• Menu
  • Skip to main content
  • Skip to secondary navigation
  • Skip to primary sidebar
  • Skip to footer

Before Header

  • About
  • Contact
  • Privacy
 
Ametros

Amaxx Workers Comp Blog

Reduce Workers Compensation Costs By 20-50%

Header Right

  • Home
    • Training Center
  • Search
    • Free Resources & Solutions
    • Subscribe to Free Newsletter
    • Create Free Training Center Account
    • Enroll in On-Demand Courses
    • Activate WC Mastery Membership
    • Request Strategic Coaching Session
    • Buy WC Guidebooks
  • Membership
    • Insider (free account)
    • WC Mastery
    • Teams & Managers Mastery
    • Training Partners
  • Products
    • On-Demand Courses
    • Specialty Courses
    • Certifications & Mastery Courses
    • Ultimate Guidebooks
    • Coaching
  • Blog
    • Video Blogs
    • COVID-19 / Coronavirus Pandemic
  • Login

Mobile Menu

  • Home
    • Training Center
  • Search
    • Free Resources & Solutions
    • Subscribe to Free Newsletter
    • Create Free Training Center Account
    • Enroll in On-Demand Courses
    • Activate WC Mastery Membership
    • Request Strategic Coaching Session
    • Buy WC Guidebooks
  • Membership
    • Insider (free account)
    • WC Mastery
    • Teams & Managers Mastery
    • Training Partners
  • Products
    • On-Demand Courses
    • Specialty Courses
    • Certifications & Mastery Courses
    • Ultimate Guidebooks
    • Coaching
  • Blog
    • Video Blogs
    • COVID-19 / Coronavirus Pandemic
  • Login
  • About
  • Contact
  • Privacy
You are here: Home / Buyers Guide: Workers Compensation Insurance / Broker Issues & Relationships / Fiduciary Responsibilities of the TPA

Fiduciary Responsibilities of the TPA

August 23, 2011 By //  by Rebecca Shafer, J.D. Leave a Comment

pic8 Nothing in this article is intended as legal advice. Seek the assistance of an attorney in drafting your next TPA contract. This article is based on hypothetical situations.


The self-insured
employer was livid. In the self-insured employer’s eyes, the third-party administrator (TPA), who had handled their workers compensation claim files for three years, had not lived up to promises made when discussing the claims handling contract. The self-insured employer remembered the TPA had promised “excellent claim service” and “cost control,” but the self-insured employer had to deal with inquiries from the Workers Compensation Board, complaints from unpaid medical providers, and their average claim cost was up almost 50 percent in just three years.

The self-insured employer wanted to sue the TPA for breach of contract. The attorney the self-insured employer consulted with had a different idea. Instead of suing for a breach of contract, the attorney recommended a lawsuit for the TPA’s breach of their fiduciary responsibilities.

Why? The relationship between a self-insured employer and a TPA of claims is one of trust and faith. The self-insured employer relies on the TPA to act in every instance in a manner that is in the best interest of the self-insured employer. In this case, the self-insured employer was relying on and trusting the TPA to handle their workers compensation claims with the same due diligence and professionalism they would expect from a workers compensation insurance company. As the self-insured employer was paying the TPA to handle the self-insured employer’s financial obligations (the payment of workers compensation claims) and trusting the TPA to handle their assets (their money) in a prudent and careful manner, a fiduciary relationship was established between the self-insured employer and the TPA.

The self-insured employer relied on the TPA’s superior workers compensation claims knowledge and claims handling skills in the management of the self-insured employer’s workers compensation claims program. The self-insured employer relied on the TPA to put the interest of the self-insured employer ahead of the TPA own interest in every claims handling decision made.

The TPA is in the business of adjusting insurance claims. The self-insured employer is in the business of manufacturing plastics. Therefore, the TPA’s knowledge and understanding of workers compensation claims is far superior to that of the self-insure employer. The TPA was being compensated to provide the self-insured employer with claims handling, guidance, counseling and advice on their workers compensation claims. At any point where the TPA saw the self-insured employer making an incorrect decision on a workers compensation claim, the TPA had both a duty and the responsibility of a fiduciary to explain both the ramifications and the probable outcome of an incorrect claims handling decision. The self-insured employer was of the opinion the TPA had repeatedly failed to provide proper guidance.

The self-insured employer was trusting the TPA to handle the self-insured employer’s workers compensation claims in accordance with generally accepted standards (commonly known as best practices) within the insurance industry. The original contract between the self-insured employer and the TPA was silent on the subject of claim quality. Best practices for claims handling had not been incorporated into the contract. The purpose of best practices is to control claim costs while providing the insured/self insured with a quality claims product. Each time the TPA adjuster, claims supervisor or claims manager failed to follow the generally accepted claims handling standards, they were breaching their fiduciary responsibility to the self-insured employer, but not their contractual requirements.

The original contract between the self-insured employer and the TPA also had not specified the number of claim files each adjuster would be assigned. The adjusters at the TPA were handling an average of 180 workers compensation files each. This number of claims is far above what a claims adjuster can properly handle. The TPA knew or definitely should have known a claims inventory/workload of this size was unrealistic and generally accepted claims handling standards could not be met. Each time the claims supervisor or claims manager assigned a new workers compensation claim to the claims adjuster with a claims inventory of 180 files, the TPA was intentionally breaching their fiduciary responsibility to the self-insured employer.

Any time a self-insured employer and a TPA enter into a claims handling agreement, the self-insured employer should be sure the contract specifies it is a fiduciary agreement. The contract should incorporate the best practices in claims handling. The contract should specify the number of claims files that can be assigned to any one adjuster. The contract should also specify how any damages the self-insured employer incurs due to the TPA’s breach of fiduciary responsibilities will be resolved.


Author Rebecca Shafer
, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing, publishing, pharmaceuticals, retail, hospitality, and manufacturing. See www.LowerWC.com for more information. Contact: [email protected].

 

Our WC Book: http://www.wcmanual.com

WORK COMP CALCULATOR: http://www.LowerWC.com/calculator.php

MODIFIED DUTY CALCULATOR: http://www.LowerWC.com/transitional-duty-cost-calculator.php

WC GROUP: http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact [email protected].

 

Filed Under: Broker Issues & Relationships, Legal Doctrines, TPA and Claims Administration Tagged With: Claims Handling, fiducary responsibility, Self-insurance, Third Party Administrators (TPA)

Related Articles

Select the Workers’ Comp Claims Administrator

Select the Workers’ Comp Claims Administrator

Is an Injured Employee’s Transitional Duty Work at a Charity Tax Deductible?

Is an Injured Employee’s Transitional Duty Work at a Charity Tax Deductible?

Effective Management of Service Providers to Reduce Workers’ Comp Costs

Effective Management of Service Providers to Reduce Workers’ Comp Costs

Details of the Third Party Administrator Service Agreement

Details of the Third Party Administrator Service Agreement

Deny That Claim! Workers Compensation Claims You Can (and Should) Deny

Deny That Claim! Workers Compensation Claims You Can (and Should) Deny

Selecting the Correct Workers’ Comp Third-Party Administrator

Selecting the Correct Workers’ Comp Third-Party Administrator

OJ Simpson, Level Of Certainty and Workers’ Comp Injury Causation

OJ Simpson, Level Of Certainty and Workers’ Comp Injury Causation

Hire Lawyers, Not Law Firms to Defend Workers’ Comp Claims

Hire Lawyers, Not Law Firms to Defend Workers’ Comp Claims

Using Defense Attorneys to Defend Work Comp Cases

Using Defense Attorneys to Defend Work Comp Cases

How Many Claims is Too Many For Your Adjuster?

How Many Claims is Too Many For Your Adjuster?

Why Every Employer Should Request Their Account Handling Instructions

Why Every Employer Should Request Their Account Handling Instructions

Key Questions to Ask When Selecting An Insurance Broker

Key Questions to Ask When Selecting An Insurance Broker

Free Download

How to Calculate Your Minimum Experience Mod, Controllable Premium & the Revenue Impact - FREE Download Click Here Now!

Train to Succeed

BECOME CERTIFIED IN WORKERS’ COMPENSATION

Proven Course Catalog & WC Toolbox Give You The Power To Achieve Lower Costs and Better Injured Worker Outcomes

VISIT WORKERS' COMP TRAINING CENTER

Free Download

How Do I Get My Adjusters To Follow My Account Handling Instructions? - FREE Download Click Here Now!

Train to Succeed

BECOME CERTIFIED IN WORKERS’ COMPENSATION

Proven Course Catalog & WC Toolbox Give You The Power To Achieve Lower Costs and Better Injured Worker Outcomes

VISIT WORKERS' COMP TRAINING CENTER

Train to Succeed

BECOME CERTIFIED IN WORKERS’ COMPENSATION

Proven Course Catalog & WC Toolbox Give You The Power To Achieve Lower Costs and Better Injured Worker Outcomes

VISIT WORKERS' COMP TRAINING CENTER

Free Download

How To Avoid, Manage, And Win Workers' Comp Claim Litigation - FREE Download Click Here Now!

Previous Post: « NEWS on Workers Compensation Roundtable
Next Post: Two of Three Canadian Whistleblower Scientists Rightfully Dismissed »

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

FREE DOWNLOAD

How to Calculate Your Minimum Experience Mod, Controllable Premium & the Revenue Impact - FREE Download Click Here Now!

FREE DOWNLOAD

How Do I Get My Adjusters To Follow My Account Handling Instructions? - FREE Download Click Here Now!

FREE DOWNLOAD

How To Avoid, Manage, And Win Workers' Comp Claim Litigation - FREE Download Click Here Now!

Our Sponsors

ARCADIA - Enhancing Settlement Outcomes

The Structured Settlements Company
 

Catastrophic and Risk Solutions, Case Management Solutions, and Specialty Networks
 

MSAs, Section 111 Audits, & Conditional Payment Resolutions
 

Post-Settlement Administration
 

Medcor

Injury Triage, Onsite Clinics

Read Our Award-Winning Blog

Blog Categories

Search Our Archive

Subscribe to Our FREE Newsletter

Return-to-Work Essentials

Footer

Search Our Archive

Search our continually growing archive of over 2500 articles about Workers' Comp issues.

Quiclinks

  • Calculators
  • Terms & Abbreviations
  • Glossary of WC Premium Terms
  • WC Resources
  • Best Practices
  • Industries
  • Return-to-Work Essentials

RSS Recent Blog Posts

  • 2023 MMSEA Section 111 Reporting Updates
  • Effective Communication Skills in Work Comp
  • Paradigm Announces Acquisition of Welvie
SUBSCRIBE TO OUR FEE NEWSLETTER
Let Us Help You Stomp Down the High Cost of Workers' Comp!
Top of Page ↑
  • Home
  • Training Center
  • Search
  • Membership
  • Products
  • Blog
  • About
  • Contact
  • Subscribe
  • Login
Copyright © 2023 Amaxx, LLC. All Rights Reserved. · Privacy Policy / Legal Notice