

James Skarzynski President of PLUS

James Skarzynski
President of PLUS

“One issue is the inter-relatedness of multiple claims within large towers of insurance. There could be multiple unrelated claims in several years of the tower, and when you have tower limits of quite easily $100 million, $200 million or more, this becomes a very substantial issue,” Skarzynski said.

These situations are being dealt with on a case-by-case basis, often with the help of mediators.

“The worst outcome is to fail to reach a resolution. It serves no one’s interest to have a dispute linger on, so that factor helps drive the parties to reach resolutions on how to allocate loss.”

But even if all parties agree and it is in their collective best interests to avoid litigation and reach a commercial resolution, negotiation challenges remain.

“Not surprisingly, the carriers at the top of the insurance towers think there should be full exhaustion of the claim from the ground up, while the insurers at the bottom of the tower may argue that if the claim would fully expose the limits of the entire tower, payment of the loss should be made pro rata so the tower shares equally in the loss.”

Even if the carriers at the top of the tower are willing to compromise and agree not to enforce full exhaustion from the ground up, they may insist that carriers in the lower portion pay a much higher proportion of their limits, Skarzynski said.

“These disputes can be very complex to resolve, and I and others in the D&O space have spent many hours in mediations, negotiating over how claims will be allocated as a prelude to mediating the underlying claims themselves, as you can’t resolve the underlying claim until you have agreed how funding will occur,” Skarzynski said.


Another post-crisis issue, he added, is the significant increase in regulatory investigations, with E&O insurers seeing the fees incurred reaching levels comparable to or above those in major 10B-5 securities litigations.

“Many years ago, no one would ever have guessed we would be routinely seeing seven- or eight-figure fees from regulator investigations and proceedings,” Skarzynski said, adding that variances in policy wordings mean that these governmental fees are not always covered under an E&O claim.

Meanwhile, increasing private equity in the corporate landscape has led to insurance around private equity “taking on a life of its own” — often involving large, volatile dollar sums.

“Private equity plaintiffs are often very serious about getting a large dollar recovery and the values can at times be proportionately higher than the recovery on losses to shareholders in a 10B-5 securities case,” Skarzynski said.

Health Care: An Evolving Risk Landscape

“Increasing settlement verdicts, hardening of the market, and a changing model of how health care is delivered through telehealth or retail clinic settings make a busy, swirling bucket for PL underwriters to get their heads around and put the right premium/price on the table,” said Bill McDonough, managing principal and broker for Integro’s national health care practice, who will be on a panel discussing whether the PL industry can keep up with “The Brave New World of Medicine.”

“The delivery of medicine is moving much quicker than how we analyze, underwrite and understand these risks.” — Bill McDonough, managing principal and broker for Integro’s national health care practice

“Whether it’s individual insureds or the lead layer for a large system, there’s a lot of moving parts. Underwriters have to be smarter and rethink how they have been underwriting for past seven or 10 years.”

The primary shift in the U.S. medical landscape is in the delivery of care, which is evolving from “brick and mortar” bedside care to “retail care” available in shopping centers other walk-up venues, and more recently “telehealth” platforms — through which the diagnosis and prescription of treatment is administered by practitioners via phone, computer or other smart technology.

“Now people are receiving care without ever being in front of a provider,” said McDonough.

“It’s a huge issue for PL underwriters. The concerns revolve around whether there are appropriate controls around the delivery of telemedicine care, whether underwriters can accurately measure the risk and understand how the risk differs to the risk they’ve been writing for the last 30 years.”

McDonough said the PL insurance market including brokers, underwriters and consultants needs to let go of its “antiquated mind-set” in order to redefine health care risk profiles, taking into account the new setting in which health practitioners — who in the case of retail and telehealth are primarily nurses rather than physicians — are operating and delivering services.

“The delivery of medicine is moving much quicker than how we analyze, underwrite and understand these risks,” he said.

“In the next three, five or 10 years, there will be a different way not only of delivering care but also in how we define that risk and insure it. As patients increasingly seek quicker, cheaper and more readily accessible health care, I believe a locus of control is being lost.


“Practitioners can operate very independently, and my sense is that offering cheaper and quicker care is going to lead to more risk.”

Yet, McDonough said, telemedicine nurses continue to be covered under the same PL policies that brick-and-mortar practitioners have been insured under for years — either from the PL market or through captives owned by health systems and providers.

“We have to think about the adequacy of coverage with the new risk profile we’re dealing with,” McDonough said.

He added, however, that practitioners are also concerned about the adequacy of coverage — primarily regarding the size of limits they can obtain.

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]
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Risk Management

The Profession

Cheryl Feltgen on the importance of analytics, the inspiration of Nelson Mandela and the appropriateness of champagne for any occasion.
By: | September 14, 2015 • 5 min read

R&I: What was your first job?

My first job during high school was as a salesperson at the department store, Montgomery Ward. After college, my first career job was as a commercial real estate lender at Continental Bank in Chicago, which was then the seventh largest bank in the country.

R&I: How did you come to work in risk management?

In 1997, I became chief risk officer of GE Capital’s railcar leasing business, GE Capital Railcar Services.

090152015_24_profession_sidebarA headhunter reached out to me in late 1996. The chief risk officer of GE Capital liked my analytical skills and banking background, and the CEO of the railcar leasing business liked that I had been an entrepreneur investing my own money in real estate transactions. At GE, I learned how to use data and analytics to make better business decisions.

R&I: What is the risk management community doing right?

Risk management has become an integral part of the business processes and strategic planning of companies. In forward-thinking companies like Arch, risk management has a seat at the table.

R&I: What could the risk management community be doing a better job of?

It could better convey to everybody in a company that they all have a role in risk management. There’s an inclination to think risk management is only done by the risk management department, but actually everybody has a role in risk management. Embracing that concept drives an appropriate risk culture and ensures resiliency.

Cyber risk is an emerging risk that gets a lot of attention, but in the mortgage industry, I am concerned that as the housing crisis recedes, the industry may allow some undisciplined practices to slip back in.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?


Better analytics and an understanding of the importance of stress-testing your portfolio to make sure your company can withstand extreme events.

R&I: What emerging commercial risk most concerns you?

Cyber risk is an emerging risk that gets a lot of attention, but in the mortgage industry, I am concerned that as the housing crisis recedes, the industry may allow some undisciplined practices to slip back in. A healthy housing market and economy requires that we not let that happen.

R&I: How much business do you do direct versus going through a broker?

We originate all our business directly with our customers who are banks, credit unions and mortgage companies.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

Cheryl Feltgen, Executive Vice President, Chief Risk Officer, Arch Mortgage Insurance Co.

Cheryl Feltgen, Executive Vice President, Chief Risk Officer, Arch Mortgage Insurance Co.

I am cautiously optimistic since No. 1, the economy has created three million net new jobs over the past 12 months and going forward, another two to three million jobs could be created over the next year. No. 2, consumers have been saving more of their extra pocket money, but spending is likely to pick up with employment growing.

And No. 3, residential construction will likely rise 10 to 15 percent a year over the next few years.

My caution is external shocks like conflicts and an economic slowdown could set things back, at least temporarily. As Warren Buffet once said: “It’s never paid to bet against America. We come through things, but it’s not aways a smooth ride.”

R&I: Who is your mentor and why?

I’ve had teachers who taught me the importance of a good education and managers, particularly at GE, who taught me great leadership skills and to have the courage to stretch myself and try new things.

Also my father, who was legally blind but accomplished many things in his life, taught me to never give up and to find joy in life. Finally, my husband and partner who’s been enormously supportive of me and my careeer.

R&I: What have you accomplished that you are proudest of?

In my 36-year career I have successfully navigated several economic cycles and have been able to mentor many young women, all while achieving a balance between my professional and personal lives.

R&I: How many emails do you get in a day?

More than I would like.

R&I: How many do you answer?

The important ones.

R&I: What’s your favorite book?

“Personal History,” the autobiography of former “Washington Post” publisher Katharine Graham. The book provides a great example of courage and doing things she never thought possible. I had the good fortune of meeting Ben Bradlee, the former editor of the “Washington Post” under her leadership, and he gave me additional insight into the extraordinary person that she was.

R&I:  What’s the best restaurant you’ve ever eaten at?


It’s called Rock House on Harbour Island in the Bahamas.

R&I: What is your favorite drink?

Champagne. It’s right for every occasion.

R&I: What is the most interesting place you have ever visited?

My great-grandfather on my father’s side emigrated from Luxembourg in the late 1800s. After my father died a few years ago, I traveled to Luxembourg to meet my father’s second cousin.

He introduced me to my whole extended family and brought me to the town where my great-grandfather was born and to the church where he was baptized. It was very special.

R&I: What is the riskiest activity you ever engaged in?

I once skied with my colleagues down a double Black Diamond slope as only a novice skier — and I survived.

R&I: If the world has a modern hero, who is it and why?

Nelson Mandela. He is an inspiration on the healing power of forgiveness and of strong leadership.

Janet Aschkenasy is a freelance financial writer based in New York. She can be reached at [email protected]
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Sponsored Content by CorVel

Telehealth: The Wait is Over

Telehealth delivers access to the work comp industry.
By: | November 2, 2015 • 5 min read


From Early Intervention To Immediate Intervention

Reducing medical lag times and initiating early intervention are some of the cornerstones to a successful claims management program. A key element in refining those metrics is improving access to appropriate care.

Telehealth is the use of electronic communications to facilitate interaction between a patient and a physician. With today’s technology and mass presence of mobile devices, injured workers can be connected to providers instantaneously via virtual visits. Early intervention offers time and cost saving benefits, and emerging technology presents the capability for immediate intervention.

Telehealth creates an opportunity to reduce overall claim duration by putting an injured worker in touch with a doctor including a prescription or referral to physical therapy when needed. On demand, secure and cost efficient, telehealth offers significant benefits to both payors and patients.

The Doctor Will See You Now

Major healthcare players like Aetna and Blue Cross Blue Shield are adding telehealth as part of their program standards. This comes as no surprise as multiple studies have found a correlation between improved outcomes and patients taking responsibility for their treatment with communications outside of the doctor’s office. CorVel has launched the new technology within the workers’ compensation industry as part of their service offering.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

SponsoredContent_Corvel“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment. The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

— David Lupinsky, Vice President, Medical Review Services, CorVel Corporation

As with all new solutions, there are some questions about telehealth. Regarding privacy concerns, telehealth is held to the same standards of HIPAA and all similar rules and regulations regarding health information technology and patients’ personal information. Telehealth offers secure, one on one interactions between the doctor and the injured worker, maintaining patient confidentiality.

The integrity of the patient-physician relationship often fuels debates against technology in healthcare. Conversely, telehealth may facilitate the undivided attention patients seek. In office physicians’ actual facetime with patients is continually decreasing, citing an average of eight minutes per patient, according to a 2013 New York Times article. Telehealth may offer an alternative.

Virtual visits last about 10 to 15 minutes, offering more one on one time with physicians than a standard visit. Patients also can physically participate in the physician examination. When consulting with a telehealth physician, the patient can enter their vital signs like heart rate, blood pressure, and temperature and follow physical cues from the doctor to help determine the diagnosis. This gives patients an active role in their treatment.

Additionally, a 2010 BioMed Central Health Services Research Report is helping to dispel any questions regarding telehealth quality of care, stating “91% of health outcomes were as good or better via telehealth.”

Care: On Demand

By leveraging technology, claims professionals can enhance an already proactive claims model. Mobile phones and tablets provide access anywhere an injured worker may be and break previous barriers set by after hours injuries, incidents occurring in rural areas, or being out of a familiar place (i.e. employees in the transportation industry).

With telehealth, CorVel eliminates travel and wait times. The injured worker meets virtually with an in-network physician via his or her computer, smart phone or tablet device.

As most injuries reported in workers’ compensation are musculoskeletal injuries – soft tissue injuries that may not need escalation – the industry can benefit from telehealth since many times the initial physician visit ends with either a pharmacy or physical therapy script.

In CorVel’s model, because all communication is conducted electronically, the physician receives the patient’s information transmitted from the triage nurse via email and/or electronic data feeds. This saves time and eliminates the patient having to sit in a crowded waiting room trying to fill out a form with information they may not know.

Through electronic correspondence, the physician will also be alerted that the injured worker is a workers’ compensation patient with the goal of returning to work, helping to dictate treatment just as it would for an in office doctor.

In the scope of workers’ compensation, active participation in telehealth examinations, accompanied by convenience, is beneficial for payors. As the physician understands return to work goals, they can ensure follow up care like physical therapy is channeled within the network and can also help determine modified duty and other means to assist the patient to return to work quickly.


Convenience Costs Less

Today, convenience can often be synonymous with costly. While it may be believed that an on demand, physician’s visit would cost more than seeing your regular physician; perceptions can be deceiving. One of the goals of telehealth is to provide quality care with convenience and a fair cost.

Telehealth virtual visits cost on average 30% less than brick and mortar doctor’s office visits, according to California state fee schedule. In addition, “health plans and employers see telehealth as a significant cost savings since as many as 10% of virtual visits replace emergency room visits which cost hundreds, if not thousands, of dollars for relatively minor complaints” according to a study by American Well.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

Benefits For All

Substantial evidence supports that better outcomes are produced the sooner an injured worker seeks care. Layered into CorVel’s proactive claims and medical management model, telehealth can upgrade early intervention to immediate intervention and is crucial for program success.

“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment,” said David Lupinsky, Vice President, Medical Review Services.

“The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

With a people first philosophy and an emphasis on immediacy, CorVel’s telehealth services reduce lag time and connect patients to convenient, quality care. It’s a win-win.

This article was produced by CorVel Corporation and not the Risk & Insurance® editorial team.

CorVel is a national provider of risk management solutions for employers, third party administrators, insurance companies and government agencies seeking to control costs and promote positive outcomes.
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