Workers Compensation Claim Practices

Allocated Loss Adjustment Expenses

(ALAE) Medical cost containment fees, legal defense expenses and claims investigation costs.

Unallocated Loss Adjustment Expenses

(ULAE) Major cost factor for insurers. Reflects how efficiently insurer operates. Manage caseloads effectively. Monitor claim closure ratios the ratio of new claim to claim closed and length of time claim opened. Best practices.

Work Comp Goals

1 Promptly paying adequate income and medical benefits according to a fixed and predetermined schedule to injured employees or dependents regardless of fault. 2 Eliminating the delays and costs of litigation to the employee and to society. 3 Establishing a guarantee of benefit payment secured by insurance. 4 Promoting industrial safety and hygiene.

Three common law defenses preventing worker from suing employer

1 assumption of risk defense when employee knowingly and voluntarily exposed themselves which is now restricted. 2 contributory negligence which is now comparative negligence. 3 fellow servant rule the negligence of fellow employee which is now eliminated or restricted.

4 elements injured worker must prove in a case based on negligence

1 legal duty owed. 2 failure to comply w/ the standard of care required by duty. 3 proximate cause. 4 damages. All have to be proven if any is missing no recovery allowed.

Elements of Employer-Employee Relationship

1- Control work assignment and direct how work is to be done and hire and discharge. 2- Consent means worker voluntarily accepts terms of employment and is competent to enter into agreement so long as it is lawful. 3 - Consideration is something of value in exchange for the work. Does not have to be monetary or tangible.

Attorneys Fees

25% of the award.

Monopolistic State Fund or Exclusive

A facility, owned & operated by a state government, that provides work comp insurance that does not permit any other insurers to sell work comp insurance in that state.

Second Injury Fund

A state operated or mandated fund that pays a portion of the work comp benefits of an injured employee whose disability is aggravated by a prior liability. The initial injury does not have to be work related & can result from injury, birth defect or debilitating illness and is permanent. Purpose was to encourage employment of disabled persons. Funding comes from states assess employers or insured yearly percentage of losses paid or premiums written the previous year.

Captive Insurer

A subsidiary formed to insure the loss exposure of the parent company and the parent's affiliates.

Alternative Dispute Resolution

ADR is a method of resolving disputes without court or admin agencies. Provides out of court settlements with advantage of economy, greater speed of resolution, less hostility between parties and some degree of privacy. Includes Arbitration and Mediation.

Qualifying Criteria for Work Comp Injury

Accidental unforseen and unintended. Arising from employment and course of employment.

Medicare eligible

Age 62 and 6 months of age or older

Fronting Agreement

Agreement whereby one entity transfers financial consequences of loss exposure to an insurer with the agreement that the entity will indemnify the insurer for most or all the losses paid.

Buy Out

Allow employers and insurers to buy out the medical benefit loss exposure rather than pay for all future med costs.

Qualified Self Insurance

Almost all states allow employers to retain self insure if they demonstrate financial capacity to do so. Employer must post a surety bond or other collateral to work comp admin agency.

Positional Risk Doctrine

Also known as the "but for". An injury arises out of the claimant's employment if the injury would not have occurred but for the fact that the conditions and obligations of employment placed the claimant in the position where he or she was injured. Not covered if the injury is caused by factors that would have occurred regardless of employment such as a cerebral hemorrhage.

Permanent Partial Disability

Although permanently disabled, has lost certain functioning. Is able to work but at reduced efficiency. Must reach MMI to determine degree of disability. Calculated by a schedule that allots certain number of weeks of benefits to loss of use of a body part. Number of weeks is multiplied by the weekly TTD benefit. Fixed and limited by the calculated benefit and duration.

Voluntary Compensation & Employers Liability Coverage Endorsement

Amends the policy to cover employees who are not subject to a work comp statute.

Reserve

Amount insurer estimates and sets aside to pay on a claim.

Statutory employee

An independent contractor's employee who because the independent contractor has not maintained workers compensation insurance is considered to be an employee of the principal employing the independent contractor. Also applies to general contractor that has hired a subcontractor.

Under the common-law contributory negligence rule, a worker is barred from recovery for injury if the worker's contributory negligence to exercise care for his or her own safety is responsible for causing the accident by which one of the following percentages?

Any percentage greater than zero.

Physical and Psycho social rehab

Application of the para medical and social sciences that optimize an individuals level of functioning after an impairment for the purposes of limiting and/or preventing disability. Takes place in medical centers, clinics or other outpatient facilities.

Employers Negligence Statutes

Apply if an injured worker can prove that the employer contributed to the injury thereby limiting the liability of other defendants and reducing amount of damages other defendants would have to pay.

Employers Negligence Statues

Apply if injured worker can prove that employer contributed to injury thereby limiting liability of other defendants and reducing amount of damages. Injured worker tried to reduce or eliminate the employer's lien by amount employer was negligent.

Accepting Cash Only Recovery

Appropriate for insurer if the future exposure to the insurer is small or the work comp claim is closed and no future benefits are expected. Recovery is not larger than the lien by more than one third and the case is not strong.

Impairment Based Approach

Assign an award for an employees unscheduled PPD based entirely on his or her degree of impairment. Employees loss of future earnings is not considered in most cases. Under this approach an injured employee can receive benefits even if the impairment results in no loss of employment or earnings.

Apportionment

Assigning to an injured worker's current employer only that portion of the worker's permanent disability that occurred while in current employment.

Common Law Defenses

Assumption of risk. Contributory Negligence. Negligence of a fellow worker.

Average Weekly Wage (AWW)

Average of a statutory period of earning to determine an employees work comp disability benefits. Calculated by averaging the workers' actual wages including overtime for a prescribed number of pre injury weeks. Can include bonuses.

Calculating employee's average weekly wage

Averaging actual weekly wages, plus OT, for a prescribed number of pre injury weeks.

Prospective Experience Rating Plan

Base policyholders' premiums in a current policy period on the losses incurred in the previous experience periods usually three years excluding the most recent year.

Finite Risk Insurance

Blend of self insurance and guaranteed cost insurance. Run for multiyear periods and insurer returns a portion of premium if it makes a profit. High severity losses for several years under a single contract. Custom tailored to an insureds needs. Limits of coverage apply on an aggregate basis.

Structured Settlement for Insurer

Bridge gap between worker's demand and settlement offer. Discount reduces the settlement's purchase price. Insurer make a qualified assignment - transfer the promise to make future payments to a third party.

Temporary Partial Disability (TPD)

Bridge the gap compensating worker for wage differential occurring when the workers returns to lighter work or reduced hours.

Injuries to nonscheduled body parts are rated

By an administrative agency based on actual economic loss and Percentage of loss or loss of use

Return to work achieves savings for employers

By indemnity and medical costs. Indemnity costs are direct for the employer. Medical Costs are indirect for the employer.

Waiting Periods for TTD or TPD

Can be anywhere from 3 to 7 days after became disabled. Dates are based on calendar days. Period between end of waiting period and start of TTD or second specified date.

Insurance Rehab costs and benefits

Can be improved by emphasizing the need to manage the process to ensure that the costs do not outweigh the benefits

Experience Rating Plan

Can motivate employers to eliminate or mitigate industrial accidents. A plan that increases or reduces the premium for a future period based on the insured's own loss experience for a period in the recent past. Can reduce work comp rates as much as 70%.

Migrant and Seasonal Ag Worker Protection Act

Can sue employers if no work comp coverage.

Temporary Total Disability

Cannot work during the period of recovery but is expected to return to work.

Lien Resolution Without Stipulation

Cash Only lien. Cash and Credit lien. Credit only lien.

Permanent partial disability

Caused by an injury that involves the permanent loss of a member of the body such as an eye, foot, finger or some body function that interferes with the workers ability to perform his tasks. Designed to compensate injured worker for residual disability to the injured part of body and diminished wages.

Nonappropriated Fund Instrumentalities Act

Civilian employee on US military base such as stores and theaters. Benefits are same as Longshore.

Defense Base Act

Civilian employees at military bases or working overseas under contracts with US government agencies. Entitled to same type of benefits defined in Longshore but minimum comp rates of Longshore do not apply.

Loss Run Review

Claim frequency. Average claim size. Large claims.

Dual Capacity Claims

Claim in which an employee contends that the employer was acting in the capacity other than that of employer & therefore the employee is entitled to pursue a claim in a tort separate from a work comp claim.

Filing System

Claim rep does not need injured worker's signature on forms nor consent to the terms of cessation of payment.

Federal Black Lung

Coal miners employed 10 years or more. Collect disability and death benefits as defined by statute.

Payment of Work Comp Claims

Commonly 14 days from date of compensation becomes due or 14 days from date of accident.

Experience Rating

Commonly used way to link an insured's premiums to the insured's actual loss experience. Linking premiums to an insured's actual loss experience is more common and more formalized in work comp.

Statute of Repose

Construction defects claim - a law indicating the time period a suit can be filed.

Initial Assessment

Contact claimant, claimant's employer, doctor and witnesses. Contact employer to help in assessment of impairment and form basis for reserving a claim.

Permanent Impairment

Continuing alteration in health that is not expected to improve with additional treatment. Deviation from normal body form or function as a result of injury, disease or condition that has stabilized over a sufficient period to allow for optimal healing to have occurred.

Permanent partial impairment

Continuing impairment that involves only apart of the body and its physical abilities. In work comp an impairment that occurs when the permanent loss of a body member or body function interferes with the workers ability to perform job duties.

Fee Managment

Controlling healthcare provider fees by negotiating discount, developing billing guidelines and auditing medical bills. Flat rates are sometimes negotiated.

Reasonable Prudent Standard

Courts use to determine whether the employer has met the duty to provide a safe workplace.

Stop Gap Coverage

Cover employers in monopolistic fund states that do not include employers liability with their Work Comp policies.

Reciprocal Agreement

Coverage applies for 6 months or less after employment begins in the reciprocating state.

Part 1 Work Comp Policy

Coverage. Obligates insurer to pay all compensation and benefits required of the insured for all states listed in 3.A and 3.C. Bodily injury by accident and disease. Accident must occur during policy period. Shows no dollar amount. Contains no exclusions.

Employers Liability

Covers an employer against its liability for employees' occupational injury or disease that is not covered by work comp statutes.

Employers Liability Coverage

Covers an employer against liability for an employee's injury that is not covered by a work comp statute.

Maritime Coverage Endorsement

Covers an employers liability for injury or death of a crew member.

Impairment

Damage to the body and/or general overall health caused by an injury, condition or disease. AMA definition is a deviation from normal in a body part or organ system and its functioning.

Handicap

Degree of functional limitation resulting from impairment. Limits one or more of life's activities.

Work Comp Policy Part 4 Duties

Describes insured's duties after injury occurs: Provide immediate med service. Names & address of injured person, witnesses. Notices, demands and legal papers. Cooperate with insurer. Do no interfere with injurer's right to recover from others. Do not make voluntary payments or incur expenses.

Steps to Process Investigating Work Comp Claims

Determine compensability, liability and benefits.

Medical Management

Determine disability status. Establish temporary or permanent work restrictions. Apportionment determination (by permission of statute).

Compensability of Claim

Determine if injured party is an employee, whether injury arose out of and in course of employment and is injured party covered under the statute. Compensability investigation usually starts at accident scene.

Apportion Liability for Subrogation

Determines if injured worker can meet the legal test such as proving negligence or lack thereof of various parties based on relevant state laws or case law to recover damages. Assist in estimating amount of recovery possible. Factors include whether injured worker might have contributed or whether employer is partially liable. Based on claim rep experience.

Retrospective Rating

Determines the premium for a policy period based on the insured's actual loss experience during the same policy period.

Lien Negotiation Strategy

Developed by the claims rep once he receives a proposal from the work comp attorney to resolve the lien. Lien resolution is recorded.

IME

Direct intervention technique used in claims that have disputes. Determine causation, physical impairment and need for present or future care. Done only when maximum recovery has been reached.

Over Reserving

Distorts an insurer's financial picture. Insurer's net income and net worth both appear smaller than they are. Might be reluctant to write new business or might increase premiums.

Cycle Process

Driven by profit expectations not underwriting execution and the relevant profit expectations are for operating profits, which are the sum of underwriting and investment income rather than underwriting profits alone.

Death Benefits

Duration is limited. If widow remarries or when minor child reaches a specific age.

Rehabilitation

Dynamic process whereby an individual achieves max physical, cognitive, emotional, social and economic capability. Includes 2 disciplines - physical and psycho social rehab and insurance rehab. Counselor is employed by state or private company.

Outer Continental Shelf Act

Employees on fixed offshore drilling platforms outer continental shelf of US. Same benefits as Longshore.

Fellow Worker

Employer is not liable for an injury caused solely by fellow workers' negligence. Exception to the general rule of respondeant superior under which the negligence of a worker acting within the course & scope of employment is imputed to the employer. Fellow worker is someone as the same rank as the injured worker.

Two laws that limit or eliminate liens for subrogation

Employers Negligence and Made Whole Doctrine.

Risk Control

Encourage return to work on light duty. Reduces frequency and/or severity of losses or makes losses more predictable.

Inherent feature of an experience rating plan

Encourages risk control. Better loss control with fewer losses results in premium and significant savings.

Projected Future Lien Amount

Equals the insurer's future exposure up to the amount of the total available credit.

Cost Benefit Analysis Factors

Estimated incurred loss (paid loss plus reserve), Third party's ability to pay, cost to be incurred in recovery action, strength of the liability case against a third party, work comp insurer subro and recovery right.

Medical Management of Claims

Expense control measure that involves directing and coordinating efforts of healthcare providers to meet patient and insurer needs. Techniques available choice of physician, physician panels and managed care.

Retrospective Reviews

Expert review. Review medicals and advise concerning the injury. After the fact. Advice re causality of injury and reasonableness of past and future treatment. Provider specializes in same area of practice.

General Section of Work Comp Policy

Explains the nature of the policy and defines important terms.

Part 3 Work Comp & Employers Liability Ins. Policy

Extends coverage to states listed in 3C.

Extraterritorial Provision

Extends protection to an employee who is injured while temporarily working in a state other than the state of hire.

Work Comp Policy Part 3 Other States Insurance

Extends the policy to cover obligation under work comp law of states in addition to the one listed in item 3.A of the Info Page. Must be listed in 3.C.

Key factors that affect the value of disability claim

Extent and duration of the disability

Under Reserving

Failing to correct can adversely affect an insurer's profitability & financial condition.

Longshore and Harbor Workers' Compensation Act

Federal compensation statute requires that an injured employee satisfy both the situs (location) test and the status (type occupation) test to be eligible for compensation benefits under this federal statute.

Jones Act

Federal statute that provides the right to sue the employer.

12 Questions before negotiating a claim

First 5 pertain specifically to a liability and work comp case under consideration. The remaining questions are state specific.

Nature and extent of employee's injury

First factor to be determined when returning an injured employee to work.

Claim adjuster represents employer or insurer

First stage of adjudication at an informal hearing

Relative Nature of the Work Test

Focus on the mechanics of the work to determine the extent of control or right to control. This factor focuses on whether the services provided are an integral part of the employer's business. If so then the independent contractor is considered an employee.

Self Insurance

Form of retention under which an organization records it losses and maintains a format system to pay for them.

Experience Modification Factor

Formula used in rating. It compares an insureds actual losses with the losses expected for an insured in same classification. It is multiplied by the manual rate for the insured's classification and directly affects the premium amounts. Better loss control results in lower premiums.

Role Playing

Goal is to simulate both impairment and resulting disability and to study the effects that both conditions have on self esteem and social interaction.

SIG self insured group

Group of employers in same industry that jointly and severally guarantee payment of work comp benefits to employees of the group's members. Not for profit association or corporation typically formed to pay premiums for self insurance purpose.

Joint Commission (TJC) and Dept of Health and Human Service

Guidelines for hospital records.

Two Phases of Profit Cycle

Hard and soft market.

Vocational Rehab

Helps injured worker to return to workfoce. Reduce the cost of paying open ended TTD benfits and promote worker's well being.

Investigate Accident Third Party Liability

How, why, when and where the accident occurred.

Utilization Managment

IME and Physician Peer Retrospective Reviews.

Pure Wage Loss Approach

If an injured employee can return to employment without any loss of earning capacity, no permanent partial disability benefit is paid for an unscheduled impairment. Approach is used to determine actual economic loss for PPD. Benefits are paid for the actual or ongoing losses that a worker incurs.

Contributory Negligence

If the workers' contributory negligence to exercise care for his own safety is responsible to any degree for causing the accident the worker is barred from recovery. Momentary lapse in behavior could eliminate recovery even if employer's negligence largely contributed to the accident.

Doctrine of Strict Liability

Imposes 100% liability on defendant for defects or certain activities.

Strict Liability

Imposes one hundred percent liability on defendant for defects.

Disability

Inability due to impairment to meet personal, social or occupational demand or other ADL. Determination of disability normally assessed nonmedically. Person can have an impairment that does not recreate a work related disability.

Primary reason for large increases in work comp cost

Increased reliance on managed care networks

Stairstepping

Incremental increases in claim reserves without any significant change in the facts of the claim. True value of claim may not become evident and can delay reports to reinsurers or notifying policy holder of potential excess loss situation.

Three Methods of Establishing Reserves

Individual case. Formula. Roundtable.

Forums for Adjudication

Informal Conference, Formal Hearing, Full Commission Appeal, State Court Appeals (alleged error of law or of fact).

Actual Notice

Information that has been directly given to someone.

Forum Shop

Injured employee is permitted to shop for jurisdictions and file work comp claim in relevant jurisdiction that provides the most advantageous benefit.

Temporary total disability

Injured worker cannot to any extent perform any of his occupational duties but the condition is not permanent. Work disabilities account for most income benefits paid.

Second Injury Funds 3 Requirements

Injured worker has a prior disability. Employer has knowledge of the preexisting disability. Combination of the preexisting disability and current injury produced a greater disability overall.

Permanent total disability

Injured worker is permanently and totally incapacitated from carrying on gainful work. Awarded for 2 reasons: presumed for certain severe injuries or returning to work is not feasible because of the injury. Arise when worker has permanent physical restrictions. Designed to compensate for residual disability to the injured part of body and diminished wages.

Temporary partial condition

Injured worker is temporarily unable to perform some job related tasks but can go to work and perform other job tasks. Work disabilities account for most income benefits paid. Compensates for wage differential.

Made Whole Doctorine

Injured workers assert that the combined amount of work comp benefits and liability awards will not adequately compensate them for loss. Usually center on damages work comp does not cover.

Permanent Partial Disability

Injuries that prohibit a return to work in the same job function. One of the most litigated issues in work comp.

Cumulative Injury (repetitive)

Injury occurs as a result of repetitive motion, stress or trauma. Are traceable to a certain time period & separate incidents but a definite time and place are not required to determine if its compensable.

Injuries and Diseases Covered

Injury or disease caused by and accident, arose out of employment, occurred in course of employment

Permanent Total Disability

Injury that prevents injured worker from ever working again.

Scheduled injury

Injury to a specific body part for which a state law specifies the number of weeks of work comp benefits to be paid for the body part's total loss or total loss of use.

National Council on Compensation Insurance (NCCI)

Insurance advisory organization for insurers that write work comp insurance.

Large Deductible Plan

Insurance policy with a per occurrence or per accident deductible of $100,000 or more.

Excess Insurance

Insurance purchased over and above the amount of employer's self insurance. Covers catastrophic losses. Some states require excess insurance above a permitted self insured retention level.

Waiver of our Right to Recover from Others Endorsement

Insurer agrees not to enforce the right of subro against any organization listed in the schedule.

Work comp claim resolved by stipulation

Insurer agrees to relinquish its right to reimbursement for past payments in exchange for release from any further benefit obligation to the insured worker. Has to be approved by work comp commission or board. It closes all or part of the work comp claim. No future benefits against which to take a credit would be available. Should estimate the insurer's future exposure to make sure the reimbursement relinquished does not exceed the future expenses.

Hard Market

Insurer competition declines. Buyers have difficulty finding coverage, premiums increase and insurer operating profit rises. Starts to harden when premiums increase and limit risks insured.

Soft Market

Insurer competition is intense and wide available coverage, lower premiums and decreased operating profit. Operating results may turn to losses.

Lien Resolution with Stipulation

Insurer is receiving at least as much or more than it is giving. Analyze the outcome without a stipulation. An insurer's max benefit from a stipulation is to reduce or eliminate its future expenses. Three types: Compromised lien with stipulation. Waiver of lien with stipulation. Wavier of lien with cash payment and stipulation.

Waiver of Lien with Cash Payment

Insurer pays a lump sum in exchange for closing its workers comp claim.

Comprised Lien With Stipulation

Insurer reduces the cash portion of its recovery in exchange for closing all or a portion of its workers comp claim.

Foreign Voluntary Workers Comp Coverage Endorsement

Insures employees who are working outside the US and are not subject to a work comp law for benefits equal to those provided under either the work comp status or of a specified state or specified federal comp act. Provides coverage equal to that required by the Defense Base Act.

Premium Fraud

Intentional misclassifications of workers' or understatement of payroll to reduce its work comp premium. Employer has a cash flow problem/high work comp experience modifier. Loss ratio worsens and rates increase.

Seven Step Process of Subrogation

Investigate the accident for third party liability. Identify potentially liable third parties. Determine liability Apportion Liability. Determine negligence test and subrogation restrictions. Determine amount of potential recovery. Conduct a cost benefit analysis.

Seven Steps to Identify Economically Viable Subro Options

Investigate the accident for third party liability. Identify potentially liable third parties. Determine liability. Apportion liability. Determine negligence test and subro restrictions. Determine amount of potential recovery. Conduct a cost benefit analysis.

Cost Benefit Analysis

Is a function of the following factors: the estimated incurred loss (paid loss plus reserve), the third party's ability to pay, the costs to be incurred in recovery action, the strength of liability case against the third party and the work comp insurer's subro and recovery rights.

Temporary Partial Disability

Is able to continue working at reduced efficiency but is expected to recover and return to full duties and hours. Befit 66.67 percent of difference between weekly wage & what the employee would have earned had no injury occurred and weekly wage that the employee actually earned during the recovery period.

Hearing Closing Statement

Itemizes the terms of the third party liability settlement such as the gross recovery amount and disbursements and would let the claim rep know if more of the lien should be paid.

Transitional Employment

Job duties of an injured worker can perform before a return to full employment. Considered part of recovery process. Workers can return to work sooner rather than wait until they are sufficiently unemployed.

Constructive Notice

Knowledge that a person is assumed by law to have. The knowledge could be gained by reasonable observation or inspection.

Professional employer organization - PEO

Leased employees are co employees of the leasing contractor or the PEO. PEO responsible for all payroll, benefits and work comp coverage.

To recover under common law for work-related injuries, a worker must prove that the employer was negligent. To collect compensation, the worker must prove which one of the following?

Legal duty owed; failure to comply with standard of care due; proximate cause; and damages

Persons and Employment Covered

Legal obligations for injury extend to employees only not independent contractors. Distinction is that the employer has the right to control & and direct activities of employee both in the work to be accomplished and in the methods & means by which the result is obtained.

Respondent Superior

Legal principle under which an employer is vicariously liable for the torts of an employee acting within the course and scope of employment.

Reservation of Rights

Letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that it may be denied later due to coverage issues.

Situs Test

Location test that a claimant must satisfy to be covered under the US Longshore and Harbor Work Comp Act. Requires that at the time of injury the claimant must have been on navigable waters or on adjoining areas or areas customarily used in loading, unloading, repairing, dismantling or building vessels.

While unloading equipment from a large commercial fishing boat after a trip, a worker slips, falls, and breaks a foot. Which one of the following federal statutes would cover this employee for his occupational injury?

Longshore and Harbor's Workers Compensation Act

Two Forms of Risk Control

Loss prevention or reducing loss frequency and loss reduction or reducing loss severity.

Work Comp Benefits Provided

Lost Wages. Medical Services. Rehabilitation Services. Death Benefits.

Structured Settlement for Injured Worker

Lump sum payment and continuing period payments keeps worker and family stable. Designed to fit specific needs of worker. Payment can increase with financial needs. Guaranteed rates of return higher than banks but lower than stock market. Typically funded by annuities from life insurance companies with AA or better ratings.

Disability Management

Managed care technique that involves providing rehab and arranging transitional employment to help return an injured worker to work.

Disability Management

Managed care technique. Direct intervention techniques such as rehab, education to help reduce disability. Vocational reviews and rehab usually provided by professionals who are certified and license in voc rehab. Assess med records, motivation and aptitude from interviews with the worker and suitable opportunities from educational problems and the labor market. Can also work with consultant to modify work space.

Manage rising medical costs

Managed care, Utlization reviews, network of medical providers and medical billing units.

Medical Records

May be part of the total medical record or summary of the information within the medical record. Summarizes one aspect of treatment.

Idiopathic Medical Condition

Medical condition arising from an obscure or unknown cause or a medical condition that is peculiar to an individual. If accident occurs as a result of the condition but there is no injury it is not covered. Can have coverage for aggravation of idiopathic condition. Can file claim if the working conditions creates a hazard resulting in an injury.

Idiopathic Condition

Medical condition arising from obscure or unknown cause or medical condition that is peculiar to an individual.

Three components of setting a reserve

Medical only for which some med treatment is provided but no time is lost from work. Lost time for which medical and rehab are provided and time lost from work, Fatalities.

Benefits Provided Under Work Comp

Medical, disability, rehabilitation and death benefits.

Benefits Payable Under Work Comp

Medical, wage loss, death and rehab which includes physical and vocational - disability

Four Major Work Comp Cost Factors

Medical. Legislative, regulatory and judicial. Economic. Demographic.

Jones Act also known as the Merchant Marine Act of 1920.

Members of a vessel's crew can sue their employers.

Work Comp Policy Part 5 Premium Determination

Method of premium determination. Establishing role of insurer in determining premium. Premium may change. Establishes classifications and rates. Defines payroll as most common premium basis. Audit rights during policy period and within 3 years after expiration.

Round Table Method

Method of setting reserves by using consensus of 2 or more claim reps who have independently eval the claim. Consensus reserve used. Time consuming and used with most serious claims. Strength lies in exchange of knowledge among team members.

Utilization Management

Monitoring and controlling the types, duration and intensity of medical treatments in an effort to control cost.

Individual Case Method

Most commonly used method of reserving. Based on the claims circumstances and the claim rep experience in handling similar claims. Re evaluated at 6 month intervals. Consider many factors that affect each case's value and tailors each reserve to the specific claim. Disadvantage is reserves can vary widely and be time consuming to examine.

Product Owned and Maintained by Employer

Most complex and most expensive because of need for expert inspection and testimony.

Medical Cost Factor

Most significant cause of increased work comp cost rising. Group health and work comp payment practices differ. Group Health can negotiate favorable rate structures and can charge co pays or deductible, not so in work comp. Also rising cost of meds like narcotics.

Alternative Work

Moving from one job to another with same employer

Agreement System or Agreed Statement of Facts

Must obtain worker's signature on form signifying acceptance or termination of compensation payments.

NCCI

National Council on Compensation Insurance that track claim injury trends and develop work comp insurance rates. Payment codes are used and claim data entered into a claims progressing system.

Acts of God

Natural and unavoidable catastrophe that interrupts the expected course of events. Same as street risk - but for and if the type of job increases risk of exposure.

PPO

Network of health care providers who have agreed to certain cost controlling measures.

Federal Employees Comp Act

Nonmilitary employees of government. Entitled to collect benefits as defined by statute.

Determination of disability

Normally is assessed non medically

Injury frequency

Number of losses. During times of increased unemployment the injury frequency rises.

Clinical Notes

Observations, exam, workup and treatment. Should include an extensive review from the initial visit, findings of any outside diagnostic service and detailed description of plan of treatment.

Workers Compensation benefits are frequently referred to as an employee's exclusive or sole remedy for occupational injury. However, there are some instances in which an employee may still sue the employer.

One such instance is when workers are outside the scope of the relevant workers compensation statute.

Work Comp Policy Part 6 Conditions

Outlines the rights & responsibilities of parties to insurance contract. Inspection - insurer has the right but is not obligated. Long Term Policy longer than 1 year and 16 days - each year is considered a separate as far as provisions are concerned. Transfer of Rights and Duties cannot be transferred to another party without insurers' consent. Cancellation - 10 days. Sole Representative - first named insured acts on behalf of all.

Ambulatory Care Records

Outpatient treatment

Paid Loss Retrospecting Rating Plan

Paid loss retro plans base premiums for the current policy period on losses incurred during the current policy period. Insured pays a deposit premium at the beginning of the policy period; then, at the close of the period the premium is adjusted to reflect the insured's actual loss experience.

Work Comp Policy

Part 1 Work Comp Ins in tandum with the Information Page and General Section enables employees to comply with state work statutes. Part 2 provides employers liability coverage to cover an employer against its liability of injury. Part 3 - Other States Insurance. Part 4 - describes the insured's duties after an injury occurs. Part 5 contains the method of premium determination. Part 6 contains the conditions which outline the rights & responsibilities of the parties.

Second Injury Funds

Passage of Americans with Disabilities Act eliminated need for second injury funds in many states as it gives employers an incentive to hire disabled workers.

Retroactive Benefits

Period set by statute after which if a disability continues workers comp benefits are payable retroactively for the designated waiting period after the disability's onset. Begins on a specified date after the waiting period.

Second Injury Fund Applies to

Permanent injuries.

Mental Injuries

Physical Mental - mental consequence of a physical injury - covered. Mental Physical - Physical consequence of mental injury - heart attack or stroke due to stress. Mental mental - many states do not allow. Has to be an unusual and severe stress related to work.

Rehab Services

Physical/Occupational. Modification of pre injury job. Assistance in applying for new job. Retraining in a new career. Provided by state statute or voluntarily by employers or insurers.

Presumptions

Places the burden of disproving the claim on the employer or insurer even though the legal burden of proof remains on injured worker. Consistent with liberal interpretation of work comp laws.

Pure Form Comparative Negligence

Plaintiff can always recover damage as long as they are not 100% at fault.

Workers Comp and Employers Liability Ins Policy (WC&EL)

Policy uses in most states to provide work comp and employers liability insurance.

Two Types of Work Comp Fraud

Premium and Claim

Loss of Earnings Capacity Approach

Problematic & lots of disputes. Degree of impairment forms the basis for benefits on the presumption that the more severe the impairment the greater the potential impact of future earnings.

Three things necessary in order for work comp policyholder to receive accurate experience rating modification factor

Proper data entry. Proper record keeping. Proper claims review.

Common Law Duties of Employer

Provide a safe place to work. Provide an adequate number of competent fellow workers. Provide safe tools & equipment. Warn the worker of inherent dangers. Make and enforce rules for the safety of all workers.

State Funds

Provide benefits required by work comp laws but controlled by state government. Accept any good faith applicant for insurance in the state. No assigned risk plan is necessary.

Bifurcated Approach

Provides greater benefits to injured employees, even when states apply a max benefit amount or benefits end at some designated point, such as when an employee reaches retirement age. If employee returned to work with earning at or near level earned prior to injury, PPD is based on the degree of impairment.

Four Negligence Tests Subrogation

Pure comparative - right to recover from negligent defendant even if worker is more at fault. Presents most opportunities for subro. 49 or 50% comparative. Contributory - barred from recovery and least opportunity.

Four Negligence Tests and Subro Restrictions if Worker is Negligent

Pure comparative - worker is more at fault than all defendants combined. Most opportunity. Fortynine and Fifty percent comparative - can recover if worker is 49 or 50% or less than overall fault of defendants. Contributory - worker barred from recovery if contributed to all of the injury. Least opportunity for subro.

Error of Law

Questions related to interpretation of legal issue.

Federal Employers' Liability Act

Railroad workers. Can sue their employers. Applies a comparative negligence standard. Contributory negligence reduced amount and eliminates assumption of risk as a defense against suits. Also can't sue the fellow servant rule. Responsible for all acts of officers, agents and employees.

Temporary Disability Benefits (TTD)

Rate also called the compensation rate (CR) is based on a percentage of the workers' gross average weekly wage (AWW). Percentage is typically 66 2/3%. TTD is subject to both a maximum and a minimum. Waiting period typically is 3 weeks. Have to reach MMI.

Non Scheduled Body Parts Rating

Rated by Admin agency using percentage of loss or loss of use.

Impairment Based Approach Rating

Rated by degree of impairment.

Modified Comparative Negligence

Recoveries are reduced by percentage of their fault. If their fault exceeds Defendant they recover nothing.

Reopening Claim

Recurrence worsening because of normal or expected progression of the original injury. Aggravation worsening because of a subsequent injury and even if the prior injury made the worker more susceptible to injury. Aggravation is considered a separate claim but employer can be liable in part for disability resulting from aggravation.

Underwriting Cycle

Recurring rise and fall in profits and prices in the property casualty insurance industry. Profit cycle measured by the operating ratio is more accurate way to describe cycle.

National Commission of State Work Comp 1970 Improvement Recommendations

Reduce litigation in all work comp claim. Increase benefits to equitable levels in all states. Provide quality service in a uniform manner in all states.

Administrative Closure

Reduce the ongoing admin costs of maintaining an open claim.

Loss Prevention

Reduces the frequency of a particular loss. Deals with actions taken before the loss occurred to lower the expected frequency of loss from a particular loss exposure.

Loss Reduction

Reduces the severity of a particular loss. Dealt with actions taken after the loss occurred to lower the expected severity of losses from a particular loss exposure. Actions that reduce the amount of medical and wage loss through managed care techniques.

Loss of earnings capacity

Reduction in a workers earning ability as a result of an injury. Benefits are normally payable until actual earnings or earning ability changes.

Risk Control

Related to safety which is one important aspect. Changing the behavior of workers and their employers to use greater caution in doing their jobs. Insurance does not eliminate loss exposure.

Standard Industrial Classification Code (SIC)

Represents the nature of the employer's business & helps determine the rating classification.

FCE

Requested before the MMI and permanent impairment determination. Performed by physical therapists. Eval not only level of ability but also level of effort and therefore can indicate whether an employee is malingering or exerting less than max effort.

Expert Reviews

Retrospective. Chiropractic. Physical Therapy. IME.

Determine Liability For Subrogation

Review legal theories such as negligence and strict liability that relate to fault. Uses the responsible person standard - what a reasonable person would do under circumstances similar to those in the case.

Chiropractor Notes

SOAP (subjective, objective, assessment and plan).

War Hazards Comp Act

Same employees as Defense Base while in a war zone and injured by war risk hazard. Injury need not occur in the course of employment.

Return to work savings stemming from medical expenses

Savings derived from medical expenses should be calculated using claims that involve similar diagnoses. Savings are achieved by indemnity and medical costs.

Formula Method

Second most common method of reserving. Setting reserves by using a mathematical formula. Fails to account for differences in claims. Quicker to learn, teach, apply and computer generated.

Managed Care

Seeks to deliver high quality healthcare cost effectively and return the injured worker to health and work as soon as possible. Three major techniques are utilization, fee and disability management.

Overreserving

Setting reserves higher than actual claim costs. Misrepresents an insurer's balance sheets, restricts its ability to write new business and leads to excessive insurance rates.

Temporary Physical Restriction

Short term limitation.

Death benefit

Sixty six and two thirds percent of the average weekly wage subject to a maximum. Percent of the AWW is 66.667 percent subject to a minimum and maximum benefit. Partially replace financial support of deceased worker to child or spouse.

Duration of work comp death benefits

Specified number of week, minor child's age and date of remarriage.

Competitive State Funds

State fund that sells work comp insurance in competition with private insurers.

Accident State

State in which the accident occurred. Determines the applicable negligence and strict liability rules.

Assigned Risk Plan

State organized pool of work comp insurers who are required to accept businesses that are unable to find insurance in the voluntary market.

Benefit state

State that governs the work comp claim and determines which subro law applies.

Independent Action

Statute gives insurer right to file the action. Insurer must file suit withing statute of limitations or repose.

Intervention Action or State

Statute requires insurer to intervene in injured workers' lawsuit. Statute of limitations does not apply to insurer.

Two Kinds of Liens

Stipulated resolves the lien and permanently closes out all or part of the work comp claim. Non Stipulation both the medical and wage loss portions of the work comp claim are left open or can be re-opened.

Three Economic Characteristics why and ways cycles in the market occur.

Structure of the industry's market. Demand for industry's products or services. Supply of industry's products or services.

Work Comp Policy Part 2 Employers Liability Coverage

Structured like a traditional liability policy containing an insuring agreement, exclusions and limits of liability.

Medical Rehab

Supervising and coordinating care, counseling the disabled worker, providing emotional support, assisting in adjusting the worker's lifestyle to commemorate the disability.

Death on High Seas Act

Survivors of vessel's crew may sue employers for death occurring beyond a marine league from shore of any US state or territory.

Temperory Total Disability - TTD

Temporarily renders an injured worker unable to perform any job duties for a period of time. Expected to return to job duties after recovering. Calculated as a percentage (66.67 percent) of average weekly wage. Benefits paid at rate of one-seventh of average weekly wage for each day.

Other Than Employee Workers

Temporary contract workers and independent contractors. Employers look for ways to increase flexibility, meet fluctuating demands and gain the skills of self employed specialist and means to reduce expense.

Classifying Disability

Temporary. Permanent. Can be either partial or total.

Street Risk

Term used to describe all dangers characteristic of public streets. The risk does not arise out of employment but for the action occurring while the injured person is performing work duties, the injury may not have occurred.

Actual economic damage

The difference between pre-injury and post injury earnings.

Alternate Employer Endorsement

The endorsement that extends workers comp and employers liability coverage to an additional organization named on the endorsement.

Purpose of Rehab

The growth of no fault insurance and increases in benefit levels and the number of workers covered by workers comp has resulted in pressure to control costs.

Insurance Rehab

The integration of medical, vocational and employer information to facilitate communication, return to work and restoration of the individual to be able to function in society. Typically provided over the phone or face to face in the home, workplace or testing center. Offer only consultation management services. Termed as Rehabilitation Vendors.

Choice of Law

The laws of the states in which the injury occurred, in which the employment usually occurs and in which the worker was hired all apply to a loss.

State laws typically define occupational injury to include which one of the following elements?

The worker suffered an injury caused by an accident, the accident arose out of employment, and the accident occurred in the course of employment.

HIPAA

Title I - health care access, portability and renewability give employees and families health insurance coverage. Title 2 is Privacy rule regulates disclosure of health information.

Total Credit

Total credit available equals the injured worker's net recovery from the liability case. Credit period starts after the settlement draft is issued by the third party's insurer.

Example of Owner-Operator

Transfer Corporation, Inc. (TCI) is a shipping operation that ships their clients' products to destinations across North America. Rather than hire drivers to make these trips, TCI has elected to hire drivers to use their own tractors to deliver TCI trailers to their respective destinations.

Temporary Impairment

Transitory and upon healing will leave no lasting residual effects.

Made Whole Doctrine

Triggered when inured workers assert that the combined amount of work com and liability awards will not adequately compensate them. Accident State and Benefit State.

Which one of the following industries attempts to hire the equipment and owner as a noninsurance transfer for workers compensation obligations?

Trucking industry

Lost Wages

Two thirds of pre-injury weekly wage. Maximum is set by the state. Max benefit typically equals 66.66 percent of state's average wages. Waiting period of 3-7 days to reduce compensation costs and eliminating compensation for job related disabilities of short duration in order to discourage malingering.

Status Test

Type of occupation test claimant must satisfy to be covered under US Longshore. Requires that at the time of injury claimant must have been engaged in maritime employment.

Medical Bills

UB04 and HCFA forms

Three Common Pitfalls with Reserving

Under reserving, stair stepping and over reserving.

Underreserving

Underestimation of present value of future losses and related loss adjustment expenses.

Best Practices

Update the action plan for ultimate resolution of the claim. Positive effect on loss adjusting expenses, effective claim closure also have positive effect on other claim costs because payments stop when claim is closed.

Third Party Liability in Work Comp Subro Arise From 3 Things:

Use of vehicle, Use of Product. Use of human resources or premises.

Managed Care

Used by group health insurers & work comp. Programs procedures or practices designed to control med care costs while ensuring the deliver of appropriate and timely med care.

Medicolegal Report

Used in negotiating a settlement. Summarize a case for a healthcare provider for trial or depo. Not intended to provide all details of a case. Describes the injury, current physical and mental condition, expected outcome of the treatment.

Predictive Modeling

Used to determine potential claim severity may be able to determine appropriate case reserved because the models incorporate many diverse factors.

Negotiated Settlement

Used when parties disagree on right to vocational rehab or when the injured worker appeals a denied claim. Settlement amount must appear reasonable given the injury's severity and appear to be in worker's best interest.

Utilization Management

Utilization review used to review common and costly treatments such as physical therapy or surgery. Effective manage care technique used in work comp claims management.

Methods of Financing Benefits for Work Comp

Voluntary Private Insurance. Insurance through assigned risk plans. Insurance through state funds. Qualified self insurance plans. Excess insurance.

Disability

Waiting period of 3-7 days after date of injury.

A crew member of a vessel is injured in the course of employment because the vessel owner failed to keep the ship's equipment in proper working order. Under the general maritime law, the crew member could seek the remedy.

Warranty of Seaworthiness

Interest Rates

When interest rates decline, insurers investments income also decline. Insurers have large percentage of assets invested in Treasury notes and bonds.

Error of Fact

Whether the commission correctly determined some element of verifiable truth including circumstances of accident.

Permanent Total disability

Will never be able to return to gainful employment. Benefits payable for life or duration of disability.

Waiver of Lien

With stipulation. Insurer completely forgoes the cash portion of its recovery in exchange for closing all or portion of its workers comp claim. Net result should be that the future savings should be at least as large as the cash recovery forgone.

Waiver of Lien with Cash Payment

With stipulation. Insurer pays a lump sum in exchange for closing all or portion of the work comp claim. Resolution is appropriate if the future exposure is substantially larger than the total credit and the insurer is determined to close as much of the claim as possible. Injured workers attorney believes the waiving the lien is insufficient.

Compromised Lien

With stipulation. Insurer reduces the cash portion of its recovery in exchange for closing all or portion of the work comp claim. Net result should be that the future savings is at least as large as the amount of cash forgone.

Cash Only Lien

Without stipulation. Applies when the total lien (current and future) is greater than or at best approx equal to the gross recovery. Example 3 way splits of gross recovery - 1/3 to attorney, injured worker and insurer. If not enough money insurer compromises lien and takes less cash and does not take a credit or waives future lien against future benefits.

Credit Only Lien

Without stipulation. Appropriate regardless of size of gross recovery as long as all of the available credit will be used. The insurer's future exposure should be greater than or equal to the total available credit. Waiving credit in cash only an insurer must realistically quantify its future exposure before considering this type of resolution. Calculate credit in present value terms. During the credit period the burden of paying either all or part of the future benefits shifts to the injured worker; the insurer pays little or no benefits during this time.

Cash and Credit Lien

Without stipulation. Worker has a positive net recovery from the third party case. The size of the gross recovery relative to the current lien determines the composition of the insurers recovery (amount of cash and credit) and the claim reps lien negotiation strategy. Should be more than one third larger than the current lien.

Elements of injuries relationship to work

Work related activities and determining compensability.

Factors that can affect post injury employment and earnings with an impaired worker

Work restrictions and the job market.

CMS Guidelines

Worker is a medicare beneficiary and total settlement amount exceeds $25,000. Worker has a reasonable expectation of becoming eligible for Medicare and total amount exceeds $250,000.

Temporary Partial Disability

Worker is able to work on a limited basis and is expected to return to regular job duties.

Assumption of Risk Conditions

Worker was aware of existence of risk and understood the extent of the danger and worker voluntarily exposed himself to the danger.

Comparative Negligence

Workers' contributory negligence is not a complete defense and does not completely bar recovery. Amount of recovery is reduced by the amount of the injured workers' own negligence.

Narrative Report

Written for other healthcare providers and usually accompanied by supporting documentation from the medical provider. Summarizes course of treatment and states a diagnosis.

Rehab is encouraged by employer to promote

the worker's well being and reduce the cost of paying open ended TTD benefits.

Accident conditions of compensable damage

unexpectedness and definite time, place or cause.

Fellow worker

worker of the same rank as the injured worker.