Audits

1. Audits What you don’t do can be costly By: Mark Watkins Vice President

2. Audits What you don’t do can be costly • CRL • Audit • Categories 1

3. Audits What you don’t do can be costly • Costly Oversights • Not reporting excess reportable files to CRL. • Remember, when in doubt, report. • Let’s identify excess reportable criteria … 2

4. Audits What you don’t do can be costly • Excess Reportable Criteria Identified: • Claims with reserves that are higher than 50% of the retention • Spinal Cord Injuries – resulting in paraplegia, quadriplegia • Amputations • Any severe head injury involving brain damage affecting mentality or central nervous system- such as permanent disorientation, behavior disorder, personality change, seizures, motor deficit, inability to speak, unconsciousness (comatose) • Impairment of vision or hearing by 50% or more • Multiple fractures- involving more than one member, non-union or significant shortening of the limbs • Nerve damage causing paralysis and loss of sensation in any body member • Massive internal injuries affecting body organ or organs 3

5. Audits What you don’t do can be costly • Excess Reportable Criteria Identified continued… • Burns- involving over 10% of body with third degree or 30% with second degree • Injury to nerve at base of spinal canal or any other back injury resulting in incontinence of bowel and/or bladder • Fatalities • Occupational Disease- such as asbestosis, black lung disease or long term chemical exposure • Any claim or suit not specified above that presents an unusual exposure to the coverage. Examples include: sexual molestation, AIDS, rape, environmental exposure, class actions and bad faith allegations • Property claims (including multiple claims) arising out of an occurrence or accident that may require payment in excess of retention • Any other serious injury that may involve CRL’s liability 4

6. Audits What you don’t do can be costly • Costly Oversights • Reservation of Rights (R&R) letters not being sent out addressing coverage issues. • Let’s identify coverage issues where R of R would normally apply if alleged or sought … 5

7. Audits What you don’t do can be costly 6

8. Audits What you don’t do can be costly • Costly Oversights • Excess ad damnum letters not being sent where damages sought are not specified or capped. • Let’s identify what happens when ad damnum letters are not sent … 7

9. Audits What you don’t do can be costly Example: Failureto advise the insured of this potential can be costly if damages are awarded above the applicable limits and the insured will be looking to the TPA or fund/carrier to cover the entire loss. #2 #1 8

10. Audits What you don’t do can be costly Sample Ad Damnum Letter 9

11. Audits What you don’t do can be costly 10

12. Audits What you don’t do can be costly 11

13. Audits What you don’t do can be costly • Costly Oversights • Should be obtained where applicable to help establish proper reserves on workers’ compensation claims that are expected to be open for a person’s lifetime. 12

14. Audits What you don’t do can be costly • Costly Oversights • File Documentation is “key!” • File Documentation should be detailed to where anybody could review the claim and tell what the claim is about, what the real facts are, what has occurred since the claim was received and what the plan is to bring the claim to a resolution or closure. This would include things such as investigation details, summaries of medical and legal reports and any other correspondence. This should also include all demands, offers and negotiations as well as plans of actions and any other activity by the adjuster or supervisor. • Documentation should also indicate whether the file is one where there is exposure, potential exposure or compensability. 13

15. Audits What you don’t do can be costly • Costly Oversights • A lack of proper file documentation can be costly in a couple of ways: • If the file is not documented properly and the adjuster handling the file is no longer around or the parties involved from the insured standpoint are no longer around, then it could potentially cost the insured/carrier money because it could end up being the claimant’s or plaintiff’s word against nobody. This is not a scenario that any insured wants to be up against. • (Example: Adjuster handling file investigates the claim and knows all the facts but does not document this. Adjuster gets hit by a bus or wins multi-million progressive slot jackpot and quits job, two years later Mr./Ms. claimant decide to file suit and when the file is reviewed to determine what happened there is nothing documented as to the facts and investigation.) Chances are the cost of that claim just went up since Mr./Ms.claimant will paint a picture of gloom and doom and how the insured was negligent or responsible for their injuries and damages. It will make it a lot harder to defend due to the fact the file was not documented with detailed information as to what occurred, what the investigation turned up, etc. 14

16. Audits What you don’t do can be costly • Costly Oversights • A lack of proper file documentation can be costly in a couple of ways: • Lack of documenting an excess report and/or reservation of rights letter and excess ad damnum letter could be costly if there is no documentation to prove these things were done on applicable cases. * • (Example: A carrier disclaims coverage due to the fact that they say the claim was never reported. The adjuster claims that the file was reported but the file documentation does not support that and the hard copy of the report is nowhere to be found) • *GOOD LUCK with trying to explain this to the insured and see how happy they are to hear this news! 15

17. Audits What you don’t do can be costly Questions???? By: Mark Watkins Vice President