Seven Things to Consider When Your Company Wants to Select Their Own Counsel

Employers are often dismayed at the remote, passive role they are compelled to play in comp claims. Frequently, claims are contested which the employer believes are worthy. Also, the law firm appearing for the carrier often does not contact or coordinate with the employer and even remains unknown throughout proceedings. Even worse, the law firm or attorney assigned to a file may change from hearing to hearing. Surprisingly, there is no specific language in the law or the insurance contract which spells out who has the right to appoint an attorney or control the issues raised. Instead, the policy language provides that the insurance carrier has a "right and duty to defend," and some general principles have evolved over the past 80 years. Here are some considerations: 1-The principal parties to a comp claim are the employee and the employer. The insurance carrier is merely a "surety" who guarantees payment of awards although they sometimes seem to replace the employer at hearings. 2-The carrier is more likely to be familiar with compensation law and procedures than the employer and is more likely to know attorneys familiar with compensation. Therefore, it is more practical, in general, to have the carrier define the legal issues and select counsel. However, there are many situations where an employer should have their own legal advocate and the carrier has an obligation to inform employers when such situations exist. 3-When a carrier contests a claim it may be exposing an employer to a lawsuit for negligence if it succeeds. A carrier may be liable under its "errors and omissions" policy if it has failed to advise the employer of consequences and offer the employer a chance to argue that a claim is compensable. A slip and fall in an employer's cafeteria at lunch is an example of this sort of situation. 4-Another conflict, more frequent now than previously, is where a carrier contests a claim arguing that the worker is an "independent contractor" and loses. Often the carrier then substantially raises the premium and even alleges employer fraud.In such cases, the carrier is negligent if it did not afford the employer an opportunity to be represented by independent counsel and advise the employer of adverse consequences. 5-Perhaps the most frequent source of conflict between carrier and employer is the carrier's failure to obtain outside counsel that consults with the employer. The attorney's client, in comp proceedings, is the employer, NOT the carrier. If an attorney's loyalty is to the source of work (the carrier) rather than to the client (the employer) the ingredients for a potentially deadly situation are present. 6-Employers should take the time to locate a qualified compensation attorney whenever a serious claim, or series of claims, arises. The attorney need not take over the entire claim but is best used as an advisor and communicator. Carriers will pay more attention to the claim and are less likely to overlook issues beneficial to the employer's interests. 7-For insured companies who want to maintain control, make sure to include in your account instructions that you have the right to select counsel. Discuss this with your insurance broker before coverage is bound while you have the most negotiation leverage. The most recent case in NY is Elacqua v Physicians' Reciprocal. The Account Instructions would become part of the contract but would vary from account to account. Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers' compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100. WC Cost Calculator www.ReduceYourWorkersComp.com/calculator.php REAL COST of work comp. WC 101 www.ReduceYourWorkersComp.com/workers_comp.php for the basics about workers comp. Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs. ©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact I[email protected]