In general, the more risk an employer has retained, the more control the insurer will relinquish. In a high deductible program (e.g. $500,000) most employers can negotiate for a very high level of control comparable to if they were self-insured.
Continuing from my prior article on items to negotiate in your account handling instructions is the element of settlement authority. It can be very frustrating if a claim you are working on is settled without your consent.
More Employer Input = Lower Settlement Threshold
Prior to settlement of claims, the carrier should contact the employer for settlement authority on all claims over a certain threshold of, for example, $5,000 or $10,000. The employer should be involved before any lump sum settlement is offered. The more input the employer wants, the lower the settlement threshold should be. For example, an employer that wants to be actively involved in decision making can state “the employer retains settlement authority for all workers’ compensation claims over $5,000 and all products liability claims over $1.”
World of Difference Between “Consult” and “Consent”
There is a world of difference between an insurer having to “consult” its insured and having to obtain its “consent” prior to settling a claim. If the insurer agrees to “consult” its client prior to settlement, the client may not have the power to alter the course of the claim. A very rude awakening is in store for the employer with a $500,000 deductible when a claim is settled against the wishes of the litigation manager, particularly when the settlement amount is within the client’s retention level.
In one large auto case, a plaintiff who had been a meat cutter for 20 years alleged his carpel tunnel syndrome was from the impact of the auto accident. The defendant company’s in-house attorney hired a medical expert to review medical causality. Yet, even though it knew of the company’s involvement and interest in the case, the insurer settled the case without the consent of its insured client. This occurred because the company had previously given the insurance carrier $100,000 of “field authority’,” even though the company had a S250,000 deductible on auto claims and the settlement was, essentially, all the company’s money.
From an employer’s perspective, a settlement decision can impact well beyond bottom-line considerations. Injudicious settlements can affect a company’s labor policy, its workers’ compensation practices, the reputation of its products and its susceptibility to future claims.
Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: firstname.lastname@example.org.
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