When a Claim Runs Off the Tracks
Mike is a 54-year-old construction worker. One day, he strains himself picking up a piece of lumber and goes home with shoulder pain. He reports his injury and five weeks later is taking Vicodin, an opioid, and Naproxen, an anti-inflammatory, and given an occupational therapy regimen.
That was the scene set for a crowded roomful of attendees at Wednesday’s “Risk Scenarios Live! Navigating the Challenging Claim” session.
Mike begins taking more Vicodin per day than he’s prescribed, and performing duties at work that do not allow his injury to heal.
Eventually, he sees an orthopedic surgeon. She suggests Mike may have a rotator cuff tear, which would require surgery and an extensive recovery period that would keep Mike out of work for six months, at least. She orders an MRI to determine if there is a tear.
Even at this early stage of treatment, there are several red flags on Mike’s case, said experts on the panel that included Dr. Kurt Hegmann, associate professor at the Rocky Mountain Center for Occupational & Environmental Health; Dr. Robert Goldberg, chief medical officer at Healthesystems; and Tracey Davanport, director-national managed care, Argonaut Insurance Co.
Using an anti-inflammatory medication alone, without an opioid, often yields better outcomes and avoids the risk of addiction that comes with opioids, said Hegmann.
In Mike’s case, Vicodin was not medically necessary. His condition was not improving, and he was commuting to and from work and performing his job under the influence of an opioid, said Goldberg.
What should have been done to get this claim back on track? Every party involved – worker, employer, claims organization and prescribing physician – should have been communicating directly. That would have helped catch early abuse of painkillers and ensured that the physician is adhering to evidence-based guidelines.
Assignment of a nurse case manager may have also been necessary.
MRIs should be administered with caution, experts said. Such tests often turn up problems unrelated to the original injury, opening up a can of worms in terms of appropriate treatment and compensability.
“You have to treat the entire patient, not just the injury that brought him in,” Goldberg said, such as taking pre-existing conditions into account. Mike’s age, for example, significantly increased his risk for a slow recovery.
The MRI scan revealed a full-thickness tear of the rotator cuff. After surgery, Mike was prescribed Oxycontin to manage post-op pain. He then sat at home, gaining weight and drinking while taking his pain medication and neglecting to perform the at-home exercises his orthopedic surgeon advised.
When he went in for a check-up, the doctor decided to switch him back to Vicodin, although Mike still had a refill left on his Oxycontin. He envisioned doubling up the medications to achieve a new high.
At this point in the case, someone needed to step in to track Mike’s refills and limit his dosage.
“The patient can’t be the one to control the prescription pad,” Goldberg said.
Employers should also try to have workers return to modified-duty positions as soon as possible, which helps to maintain social connections and motivates the employee to get back to their pre-injury capacity.
“The patient needs to be engaged and motivated to get better,” Hegmann said. “If they choose not to do the work, then there’s nothing else a doctor can do for them.”
Mike was not motivated. He did not adhere to the restrictions placed on him in a light-duty position; he failed to dedicate himself to physical therapy and stay active; and he abused the opioids prescribed to him.
A year after his injury, he was 20 pounds heavier, had not progressed in strengthening his shoulder, and his employer’s workers’ comp claims organization was looking at a six-figure settlement for permanent disability.
Presentation Asks ‘What Would You Do?’
A middle-aged construction worker undergoes rotator cuff surgery but fails to adhere to his therapy regimen in the second annual installment of Risk Scenarios™ Live!, which kicks off at 2:30 p.m. today.
Risk Scenarios™ are fictional but realistic narratives written by Risk Insurance®, which are designed to showcase a risk management or insurance coverage dilemma.
This year’s multimedia presentation of Risk Scenarios Live! will feature a panel discussion moderated by Tracey Davanport, director of managed care for the Argo Group.
Also appearing on the panel will be Dr. Robert Goldberg, the chief medical officer of Healthesystems, and Dr. Kurt Hegmann, director, the Rocky Mountain Center for Occupational & Environmental Health.
Join us to participate in the CM2 session at 2:30 p.m. today in Mandalay Bay’s Islander D&E room.
The panelists will analyze each segment of a three-part story, told using videotaped professional actors, still photos and voice-over narration.
The story dramatizes the challenges that occur when a middle-aged worker suffers a rotator cuff tear, fails to adhere to his therapy regimen, gains weight and begins overusing addictive painkillers.
Drawing on their deep knowledge of claims management, pharmacy benefit management and occupational medicine, the panelists will highlight the treatment failures that resulted in a negative outcome: A worker who failed to heal properly and who eventually receives a sizable settlement from his employer.
In a Q&A session following the presentation, audience members will be able to discuss the nuances of the fictional case study and the lessons to be learned from it.
Last year’s session was attended by nearly 300 conference attendees, so make plans to reserve your seat early for this popular afternoon session.
Construction’s New World
Get off a plane at Logan Airport and cross the harbor toward Boston and you will see construction cranes, a lot of them.
Grab an Amtrak train from Philadelphia into New York and pulling into Penn Station, you will see more construction cranes, many more of them. The same scene repeats in Denver, Los Angeles, San Francisco and Chicago.
All that steel and cable in the skyline signifies a construction industry that is growing again, after having the rug pulled out from under it in the Great Recession of 2008-2010.
The cranes these days look the same as cranes looked in 2008, but the risk management and insurance environment in construction is anything but the same now.
A variety of factors are now in play that have drastically changed construction risk underwriting, according to Doug Cauti, a senior vice president and chief underwriting officer with Boston-based Liberty Mutual’s construction practice.
Doug Cauti characterizes the current construction market.
Talent and Margins
For one thing, according to Cauti, the available talent pool in construction is nowhere near what it was pre-recession.
“When the economy went into its downturn, a lot of talent left the business and hasn’t returned,” Cauti said.
Cauti said recent conversations with large contractors in Ohio and Pennsylvania confirmed once again that contractors are facing a workforce that is either aging or very inexperienced. That leads to safety management and project quality concerns at just the moment in time that construction is rebounding.
Doug identifies one of the top risk management issues facing construction firms today.
Workers compensation risks in construction, already a problematic area, are seeing an impact from that dynamic.
Contractors are also facing much more competition. In the past, contractors might have bid on 10 jobs to get one, now they have to bid on 50 or 60 jobs to get one. That’s putting pressure on margins.
“There are a lot of contractors out there competing for business,” Cauti said.
“Margins are going up but not at the same rate as the industry’s recovery,” he added.
Financing and Risk Transfer
Another factor impacting the way construction risk is being underwritten is the size of projects and the way they are being financed. Construction’s recovery from the recession might be slow and steady, but the size of projects requiring risk management and insurance has increased substantially.
In 2010, there were 85 projects under contract nationally that were worth $1 billion or more, according to Cauti. One year later, the percentage of projects of that value or higher had grown by 30 percent, and the trend continues.
A lot of those projects are design-build, a relatively new approach to construction that Liberty Mutual has grown comfortable underwriting over the years. But design-build is still an additional complication, blurring the traditional lines of responsibility.
“We did it when the growth in contractor-controlled insurance programs happened, we did it with the evolution in design-build and we’re laying the groundwork to be a thought leader in public-private partnerships and integrated project delivery.”
– Doug Cauti, Chief Underwriting Officer, Liberty Mutual National Insurance Specialty Construction
Given the funding demands of these much larger and more valuable projects — many of them badly needed public sector infrastructure improvements — public-private partnerships, otherwise known as P3s, are now coming into vogue as a financing option.
But deciding how risk should be allocated, underwritten and transferred in this new arrangement between contractors, the state, and private partners is a relatively new and untested science.
As a thought leader in the underwriting of the design-build approach – and the more traditional design-bid-build – Cauti said construction experts within Liberty Mutual are growing their knowledge to stay in step.
“We did it when the growth in contractor-controlled insurance programs happened, we did it with the evolution in design-build and we’re laying the groundwork to be a thought leader in public-private partnerships and integrated project delivery,” he said.
That means attending relevant industry conferences like the annual IRMI Construction Risk Conference where Liberty Mutual has maintained a significant presence, and engaging in dialogues with contractors and government officials, and maintaining clear and active lines of communications with brokers.
Doug discusses emerging approaches to construction.
Legal and Regulatory
Another change that is creating challenges for construction risk underwriting, according to Cauti, stems from what’s happening in United States courtrooms.
Across the country, how a court interprets coverage can vary widely, especially in the area of construction defect.
“In the past, many jurisdictions viewed construction defect simply as shoddy workmanship and they had to go back and redo it,” Cauti said.
But now, on a state by state basis, courts are ruling that a construction defect is an accident under certain circumstances that may be covered by a contractor’s general liability policy.
In 2014 alone, according to Cauti, Supreme Courts in West Virginia, Connecticut and North Dakota ruled that construction defects can sometimes be considered accidents.
Cauti said doing business with a carrier that pursues contract clarity whenever possible – and that possesses an experienced claims team that can navigate the wide variety of state interpretations – is absolutely essential to the buyer.
Having claim teams not only dedicated to construction but also to construction defect, adds a lot of value to a carrier’s offering.
Doug outlines another top risk management issue facing construction firms in today’s booming market.
Now, as never before, contractors are relying on experienced construction insurance teams to help them address these complexities.
Insurers need to have the engineering expertise to analyze a project, to make sure the right contracting team is in place and to insure that risk exposures are being properly assessed. Another key in a construction insurance team, according to Cauti, is the claims department.
A Strategic Approach
The legal and financing changes that are taking place in the construction market, from a risk transfer standpoint, aren’t going to get ironed out overnight.
Cauti said it could be 10 years until the construction and insurance industries fully understand the complications of public-private partnerships and integrated project delivery, these approaches gain traction, and the state-by-state legal decisions that are causing so much uncertainty can be digested.
In the meantime, an engaged, collaborative approach between carriers, brokers, contractors, and their financing partners will be necessary.
Doug discusses how his area can provide value to project owners and contractors.
For more information on how Liberty Mutual Insurance can help assess your construction risk exposure, contact your broker or Doug Cauti at firstname.lastname@example.org.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.