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Reducing Cat Risks

Wind Turbines Slow Down Hurricane Winds

Hurricane winds are dissipated by offshore wind farms.
By: | March 6, 2014 • 3 min read
Topics: Catastrophe | Energy
03062014WindTurbines

Off the New York coastline would be a perfect place for an array of wind turbines, according to a Stanford professor. It would not only offer clean energy to the Big Apple but it would protect it the next time a Superstorm Sandy comes calling.

“If you have a large enough array of wind turbines, you can prevent the wind speeds [of a hurricane] from ever getting up to the destructive wind speeds,” said Mark Jacobson, a professor of civil and environmental engineering at Stanford University.

Computer models demonstrated that offshore wind turbines reduce peak wind speeds in hurricanes by up to 92 mph and decrease storm surge by up to 79 percent, said Jacobson, who worked on the study with University of Delaware researchers Cristina Archer and Willett Kempton.

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“The additional benefits are there is zero cost unlike seawalls, which would cost about $30 billion,” he said, noting that the wind turbines “generate electricity so they pay for themselves.”

The researchers studied three hurricanes, Sandy and Isaac, which struck New York and New Orleans, respectively, in 2012; and Katrina, which slammed into New Orleans in 2005. Generally, 70 percent of damage is caused by storm surge, with wind causing the remaining 30 percent, he said.

That’s why onshore wind farms would not be as effective, he said. While they would reduce the wind speed, they wouldn’t impact storm surge.

In 2013, one of the “most inactive” Atlantic hurricane seasons on record, insured losses totaled $920 million, according to Guy Carpenter, which relied on information from the Mexican Association of Insurance Institutions. The most noteworthy events were Hurricane Ingrid in the Atlantic and Tropical Storm Manuel in the Pacific, which displaced thousands as they caused excessive rainfall, flooding and mudslides.

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According to the Insurance Information Institute, Katrina was the costliest hurricane in insurance history, at $48.7 billion, followed by Andrew in 1992 at $25.6 billion and Sandy at $18.8 billion. Economic losses, of course, were much higher.

Wind turbines, which can withstand speeds of up to 112 mph, dissipate the hurricane winds from the outside-in, according to Jacobson’s study. First, they slow down the outer rotation winds, which feeds back to decrease wave height. That reduces the movement of air toward the center of the hurricane, and increases the central pressure, which in turn slows the winds of the entire hurricane and dissipates it faster.

The benefit would occur whether the turbines were immediately upstream of a city, or along an expanse of coastline. It could take anywhere from tens of thousands to hundreds of thousands of wind turbines off the coast to offer sufficient hurricane protection.

At present, there are no wind farms off the U.S. coastline, although 18 have been proposed for off the East Coast. Proposals have also been made for off the West Coast and the Great Lakes. There are 25 operational wind farms off the coast of Europe.

“Overall,” Jacobson and his colleagues concluded in the study, “we find here that large arrays of electricity-generating offshore wind turbines may diminish hurricane risk cost-effectively while reducing air pollution and global warming, and providing local or regionally sourced energy supply.”

Anne Freedman is managing editor of Risk & Insurance. She can be reached at afreedman@lrp.com.
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The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | November 3, 2014 • 5 min read
You Be the Judge

Court Upholds Reservation of Rights

Wellons Inc. created two thermal oxidation energy systems in 2002 for Langboard Industries in Quitman, Ga., that were designed to generate electricity to be sold to Georgia Power.

11012014_legalspotlight_electricityAfter designing and providing the systems to Langboard, at a cost of $13.7 million, Wellons agreed in 2003 to install them, at a cost of $3 million.

During the construction phase in 2004, a “tube bundle” collapsed, causing extensive property damage, but the system was ultimately placed in service by June 2005, at which time leaks were discovered in the “superheater” portion of the system, according to court documents.

To fix the leaks and seal weld the joints, Wellons hired Hunt Construction, which completed the work in March 2006. The superheater was put back into service even though leaks still occurred. Two weeks later, one of the superheater tubes “completely severed.” Wellons claimed Hunt’s faulty repair work was responsible.

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Langboard requested a new superheater, at a cost of $850,000, to be designed and installed as the current system was “not conducive to long term operation.” Wellons agreed, but did not immediately notify Lexington Insurance Co., which had issued a commercial general liability policy, with a per occurrence limit of $1 million. Lexington also had issued an umbrella policy, with a per occurrence limit of liability of $10 million.

Two months later, Hunt filed suit against Wellons for monies owed for its work. Lexington was notified through its agent, referencing the CGL policy and not the umbrella policy. Lexington issued a reservation of rights letter, notifying the company it was “investigating this matter.”

Langboard eventually filed suit against Wellons in 2007. Lexington sent another, similar reservation of rights letter.

After a jury trial in 2010, Langboard was awarded $8.4 million for breach of the purchase and construction agreements. A month later, Lexington advised Wellons it had “no obligation” to defend or indemnify it.

Wellons filed suit seeking a court declaration that the verdict was a covered loss under its CGL or umbrella policy. Both it and Lexington sought summary judgments.

The U.S. District Court for the Northern District of Georgia ruled in Lexington’s favor. On appeal to the U.S. 11th Circuit Court of Appeals, Wellons argued the reservation of rights notification needed to be more specific to comply with Georgia law.

The appeals court disagreed in May, saying that Lexington’s “defenses of noncoverage were not known …  until it concluded its investigation… .” The court also found that Wellons had never notified the company of a claim under the umbrella policy.

Scorecard: Lexington Insurance did not have to cover an $8 million jury verdict resulting from faulty construction of an energy system.

Takeaway: Insurers “must” give insureds notification of a reservation of rights, but Georgia law only recommends that specific policy terms be part of that notification.

Imitation is Not Disparagement

In 2010, Gary-Michael Dahl, manufacturer of the Multi-Cart, filed a lawsuit against Ultimate Support Systems claiming that Ultimate’s Ulti-Cart infringed on Dahl’s patent and trademark, and damaged its business and reputation, among other issues.

Both the Multi-Cart and Ulti-Cart are collapsible carts designed for the musical industry to transport music, sound and video equipment.

Ultimate sought defense under its commercial liability policy issued by Hartford Casualty Insurance Co., which denied coverage, claiming that “disparagement” was not covered by the personal and advertising injury policy terms.

The insurance company also said the policy did not cover violations of intellectual property rights.

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After Ultimate sued for coverage, the California Superior Court dismissed the lawsuit. That decision was affirmed by the Court of Appeal, and on further appeal to the California Supreme Court, Ultimate lost once again.

The state’s high court ruled in June there was no disparagement, either explicit or inferred.

The possible confusion between the two products does not imply inferiority of the Multi-Cart, the court ruled. In addition, Dahl’s claim that Ulti-Cart was a “knock-off” of the Multi-Cart, and thus derogatory of the Multi-Cart, was disputed by Dahl’s own claim that the two products were “nearly identical.”

Scorecard: Hartford did not have to provide a defense to Ultimate Support Systems in a trademark infringement lawsuit.

Takeaway: The ruling limits the scope of an insurer’s duty to defend a policyholder when the allegations involve disparagement.

Court Rules on Additional Insureds

On Sept. 13, 2010, workers of Fast Trek Steel were tightening safety cables on steel beams at Yale University’s Science Area Chilled Water Plant Shell when the unsecured beams dislodged and collapsed. One ironworker, Robert Adrian, fell to his death. Three others were injured by the falling beams.

11012014_legalspotlight_beamsAdrian’s estate and the injured men filed suit alleging negligence against, among others, Shawmut Woodworking & Supply Inc., general contractor of the construction project, and Shepard Steel Co., a steel fabrication subcontractor.

Because of workers’ compensation laws, there were no lawsuits filed against Fast Trek, which, as required by its contract with Shepard, had obtained a general liability policy from First Mercury Insurance Co. with a $1 million per occurrence coverage limitation, and an excess liability policy from National Union Fire Insurance Co., with up to $10 million of coverage.

Both Shepard and Shawmut sought defense and indemnification from First Mercury as “additional insureds” of that Fast Trek policy. Liberty Mutual — which had issued a liability policy to Shepard and is currently providing a defense to Shepard and Shawmut under a reservation of rights — also demanded that First Mercury assume that defense.

First Mercury demurred, contending, among other reasons, that Shawmut was not included in the definition of additional insured, and that even if Shawmut and Shepard were included, there was no coverage because Fast Trek was not named in the underlying lawsuits.

The U.S. District Court for the District of Connecticut disagreed.

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It ruled that when Shepard hired Fast Trek as its subcontractor — and as Shawmut’s sub-subcontractor — the agreement expressly incorporated the Shawmut-Shepard contract, and that it was “immaterial” that there was not a “direct contractual relationship” between Shawmut and Fast Trek.

In addition, it ruled that the accident was arguably caused by Fast Trek and that the reason Fast Trek was not named in the underlying lawsuits was due to the exclusive remedy rule of workers’ compensation law.

Scorecard: First Mercury must defend and indemnify the general contractor and subcontractor in the workplace death and injury lawsuit.

Takeaway: A sub-subcontractor need not be explicitly included in a contract for coverage to be extended.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at afreedman@lrp.com.
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Sponsored: Healthesystems

Changing the WC Medical Care Mindset

Having a holistic, comprehensive strategy is critical in the ongoing battle to control medical care costs.
By: | November 3, 2014 • 6 min read
SponsoredContent_HES

Controlling overall workers’ compensation medical costs has been an elusive target.

Yet, according to medical experts from Healthesystems, the Tampa, Fla.-based specialty provider of innovative medical cost management solutions for the workers’ compensation industry, payers today have more powerful options for both offering the highest quality medical care and controlling costs, but they must be more thoroughly and strategically executed.

Specifically as it relates to optimizing patient outcomes and controlling pharmacy costs, the key, say those experts, is to look beyond the typical clinical pharmacy history review and to incorporate a more holistic picture of the entire medical treatment plan. This means when performing clinical reviews, taking into account more comprehensive information such as lab results, physician notes and other critical medical history data which often identifies significant treatment plan concerns but frequently aren’t effectively monitored in total.

Healthesystems’ Dr. Robert Goldberg, chief medical officer, and Dr. Silvia Sacalis, vice president of clinical services, recently weighed in on how using a more holistic, comprehensive strategy can make the critical difference in the ongoing medical care cost control battle.

Fragmentation, Complexity Obscure the Patient Picture

According to Dr. Goldberg, fragmentation remains one of the biggest obstacles to controlling overall healthcare costs and ensuring the most successful treatment in workers’ compensation.

Robert Goldberg, MD, discusses obstacles to controlling overall medical costs and ensuring the best treatment in workers’ compensation.

“There are several hurdles, but they all relate to the fact that healthcare in workers’ comp is just not very well coordinated,” he said. “For the most part, there is poor communication between all parties involved, but especially between the payer and the provider. Unfortunately, it’s rare that all the stakeholders have a clear, complete picture of what’s happening with the patient.”

Dr. Goldberg explains that health care generally has become a more complex landscape, and workers’ comp adds another level of complexity. Physicians have less time to spend with patients due to work loads and other economic factors, and frequently there isn’t adequate time to develop a patient specific treatment strategy.

“Often we don’t have physicians properly incentivized to do a complete job with patients” he said, adding that extra paperwork and similar hurdles limit communication among payers, nurse case managers and other players.

In fact, Dr. Sacalis emphasized that it’s not only the payer, but often the healthcare provider who is not getting a complete picture. For example, a treating doctor may not be the primary care physician and therefore they may not have access to the total healthcare picture for the injured worker.

SponsoredContent_HES“Most of all, payers need to adopt a more collaborative approach in their relationships with physicians, employers and patients, as well as networks involved. It will result in getting people back to work through appropriate medical care and moving the case along to a prompt closure.”
– Robert Goldberg, MD, FACOEM, Chief Medical Officer, Healthesystems

“It’s often difficult for multiple physicians to communicate and collaborate about what’s happening because they may not be aware of each-others involvement in that patient’s care,” she said. “Data sharing is lacking, even in integrated healthcare systems where doctors are in the same group.”

Done Right, Technology Can Bridge the Treatment Strategy Gap

Dr. Sacalis explained the role technology advancements can play in creating a more holistic picture of not only an injured workers’ post-accident state or pace of recovery, but also their overall health history. However, the workers’ comp industry by and large is not there yet.

“Today’s technology can be very useful in providing transparency, but to date the data is still very fragmented,” she said. “With technology advancements, we can get a more holistic patient view. However, it is important that the data is both meaningful and actionable to promote effective clinical decision support.”

Silvia Sacalis, PharmD, explains the role that technology advancements can play in creating a more holistic picture of an injured worker’s overall health.

Healthesystems, for example, offers an advanced clinical solution that incorporates a comprehensive analysis of all relevant data sources including pharmacy, medical and lab data as part of a drug therapy analysis. So, for example, the process could uncover co-morbidities – such as diabetes – that may be unrelated to a workplace injury but should be considered in the overall treatment strategy.

“Healthcare professionals must ensure there are no interactions with any
co-morbidities that may limit or affect the treatment plan,” Dr. Sacalis said.

In the majority of cases where Healthesystems has performed advanced clinical analysis, information gathered from the various sources has uncovered critical information that significantly impacted the overall treatment recommendations. Technology and analytics enable the implementation of best practices.

She cites another example of how a physician may order a urine drug screen (UDS), yet the results indicating the presence of a non prescribed drug were not reflected in the treatment regimen as evidenced by the lack of modification in therapy.

“Visibility and transparency will help with facilitating a truly effective treatment plan,” she said, “Predictive analytics are necessary tools for proactive monitoring and detection of trends as well as early identification of cases for intervention.”

Speaking of Best Practices …

Dr. Goldberg highlighted that the most important overall best practice needed to secure the optimal outcome is centered around getting the right care to the right patient at the right time. To him, that means identifying patients who need adjustments in care and then determining medical necessity during the entire case trajectory.

“It means using evidence-based medical treatment guidelines that are coordinated,” he said.

“You must look at the whole patient, which means avoiding the typical barriers in the workers’ comp treatment system, issues such as delays in authorizations, lengthy UR processes or similar scenarios that are well intentioned but if not performed effectively they can get in the way of expedited care.”

Dr. Goldberg and Silvia Sacalis provide recommendations for critical steps payers should take to achieve the best outcomes for everyone.

Dr. Goldberg noted that seeking out the most effective doctors available in geographic locations is another critical best practice. That requires collecting data on physician performance, patient satisfaction and medical outcomes, so payers and networks can identify and incentivize them accordingly.

“This way, you are getting an alignment of incentives with all parties,” Dr. Goldberg said, adding that it also means removing outlier physicians, those whose tendencies are to over-treat, dispense drugs from their office or order unnecessary durable medical equipment, for example.

SponsoredContent_HES“Visibility and transparency will help with facilitating a truly effective treatment plan. Predictive analytics are necessary tools for proactive monitoring and detection of trends as well as early identification of cases for intervention.”
– Silvia Sacalis, PharmD, Vice President of Clinical Services, Healthesystems

“Most of all, payers need to adopt a more collaborative approach in their relationships with physicians, employers and patients, as well as networks involved,” he said. “It will result in getting people back to work through appropriate medical care and moving the case along to a prompt closure.”

Dr. Sacalis added that from a pharmacy perspective, another best practice is becoming more patient-centric, using a customized and flexible approach to help payers optimize outcomes for each patient.

“Focus on patient safety first, and that will naturally drive cost containment,” she said. “Focusing on cost alone can actually drive results in the wrong direction.”

Additional Insights 

Dr. Goldberg explains how consolidation in the health care and WC markets can impact the landscape and quality of care.

Dr. Goldberg and Silvia Sacalis discuss if injured workers today are getting better treatment than they were twenty years ago.

SponsoredContent

BrandStudioLogo

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthesystems. The editorial staff of Risk & Insurance had no role in its preparation.


Healthesystems is a leading provider of Pharmacy Benefit Management (PBM) & Ancillary Benefits Management programs for the workers' compensation industry.
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