Keefe, Campbell & Associates, LLC

Editor’s comment: We sent this to one of our readers and thought we should share it with all of you.

Summary:

1. Open claims generate new claims.

2. Your defense witnesses and defense case-in-chief may disappear.

3. Reserves sit and mess up your cash position and/or credit lines.

4. Costs and exposures rise as claims sit.

5. Doctors, doctors, doctors.

6. Why reward defense lawyers who don’t close claims effectively?

Open claims generate new claims.

The more claims a company has pending, the more employees you may have with pending claims. Those employees start to look at workers’ compensation claims as money in the bank with solid long-term potential. They know they will cash in some day and usually get the highest possible return in a state that usually rewards old claims.

When they see even a soft-tissue strain/sprain, the same employees are also likely to tell other employees to start “workers’ comp bank accounts” by filing whenever the other employee has an injury. They will caution their friends to expect to have to wait but also expect they will get a nice bonus some day when the case finally comes to a close. In the interim, the employee coaching new employees to file claims may also tell them to get lots of treatment to insure a solid outcome and settlement.

Employees with pending claims also know claimant lawyers. In Illinois, those lawyers give out business cards and may give “bonuses” to claimants who bring them more claimants. We would bet veteran risk managers see lots of the same lawyers handle claim after claim against your company—this demonstrates there may be a “mole” or “shill” at your facilities who are directing employee after employee to the same attorney.

You may be able to prevent all of it with a litigation avoidance plan and more aggressive litigation management approach.

Your defense witnesses and defense case-in-chief may disappear.

If you don’t push claims to closure, your defense witnesses and defense case-in-chief may disappear. We have seen bona fide disputes and strong cases made to refute any claim for benefits completely erode and potentially disappear when cases are allowed to sit for months and years. People come and go in your organization with expected rapidity—we are a mobile society. While you may have a willing supervisor or co-employee ready to testify and completely rebut a claim of injury this month, in three years or more, such individuals may be half-way around the world or retired or simply lose any interest in the matter. All of it works to the detriment of the company and not claimant.

Any veteran defense attorney will tell you even the most conniving claimants will typically remain interested in the case while it is pending. Claimants have a strong financial interest in a phony claim. Due to the financial potential, they are typically going to remember their stories and the “plot line” in a phony case. In Illinois, it is incumbent on the employer to locate and obtain the return of your defense witnesses to testify if you are going to maintain denial of a disputed claim. The longer you let a major disputed case sit, the lesser your chance of having the ammunition needed to demonstrate the dispute to the Arbitrator. Many veteran claims managers in Illinois have paid claims they know they might have won if the witnesses were present and testified consistent with their prior statements—this potential makes it imperative to try fully disputed cases earlier rather than later.

Reserves sit and mess up credit lines.

There is no question the more claims you have pending, the higher your reserves may be. Any accountant will tell you that your company is going to have to keep monies set aside, in either cash or lines of credit to reflect the loss and potential payout. When a company has numerous pending claims, the reserves clog up cash or credit that can be used for much better things. This year, we audited claims for a major hospital chain. They have several million dollars in reserves sitting for 3-5 years awaiting claim closure. Many of the claims were simple and undisputed matters but the corporate powers-that-be didn’t take action to move the files. This is what we assume you may be doing in handling claims.

So for one example, this hospital group had a claimant with a broken hand. The case had a settlement value of $15,000. The reserves were for “worst-case” value of $40,000. We took a look at the file, knew opposing counsel, called the attorney and settled the matter in ten days for $15,000. In doing so, we freed up $25,000 in reserves. If you assume the hospital group had 75 similar claims and we could work to close all of them in the same fashion, we would free up almost $2,000,000 in reserves by simply paying fair value on accepted claims.

Costs and exposures rise as claims sit.

When claims are allowed to intentionally age in Illinois, they usually age poorly. Claimants like to get lots of medical care to justify the value of the matter. Claimants will try to stay off work longer to insure they get the best possible outcomes. Some injured workers will also seek restrictions and limitations on their work as the years roll on.

We have seen a number of rulings in Illinois where hotly disputed claims finally get tried after two, three, four years of fighting. The employer or insurance carrier appeared to be making efforts to “wait out” the current liberal administration. When the matter finally got tried, the employee was awarded years and years of disputed TTD. For most of your employees who have generally favorable rates, an award of three years of TTD can force you to pay $100,000 or more in benefits. We feel you are much better served to drive to drive claims to rapid resolution to bring more predictability to the outcome.

We also hate to see hotly disputed and denied claims sit to the point the injured worker can come to the Commission and cry and moan about being broke due to the actions of the employer. The liberal administration likes to penalize employers and reward big money to such claimants in a punitive fashion. It can all be avoided simply by bringing the matter before an Arbitrator sooner rather than later.

Doctors, doctors, doctors.

We feel Illinois has a cadre of treating doctors who are notorious for over-treating patients. These doctors will order lots of tests and esoteric surgical procedures. If the patient keeps showing up and complaining the doctors will perform lots of trimming and then start replacing joints or fusing backs/necks. The medical costs can quickly escalate into the mid six-figure range.

These doctors/surgeons are very well-known in the Illinois workers’ compensation claims community. They have learned the system won’t typically slow them down and they expect to get paid under Illinois’ favorable WC medical fee schedule. Every veteran claims manager and defense attorney has used independent medical examination and utilization review to try to slow these physicians/surgeons down.

However, the best way to shut them off is to close accepted claims quickly or fight disputed claims faster. The best thing about Illinois workers’ compensation is you can effectively close medical rights if the employee has left your organization at the time of settlement.

Why reward defense lawyers who don’t close claims effectively?

We have learned over the years of auditing defense files and handling claims that defense lawyers love clients who will sit on claims. The costs of sitting on claims are a boon to the defense industry. There is no question the longer a claim is allowed to sit idle, the more your legal fees increase.

Such lawyers are thrilled to call and meet and regularly entertain such clients. They are hoping to keep making more money and get similar rewards as the years roll on.

To the contrary, we feel lawyers who get to the point and win or settle cases effectively are the sort of legal talent that should be rewarded and nurtured. Litigation is uncertain and expensive. The less litigation a company has, the more predictable your costs are. It is a challenge to close litigated files in Illinois but the harder a company works to close them and avoid what caused the litigation in the first place, the better suited you will be moving forward.

How to do it

Keefe, Campbell & Associates is devoted to closing WC, GL and EPLI claims faster than our competitors. We have an Illinois litigation management plan that should allow you to

• Avoid litigation in accepted claims in the first instance;
• Make every possible effort to keep your injured workers away from lawyers where possible;
• Focus on implementing pro se settlements whenever prudent;
• When the worker goes to a lawyer, move quickly to bring the matter to closure via trial or settlement;
• Conduct “settlement days” for litigated claims at the Illinois Commission to induce file closure;
• Conduct claim “exit interviews” to see if you can learn from the issues that led to litigation and lawyers and avoid it moving forward.

We would be happy to outline the overall approach for any of our readers. If you are interested in these suggestions, please let us know. If you know any defense competitor in Illinois that closes claims faster, please let us know how they do it!!!