Court Sinks Subrogation
On March 17, 2012, the commander, a vessel owned by Nature’s Way Marine, ran aground in the mouth of a narrow channel of the Mississippi River near Crown Point, La., owned and operated by Crown Point Holdings LLC.
As it maneuvered to free itself, the movements created “extreme wave wash” that broke the mooring lines of two of Crown Point’s vessels, the Port Gibson and the Buccaneer, grounding them on a mud bank.
On March 21, the Port Gibson began to take on water and sank, pulling the Buccaneer down with it. After raising the ships, it was discovered Port Gibson’s hull was punctured by a bolt-studded piece of timber.
Osprey Underwriting Agency Ltd., which issued Crown Point marine hull insurance on the Port Gibson and the Buccaneer, paid for salvage and damage expenses and then, as subrogee, it sued Nature’s Way for reimbursement, arguing the Commander’s maneuvers caused the sinking of Crown Point’s vessels.
A district court in Louisiana ruled against Osprey. It said Osprey failed to prove the Commander’s actions caused the sinking, and even if the causation could be determined, Crown Point’s failure to warn anyone of the timber impaled in the hull was a superseding cause of the sinking.
On March 25, the U.S. 5th Circuit Court of Appeals upheld that decision. It concluded that experts from both sides “vehemently” disagreed with how the hull impalement occurred, and that marine law required negligence to be a “substantial factor” in the damage.
Scorecard: Osprey will not be reimbursed for its costs to salvage and repair the vessels.
Takeaway: Under general maritime law, “negligence must be a ‘substantial factor’ in the injury.”
Legal Fees Contested
On Dec. 29, 2011, William R. Kowalski and Hawaii International Seafood filed suit against Anova Food LLC, claiming patent infringement and false advertising. The lawsuit accused Anova of using Kowalski’s “tasteless smoke” process to treat tuna, although Anova advertised the fish were treated by a “clearsmoke” process.
Anova retained Gary Grimmer as local counsel in Hawaii to represent it.
On Oct. 12, 2012, Anova requested a defense from the Hanover Insurance Co. and its subsidiary, Massachusetts Bay Insurance Co. (“Hanover”). Defense was granted under a reservation of rights, and the insurer agreed to pay Grimmer in accordance with its litigation guidelines and fees.
Hanover’s claim that it only agreed to hire Grimmer and not Zobrist conflicted with its payment of some of Zobrist’s legal fees, the court ruled.
Hanover stated it would not pay, however, for any fees paid by Anova prior to the claim being made.
The insurer said it would not apply the exclusion for injuries “arising out of” infringement of intellectual property, but would not indemnify Anova for any punitive damages.
On Dec. 11, 2012, the Zobrist law firm, which had a history with Anova’s intellectual property issues, filed its appearance as counsel of record for Anova, and was subsequently paid $284,624 by Hanover.
A year later, Hanover informed Anova it was transferring defense in the case from Grimmer to two other attorneys. At that time, it said that any continued involvement by Zobrist “will need to be funded directly” by Anova.
On June 19, 2014, Hanover asked for a court determination that it need not defend nor indemnify Anova. The insured filed a counterclaim for breach of contract and bad faith, arguing Hanover owed it a defense, and the unpaid balance to Zobrist of $385,153.
Anova reached a settlement with Kowalski in April 2015.
The U.S. District Court for the District of Hawaii ruled on March 24, 2016 that Hanover did have a duty to defend Anova but did not have to pay for legal services prior to Anova’s request for a defense.
Because factual questions remained about the legal fees paid to Zobrist, the court denied Anova’s motion for summary judgment on its claim that Hanover breached its contract.
Scorecard: Additional court proceedings will determine whether Hanover must pay $385,153 for Zobrist’s legal fees.
Takeaway: Hanover’s claim that it only agreed to hire Grimmer and not Zobrist conflicted with its payment of some of Zobrist’s legal fees, the court ruled.
Request for Defense Denied
In 2009, Larry Naquin was using a land crane owned by Elevating Boats LLC (EBI) to move a “test block” when the welding holding the crane to its base failed.
Naquin jumped from the crane house, breaking both feet and sustaining a lower abdominal hernia. He was never able to return to physical work.
In May 2012, a federal jury in Louisiana awarded Naquin $2.4 million for physical and emotional pain and lost wages. EBI appealed and the negligence verdict was upheld.
Subsequently, EBI sued State National Insurance Co. and London insurers, accusing them of breaching their contracts by denying EBI’s request for defense and indemnification.
On March 22, the U.S. 5th Circuit Court of Appeals agreed with a lower court in dismissing EBI’s lawsuit.
Scorecard: The insurers are not responsible for indemnifying EBI.
Takeaway: EBI’s policy offered indemnity for the company “as owner of the Vessel,” and it was not triggered because the accident occurred on land. &
Sometimes the reason for a clean slate is a looming complication. So it was for Marsh’s Herman Brito, who had a singular opportunity to completely restructure the master cargo policy for a major multinational corporation.
The client had a captive program without underlying admitted policies. Brito advocated for, then marketed and placed, a commercial policy with reinsured local admitted policies, and even saved some money.
“[Herman] revamped the program to where it’s still global but with locally admitted policies so it allows for claims payments in individual countries,” said the head of corporate risk management. The new structure “removed the risk that the captive was taking in the program entirely. We ended up at around the same price, actually a little bit cheaper. He completely revamped the program with better coverage. We had a claim recently that wouldn’t have been covered previously.”
The risk manager stressed the amount of work involved. “We needed to gather new exposure info on the country level because of the locally admitted insurers. That was quite a lot of information.”
Policy language was a key issue. “The old policy had very specific wording addressing refrigeration. If the transportation company had any type of involvement, if they forgot to set the temperature control, if it wasn’t a natural loss, it wouldn’t have been covered. Now if it’s impaired or ceased to work to our standard that loss is covered.”
With the Client Every Step
Supporting clients’ claims is an essential component of a broker’s work, but Joanna Paredes went one better in getting a positive outcome for her client, and also minimize the actual loss and thus make the claim easier to resolve.
“We had a claim on imported delicate commodities,” said the traffic manager for an international trading company.
“We discovered water damage to some of our shipment in March. Due to the extensive damage among other shipments, the warehouse was doing their best to perform reconditioning in a timely manner.”
However, the client discovered in June that the remaining undamaged portion of the shipment was contaminated with a foul odor. Therefore, they moved the whole lot to another warehouse hundreds of miles away and across another international border for further inspection.
“We were finally able to sell all the goods after a rebagging process,” said the traffic manager. “Joanna walked with us for every step to generate a supplementary claim.”
As Paredes has other clients in similar lines, some using similar supply chains, she takes a holistic approach. One client, based in Mexico, recalled how Paredes came to one of the main ports in that country. She inspected warehouses from their storage systems to their fire and flood protection, and then made recommendations to clients on guidance they could give to their transportation and storage operators.
In the fever dreams of some risk managers lurk massive components worth many millions of dollars that take years to manufacture, reticent underwriters and looming regulators.
Those dreads became reality for Marsh’s Ali Rizvi when a client retrofitted an old heavy-industrial site.
“Permit appeals and regulatory issues delayed the financing by a year, and during that time there were several starts and stops in placing the construction insurance program,” said the CFO. “By the time it is all finished, there will be more than 400 barge deliveries from a staging site 30 miles away. Ali was instrumental in making all this possible.”
He has been “able to identify and resolve issues related to terminal operator’s obligations, vessel owners, and charterers. Thus not only helping the business move along, but also ensuring that our rights are protected, and that we only assumed contractual obligations. Those can either be transferred down to contractors, or insured.” The solution included placing several hundred million dollars’ worth of project cargo delay-in-start-up insurance.
Another client said that she trusted Rizvi with “all her marine energy risks.” As risk manager for a major global firm, she noted that 2015 was a very difficult year for the energy sector, in which many significant projects were cancelled, delayed, or changed. That required constant revisions and updates to in-place insurance.
A Skilled Liaison
One of Andrew Smith’s client companies went through a corporate restructuring, which is complex from a risk management perspective, particularly in a renewal.
“Andrew helped us work through a complicated underwriting process and has coordinated the primary and excess carriers to help them understand how data is presented. He helped communicate with carriers during the renewal and explained the issues that arose when gathering underwriting information. He acts as an excellent liaison between our company and the market, which is limited in the number of carriers available for our portfolio. His input assisted us in understanding the actual exposure generated by our operations — marine and boat, diving and swimming,” the client’s insurance and risk manager said.
Another client is a family-owned business. Smith had to field the opinions of numerous family members, stressed as they were due to some of the marine-related sectors of the economy showing weakness.
The insurance budget was tightly limited by economic circumstances, and the client’s treasurer said that Smith reduced premiums while maintaining or expanding terms and conditions. The treasurer noted that the company’s many different lines of business add complexity, but that Smith was able to differentiate those segments to the carriers. That helped them become comfortable with actual rather than perceived risks.
Advocacy: The Impact of Continuous Triage
In the world of workers’ compensation, timing is everything. Many studies have shown that the earlier a workplace incident or injury is acted upon, the more successful the results*. However, there is further evidence indicating there is even more of an impact seen when a claim is not only filed promptly, but also effective triage is conducted and management of the claim takes place consistently through closure.
Typically, every program incorporates a form of early intervention. But then what? While it is common knowledge that early claims reporting and medical treatment are the most critical parts of a claim, if left alone after management, an injured worker could – and often does – fall through the cracks.
All Claims Paths are Not Created Equal
Even with early intervention and the best intentions of the adjuster, things can still go wrong. What if we could follow one injury down two paths, resulting in two entirely different outcomes? This case study illustrates the difference between two claims management processes – one of proactive, continuous claims triage and one of inactivity after initial intervention – and the impact, or lack thereof, it can have on the outcome of a claim. By addressing all indicators, effective triage can drastically change the trajectory of a claim.
While working at a factory, David, a 40-year-old employee, experienced sudden shoulder pain while lifting a heavy box. He reported the incident to his supervisor, who contacted their 24/7 triage call center to report the incident. After speaking with a triage nurse, the nurse recommended he go to an occupational medicine clinic for further evaluation, based on his self-reported symptoms of significant swelling, a lack of range of motion and a pain level described as greater than “8.”
The physician diagnosed David with a shoulder sprain and prescribed two weeks of rest, ice and prescription strength ibuprofen. He restricted David from any lifting over his head.
By all accounts, early intervention was working. Utilizing 24/7 nurse triage, there was no lag time between the incident and care. David received timely medical attention and had a treatment plan in place within one day.
A critical factor in any program is a return to work date, yet David was not given a return to work date from the physician at the occupational medicine clinic; therefore, no date was entered in the system.
One small, crucial detail needs just as much attention as when an incident is initially reported. What happens the third week of a claim is just as important as what happens on the day the injury occurs. Involvement with a claim must take place through claim closure and not just at initial triage.
The Same Old Story
After three weeks of physical therapy, no further medical interventions and a lack of communication from his adjuster, David returned to his physician complaining of continued pain. The physician encouraged him to continue physical therapy to improve his mobility and added an opioid prescription to help with his pain.
At home, with no return to work in sight, David became depressed and continued to experience pain in his shoulder. He scheduled an appointment with the physician months later, stating physical therapy was not helping. Since David’s pain had not subsided, the physician ordered an MRI, which came back negative, and wrote David a prescription for medication to manage his depression. The physician referred him to an orthopedic specialist and wrote him a new prescription for additional opioids to address his pain…
Costly medical interventions continued to accrue for the employer and the surmounting risk of the claim continued to go unmanaged. His claim was much more severe than anyone knew.
What if his injury had been managed?
A Model Example
Using a claims system that incorporated a predictive modeling rules engine, the adjuster was immediately prompted to retrieve a return to work date from the physician. Therefore, David’s file was flagged and submitted for a further level of nurse triage intervention and validation. A nurse contacted the physician and verified that there was no return to work date listed on the medical file because the physician’s initial assessment restricted David to no lifting.
As a result of these triage validations, further interventions were needed and a telephonic case manager was assigned to help coordinate care and pursue a proactive return to work plan. Working with the physical therapist and treating physician resulted in a change in David’s medication and a modified physical therapy regimen.
After a few weeks, David reported an improvement in his mobility and his pain level was a “3,” thus prompting the case manager’s request for a re-evaluation. After his assessment, the physician lifted the restriction, allowing David to lift 10 pounds overhead. With this revision, David was able to return to work at modified duty right away. Within six weeks he returned to full duty.
With access to all of the David’s data and a rules engine to keep adjusters on top of the claim, the medical interventions that were needed for his recovery were validated, therefore effectively managing his recovery by continuing to triage his claim. By coordinating care plans with the physician and the physical therapist, and involving a case manager early on, the active management of David’s claim enabled him to remain engaged in his recovery. There was no lapse in communication, treatment or activity.
After 24/7 nurse triage is conducted and an injured worker receives initial care, CorVel’s claims system, CareMC, conducts continuous triage of all data points collected at claim inception and throughout the life of a claim utilizing its integrated rules engine. Predictive indicators send alerts to prompt the adjuster to take action when needed until the claim is closed – not just at the beginning of the claim.
This predictive modeling tool flags potentially complex claims with the risk for high exposure, marking claims that need intervention so that CorVel can assign appropriate resources to mitigate risk.
Claims triage is constant – that is the necessary model. Even on an adjuster’s best day, humans aren’t perfect. A rules engine helps flag things that people can miss. A combination of predictive systems and human intervention ensures claims management is never stagnant – that there is no lapse in communication, activity or treatment. With an advocacy team in the form of an adjuster empowered by a powerful rules engine and a case manager looking out for the best care, injured employees remain engaged in their recovery. By perpetuating patient advocacy, continuous triage reduces claim severity and improves claim outcomes, returning injured workers to the workforce and reducing payors’ risk.