What happens when you experience a significant large loss at your organization? We recently supported one of our clients through such an event and wanted to share lessons learned in the hopes they can help other employers be mindful of how structured settlements can be a valuable tool when taking care of those involved.
Less than two years ago, one of our clients experienced a significant large loss. While we can’t provide all the details, the impact is evident even at a high-level view. This particular loss had catastrophic exposure as soon as the first claim was called in, involving more than 30 separate incidents which had occurred over a long period of time. The result was 30 individual claims, many including long-term healthcare with the potential to cost millions of dollars. In addition to the new injuries, many of the affected workers were already in poor health, which would only decrease their ability to heal and make it more difficult to receive the treatment they needed.
The client in this scenario had a significant self-insured retention, as well as two levels of excess. Upon the first report of the accident, it was evident the first level of excess was instantly going to be put on notice. The client’s primary focus from the start was to care for their workers, but their goal was also to handle claims appropriately in an attempt to mitigate expenses to the point where the second level of excess would not be reached. This was a lofty goal, but it gave our team a financial ceiling to work within.
The client service manager (CSM) for this client immediately jumped to action, making sure all involved parties were included and informed early in the process.
Defense counsel was involved from the beginning as it was anticipated many of the claimants would seek immediate counsel. In addition to defense counsel, the CSM understood that a loss of this nature was going to require a great deal of financial expertise to be able to handle claims appropriately while meeting the client’s goal of not crossing over into the second level of excess. This is where Galaher Settlements’ nationwide network of brokers, experience in working through settlement negotiations, and guidance in providing the right financial direction made a difference in the outcome.
The first step was to bring in a broker who was both familiar with and local to the area. The broker would work side by side with defense counsel to ensure understanding of financial goals and how to achieve those goals on behalf of the injured workers and our client. The broker also helped to create a bridge between the parties on the ground locally and the Sedgwick examiner.
In this situation, compensability, diagnosis and treatment were never in doubt, which allowed us to move forward rather quickly toward resolution for the injured workers. Within a year of the claims being opened, it was clear settlement negotiations were going to start early. The early start would hopefully help to mitigate losses and support a crisis management plan.
The quick turnaround also meant defense counsel and the examiner would need to quickly grasp the financial impact of each claim. One of the main issues in this case was that each worker had their own set of comorbidities with their own set of medical needs; there would not be a single global settlement to close all claims. In addition, each had their own counsel; defense, examiner and broker would need to be prepared to negotiate a settlement with 30 different individuals, ensuring each was fairly treated and made whole, while also being mindful of the fiduciary goals of the client. The impact of the Galaher broker was immediately clear, as it allowed the examiner and defense counsel to quickly asses the financial impact of each case and prepared them to negotiate settlements. The local broker was able to attend every mediation conference in person, running numbers for the parties and explaining the value being negotiated to both sides of the table.
Of the 30-plus claims being negotiated, only about a third of them ended up settling with a structured settlement, however, by having the structured settlement broker present during all negotiations they were able to give an accurate representation of the cash settlements’ true value. With this level of expertise – and with all parties on the same page – the results achieved met the objective of caring for the individuals involved, while also meeting the goals of the client.
In less than two years from the initial date of accident, all claims were settled without the client reaching their second level of excess.
Do you have experience with a similar type of event with lifetime exposure or high-dollar value? How have you been able to utilize structured settlements to ease a large loss?
Matthew Zink, MPA, Manager Medicare Compliance & Structured Settlements