The courtroom is at the heart of managing general liability claims. Why?
The courtroom is at the heart of general liability management because every general liability claim centers on the idea that a policyholder mistake hurt someone.
And now it's time to pay. That's why more than 80 percent of people who file such a claim hire a lawyer.
The legal system can be a dangerous place for general liability policyholders, especially given some of the system's biggest challenges.
They include huge variations in jury awards, legal playing fields that change drastically between and within states, and plaintiffs' attorneys constantly looking downstream for even deeper pockets.
But it's possible to survive this legal jungle.
A four-step process can help commercial buyers better manage the impact of general liability claims on their company's bottom line and reputation. Here is what to look for in each step.
Managing general liability claims starts by setting a shared objective and building the process to achieve it, whether policyholders have a long-established general liability program or are building one from scratch.
So policyholders must bring all stakeholders together--their insurance buyer, the buyer's legal team, the safety director, and the insurer's claims and legal experts. Add the broker and third-party administrator. The key ground to cover includes:
The approach. What is the general philosophy that will guide all claims decisions? Some buyers protect their brand at all costs, aggressively fighting most claims. Others prefer to manage their reputation by more selectively choosing their legal battles. Where does the company fall on this spectrum?
The scope. Will the process focus on claims or accidents? Not all accidents spark general liability claims, but all claims stem from accidents. So building a process that tracks accidents has two advantages. First, doing homework up front, in response to each accident, helps policyholders more quickly respond to claims as they're filed. Second, focusing on accidents improves safety, preventing future claims and their associated costs.
Notification details. When and how will policyholders notify the liability insurer of an accident and claim? The faster the insurer is aware of an accident, the quicker it can take steps to manage any resulting claims.
Gathering information. How will policyholders immediately capture information about the accident? Memories fade and witnesses disappear, so policyholders must know how they will gather evidence. And while this is easier in some industries such as trucking and restaurants--where policyholder employees can grab digital photos or file reports recording damage and conditions--it is equally important for all general liability policyholders
GET THE FACTS
While quickly gathering basic information is important, bringing sophisticated investigative resources to a claim is vital.
General liability claims hinge on negligence, so policyholders need the facts. What happened? Why did it happen? Did the actions or inactions of others have an impact on the accident? Be objective and detailed. Document the findings. For example, someone at a construction company may have removed protective equipment from a hand tool that later injured an employee. Or a mechanic from the vendor that maintains the delivery fleet may have inadvertently removed safety equipment, contributing to a crash.
Are the medical and financial damages claimed consistent with what happened and who was involved? Did the restaurant patron fall far enough to cause the injury claimed? Does the income lost because of the injury match that person's past earnings? Was the patron's medical treatment consistent with the accident?
Look beyond the investigation to recreating the accident. The investigation tells what happened, but recreating the accident shows why. And this gets to responsibility.
Because not all investigators and recreation specialists are the same, it's important to understand how the general liability insurer selects and manages the resources it uses.
In fact, risk managers should expect to meet with these experts ahead of any claim.
These consultants should also understand the policyholder company's specific workflows and equipment.
KNOW THE PLAYERS
Before policyholders can decide how to best defend against a claim, they must learn the legal landscape.
A trial is often two completely different versions of the same story. A judgment typically hinges on a jury's perception of witnesses and evidence.
It calls for an understanding of the venue and judges likely to hear the case, understanding of the pool that will form the jury, sniffing out the strengths and weaknesses of the plaintiff's lawyer, taking stock of the skills of supporting witnesses on both sides, and being wary of how the media may influence the process.
There's no substitute for experience. The best legal minds from the policyholder and insurer must be combined to get the lay of the land. This is a key value provided by the general liability insurer, which should have skilled legal representation in every state.
CHOOSE THE BEST PATH
Most claims typically end in one of five ways. The policyholder and general liability insurer pay the full amount, negotiate a settlement, mediate, arbitrate or litigate--all the while exploring opportunities to involve others who may have contributed to the loss.
While policyholders may start with one strategy and end up with another, each one has pros and cons.
Paying the full amount quickly settles the claim, but then policyholders become an easy mark if done too often. This approach makes sense only where the amount requested is fair--that is, it reflects what really happened and the harm that resulted.
Negotiating a settlement means compromise, and compromise is the essence of negotiation. Each party will both gain and lose less than they might otherwise.
Mediation speeds the process and lets both parties present their case to a neutral third party.
The next alternative is arbitration. It comes in two flavors: binding, whereby the final decision must be accepted; and nonbinding, whereby the parties aren't bound by the outcome. Both speed a claim's resolution and let everyone present their case. But there's no appeal with most binding arbitration agreements.
Litigation, the final option, has the biggest potential gain and loss. It's possible to win or lose it all.
What's the best approach? One that's driven by the policyholders' claims philosophy and based on the facts, judicial realities and potential impact on their companies. It's a decision that must involve discussion between insurers and policyholders. This is where the relationship, understanding and communication developed in the first three steps pay off.
Sure, managing general liability claims is hard, but fine-tuning the process by following these four steps makes finding the way through that jungle a little easier.
manages general liability claims for Liberty Mutual's National Market strategic business unit, which provides complex insurance solutions to large companies.
September 1, 2006
Copyright 2006© LRP Publications