The Risk Professional Behind the Scenes
As tragedies occur across our globe, I empathize with the families of the fallen, shudder at the devastation of the losses and admire the courage and the perseverance of those brave individuals who patiently stand and answer questions thrown at them by the press as they deal with their own grief and loss.
My first thought is the team standing behind each of these brave souls who have the responsibility of working together to determine the cause, the outcomes and the potential consequences needed to bridge recovery to the future.
As I recently watched the fires of Flagstaff unfold on national television, I immediately thought of my colleague there.
He is a quiet, experienced professional who stands as an example of the risk professional in the background, who understands the ramifications of all that is occurring around him while trying to work towards solutions for bringing the situation back to the new normal for those he serves — if a solution can ever be found.
As a trade, risk professionals are an analytical species who stoically listen, comfort, piece together the unfolding tragedy and assist in weaving together the best available response possible in any given situation.
We stand without emotion or judgment, listen and try to comprehend what is transpiring before our eyes as we seek answers and work toward bringing teammates back to an acceptable reality.
Risk professionals, true to character, don’t speak to the cameras and shun publicity when offered. You won’t see us on the nightly news or read about us on the front page of your newspaper. Instead, look to the site of the loss, the throes of the recovery and in the places of those most in need. The loss of property may be replaced, but the loss of life lives with us forever.
Each of us as a risk professional has the capacity to make a difference as we deal with the tragedies that occur within our communities and beyond, whether natural or man-made. We come from different demographics, public and private entities, and generations. Central to who we are as a profession is a universal pursuit of truth and service to those we individually and collectively serve.
I’m often asked by folks why I concern myself with the wildfires out west, the tornadoes of the Midwest and the storms in countries far from my own. My answer is a simple one. We live on a very small planet, which shrinks as technology broadens.
From a global risk perspective, a flood in Europe is just as real as a fire in my own downtown. We as a risk community share the air, the water and the totality of the global risk together each time we measure our own entity’s risk, and the losses of one of our own.
We as a risk management profession will be there when you most need us, even if you don’t know it yet … just like a storybook character called Nanny McPhee.
Duty to Advise
An increasing number of courts are taking a fresh look at whether insurance brokers should be held liable for their insurance purchasing recommendations.
One case weaving through the Florida courts now is Tiara Condominium Association Inc. vs. Marsh USA Inc., in which the condo association alleges that the Marsh broker failed to procure an adequate insurance policy on its building, which subsequently suffered extensive wind damage from two hurricanes in September 2004.
The case, which revolves around whether the broker had a “special relationship” with the client, is provoking interest around the country.
Marsh had secured windstorm coverage through Citizens Property Insurance Corp., which issued a policy that contained a loss limit in an amount close to $50 million, according to the lawsuit. After the condo building sustained significant damage caused by hurricanes Frances and Jeanne, Tiara claims Marsh assured the association that it would be entitled to nearly $100 million for both occurrences, and the association proceeded to repair the building.
However, when Tiara sought payment from Citizens, the carrier claimed that the loss limit was $50 million in the aggregate, not per occurrence, according to the lawsuit. The carrier settled with Tiara for roughly $89 million — less than the more than $100 million spent by condo association.
Tiara’s attorney Mark L. McAlpine, founding principal of McAlpine & Associates, P.C. in Auburn Hills, Mich., said it will be up to the jury to decide whether Marsh did, indeed, have a special relationship with the condo association, which affects its liability in the case.
A broker is determined to have a special relationship that imposes enhanced duties to the insured, he said, if:
• They hold themselves out to have special expertise;
• The broker is an integral part of the claimant’s decision-making process;
• The broker receives additional compensation for risk advising services; or
• The broker is in a position to affect such decisions and the insured is known to be relying on the broker’s advice in making an insurance purchase decision.
A Marsh spokeswoman said Marsh did not have a “special relationship” with the condo association, and noted that the association’s “purchasing decisions were made by the association’s special insurance committee which included a former senior insurance executive, a lawyer and a CPA.”
“The law in virtually all states is that an insurance broker has a duty to obtain the insurance requested by the client or inform the client that it could not be obtained. Some courts have created an exception to this rule when the plaintiff alleges the existence of a ‘special relationship’ between the broker and the client,” she said.
“However, those courts have also made clear that the ‘special relationship’ exception should be applied only in very limited circumstances. For example, New York’s highest court recently stated that ‘[we] reiterate that special relationships in the brokerage context are the exception, not the norm.’”
Typical Skills and Experience
Bryson Popham, a partner in the Annapolis, Md. law firm, Popham & Andryszak, P.A. who represents agents and brokers, said that they are generally held to a legal standard of care based upon typical skills and experience, and that they should be accountable for the advice they give.
There’s always the exception, Popham said, but on typical issues such as whether a client has the right coverage, an agent or broker should advise a client based on the client’s needs.
“Agents and brokers are knowledgeable about insurance coverage, but they are not property appraisers,” he said. “They should not take on that responsibility unless they have a special ability to make that determination, and most do not.
“Sometimes they take on those additional responsibilities unwisely,” he said, “and then they may have liability issues that could be hazardous to their professional health.”
“Where a broker says that he will evaluate risk and tell you what insurance to buy, the broker is going to be held to a very high standard.”
—Robert D. Chesler, shareholder, Anderson Kill
Issues over broker liability are also being scrutinized in the Northeast, where hundreds of insureds have not collected on insurance claims following Superstorm Sandy flooding.
There are many pending lawsuits alleging that insurance brokers did not advise their insureds on the availability of flood insurance, said Robert D. Chesler, a shareholder based in the Newark, N.J. office of the Anderson Kill law firm.
The law differs from state to state regarding the duty of an insurance broker to advise a client.
“In New Jersey, we’ve seen insurance brokers trying to market themselves as professionals with more expertise and greater standards,” Chesler said. “Where a broker says that he will evaluate risk and tell you what insurance to buy, the broker is going to be held to a very high standard.
“It used to be that policyholders just bought general liability insurance, but now they also must consider employment, cyber, environmental, flood insurance — the types of insurance that are now available has mushroomed,” Chesler said.
“This has led to some brokers in some cases not being fully up to speed on having the necessary knowledge to deal with their clients,” he said.
In New York, a February ruling by the N.Y. Court of Appeals in Deborah Voss vs. The Netherlands Insurance Co. found that a broker can only be liable if it has a special relationship with the insured, he said.
“It’s a major development, as it’s the first time a New York court found that a special relationship may exist,” Chesler said.
Business owner Deborah Voss claimed, among other things, that her broker from CH Insurance Brokerage Services Co. Inc. assured her that $75,000 per incident in coverage for business interruption losses was adequate, even after she questioned the limit, according to the lawsuit.
Moreover, the broker promised to reassess her coverages as her business grew, but failed to do so after she moved into another building that subsequently sustained water damage from a leaky roof on multiple occurrences, according to the lawsuit.
The court denied the insurance broker’s motion to dismiss the litigation and found that a special relationship could have existed — particularly since the broker promised to re-evaluate her policies as her business grew.
The concept of when an insurance broker has a duty to advise used to be “a much greater mountain to climb,” said Peter Biging, a partner at Goldberg Segalla LLP in New York City.
“I think these types of decisions are indicators of the judicial system increasingly identifying agents and brokers as experts providing highly specialized advice, instead of just being order-takers,” Biging said.
Such perceptions are due to the realities of “the competitive marketplace of today,” which demands that agents and brokers promise greater risk management services, either expressly or implicitly, he said.
“These types of decisions are indicators of the judicial system increasingly identifying agents and brokers as experts providing highly specialized advice, instead of just being order-takers.”
When that risk management duty is implied, it may be harder for clients to prove broker liability, he said. But if the agent’s or broker’s contract states they will act as the insured’s “exclusive risk manager” or “financial risk adviser,” courts will now likely require a higher level of care and responsibility on the part of the agent or broker.
In the Tiara case, McAlpine said, the condo association that made the insurance purchasing decisions “is actually run by volunteers who don’t have the expertise to make commercial insurance risk decisions and thus have no choice but to rely on the broker’s advice, which I believe, is an important consideration in determining whether or not its broker has a special relationship.”
He said Marsh was part of Tiara’s decision-making process as to the type and amount of hurricane coverage to obtain, and evaluated the condo association’s outdated replacement value appraisal, advising that a new appraisal was not necessary.
The trial is scheduled to begin in October, following a ruling in federal district court that the special relationship test should apply, McAlpine said.
“I think Florida is taking an enlightened path in recognizing that brokers in certain circumstances undertake enhanced duties to properly advise their clients as to their insurance risks,” he said.
If the special relationship exists, the broker may have a duty to properly advise them on the type and amount of insurance they need to buy, McAlpine said. Moreover, once the client has made its decision, the broker may have a further duty to warn the client if it has made a risky decision.
“Obviously, the broker’s duties may be tempered either way by the sophistication of its client,” he said.
“An experienced risk manager can be expected to know and understand its insurance risks, while a condo association making decisions through a voluntary board will likely be perceived by a jury to be particularly vulnerable and therefore reliant on the broker’s advice.”
Achieving More Fluid Case Management
Risk management practitioners point to a number of factors that influence the outcome of workers’ compensation claims. But readily identifiable factors shouldn’t necessarily be managed in a box.
To identify and discuss the changing issues influencing workers’ compensation claim outcomes, Risk & Insurance®, in partnership with Duluth, Ga.-based Healthcare Solutions, convened an April roundtable discussion in Philadelphia.
The discussion, moderated by Dan Reynolds, editor-in-chief of Risk & Insurance®, featured participation from four tenured claims management professionals.
This roundtable was ruled by a pragmatic tone, characterized by declarations on solutions that are finding traction on many current workers’ compensation challenges.
The advantages of face-to-face case management visits with injured workers got some of the strongest support at the roundtable.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” participant Barb Ritz said, a workers’ compensation manager in the office of risk services at the Temple University Health System in Philadelphia.
Telephonic case management gradually replaced face-to-face visits in many organizations, but participants said the pendulum has swung back and face-to-face visits are again more widely valued.
In person visits are beneficial not only in assessing the claimant’s condition and attitude, but also in providing an objective ear to annotate the dialogue between doctors and patients.
“Oftentimes, injured workers who go to physician appointments only retain about 20 percent of what the doctor is telling them,” said Jean Chambers, a Lakeland, Fla.-based vice president of clinical services for Bunch CareSolutions. “When you have a nurse accompanying the claimant, the nurse can help educate the injured worker following the appointment and also provide an objective update to the employer on the injured worker’s condition related to the claim.”
“The relationship that the nurse develops with the claimant is very important,” added Christine Curtis, a manager of medical services in the workers’ compensation division of New Cumberland, Pa.-based School Claims Services.
“It’s also great for fraud detection. During a visit the nurse can see symptoms that don’t necessarily match actions, and oftentimes claimants will tell nurses things they shouldn’t if they want their claim to be accepted,” Curtis said.
For these reasons and others, Curtis said that she uses onsite nursing.
Roundtable participant Susan LaBar, a Yardley, Pa.-based risk manager for transportation company Coach USA, said when she first started her job there, she insisted that nurses be placed on all lost-time cases. But that didn’t happen until she convinced management that it would work.
“We did it and the indemnity dollars went down and it more than paid for the nurses,” she said. “That became our model. You have to prove that it works and that takes time, but it does come out at the end of the day,” she said.
The ultimate outcome
Reducing costs is reason enough for implementing nurse case management, but many say safe return-to-work is the ultimate measure of a good outcome. An aging, heavier worker population plagued by diabetes, hypertension, and orthopedic problems and, in many cases, painkiller abuse is changing the very definition of safe return-to-work.
Roundtable members were unanimous in their belief that offering even the most undemanding forms of modified duty is preferable to having workers at home for extended periods of time.
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Unhealthy households, family cultures in which workers’ compensation fraud can be a way of life and physical and mental atrophy are just some of the pitfalls that modified duty and return-to-work in general can help stave off.
“I take employees back in any capacity. So long as they can stand or sit or do something,” Ritz said. “The longer you’re sitting at home, the longer you’re disconnected. The next thing you know you’re isolated and angry with your employer.”
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Whose story is it?
Managing return-to-work and nurse supervision of workers’ compensation cases also play important roles in controlling communication around the case. Return-to-work and modified duty can more quickly break that negative communication chain, roundtable participants said.
There was some disagreement among participants in the area of fraud. Some felt that workers’ compensation fraud is not as prevalent as commonly believed.
On the other hand, Coach USA’s Susan LaBar said that many cases start out with a legitimate injury but become fraudulent through extension.
“I’m talking about a process where claimants drag out the claim, treatment continues and they never come back to work,” she said.
Social media, as in all aspects of insurance fraud, is also playing an important role. Roundtable participants said Facebook is the first place they visit when they get a claim. Unbridled posts of personal information have become a rich library for case managers looking for indications of fraud.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” said participant Barb Ritz.
As daunting as co-morbidities have become, roundtable participants said that data has become a useful tool. Information about tobacco use, weight, diabetes and other complicating factors is now being used by physicians and managed care vendors to educate patients and better manage treatment.
“Education is important after an injury occurs,” said Rich Leonardo, chief sales officer for Healthcare Solutions, who also sat in on the roundtable. “The nurse is not always delivering news the patient wants to hear, so providing education on how the process is going to work is helpful.”
“We’re trying to get people to ‘Know your number’, such as to know what your blood pressure and glucose levels are,” said SCS’s Christine Curtis. “If you have somebody who’s diabetic, hypertensive and overweight, that nurse can talk directly to the injured worker and say, ‘Look, I know this is a sensitive issue, but we want you to get better and we’ll work with you because improving your overall health is important to helping you recover.”
The costs of co-morbidities are pushing case managers to be more frank in patient dialogue. Information about smoking cessation programs and weight loss approaches is now more freely offered.
Managing constant change
Anyone responsible for workers’ compensation knows that medical costs have been rising for years. But medical cost is not the only factor in the case management equation that is in motion.
The pendulum swing between technology and the human touch in treating injured workers is ever in flux. Even within a single program, the decision on when it is best to apply nurse case management varies.
“It used to be that every claim went to a nurse and now the industry is more selective,” said Bunch CareSolutions’ Jean Chambers. “However, you have to be careful because sometimes it’s the ones that seem to be a simple injury that can end up being a million dollar claim.”
“Predictive analytics can be used to help organizations flag claims for case management, but the human element will never be replaced,” Leonardo concluded.