about a claim denial now, wait until occur. While lawyers are well advised ate just that way, paying virtually
that client spends a hundred thou- to take the assertions of their clients everything regardless of whether it is
sand or more prosecuting a case with a grain of salt, sometimes the owed or not according to contract
against the carrier that the broker story is superficially convincing terms. While this may be a viable
advocated, only to lose in the end. A enough, and one only learns about the strategy in the short-term, sooner or
broker/TPA that doesn’t come clean problems with one’s case well into the later the loose claims payment
at the outset with its client about a discovery phase. At this point, the approach will require underwriting
stop loss claim that really should have illogical “too much water under the adjustments that may price the carri-
been denied is simply delaying the bridge” mentality may kick in, and the er out of the market, because com-
inevitable, and using its client’s case pursued unreasonably on the peting carriers are paying attention
money to do it to boot. Discovery in ground that “we’ve come this far, we to their yins as much as their yangs.
a lawsuit will almost always uncover might as well see it through.” As a result, the competition can
the important facts, and if they are in Actually, the only relevant calculus for quote lower rates, thus capturing
truth such that the stop loss claim assessing whether or not to settle a more business.
was properly denied, it is likely that case is the additional costs to proceed
the claims decision will be upheld by versus the likely benefit. Money Likewise, an MGU overly focused on
the court. already spent on attorneys’ fees is claims denials at the expense of busi-
wholly irrelevant. Despite the self- ness relationships may profit in the
Of course, counsel familiar with the evident wisdom of this principle, short term, only to lose in long run, as
industry—and good counsel that human nature sometimes encourages its inflexible claims practices are fac-
spends the time and effort to educate us to ignore it. tored in by the market. The ideal sit-
himself about its workings if he is uation is, not surprisingly, equilibrium
not—is in a position to provide the Given all the negative consequences between yin and yang, where claims
group with the objective analysis it of a claim denial, why is that claims are paid if they are owed, denied when
deserves before embarking on a law- are ever denied except in the clearest
suit. But too often, even this fails to of cases? Some MGUs/carriers oper-
(see page 20)
CIRCLE #4 ON READER SERVICE CARD
The Self-Insurer
©
/ January 2010 • 19
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