The Importance of Recognizing When It Is Time to Settle a Claim

Claims have shown to only worsen with time, especially with ongoing temporary total disability (TTD), potential permanent total disability (PTD), and increasing medical, prescription, and rehabilitation costs. Settlements may help eliminate many of these exposures while preventing future litigation or even jeopardizing insurance coverage.

“An insured should not hesitate to settle when a reasonable opportunity to resolve is presented,” said Christa Manwaring, Senior Claims Manager at Safety National. “There is no way of knowing what the future may hold for an injured worker’s medical expenses, and with rising medical costs and inflation, a settlement may greatly reduce long-term claim costs.”

When Should You Consider Settling?

Settling claims starts with the right team, where all parties have a mutual goal to settle the case. A conference call with all stakeholders can help gain an understanding of the value and obstacles to settling and develop a clear plan of action to move forward. Your excess insurance carrier can be an excellent resource during the process, providing unique expertise in handling highly developed cases, providing guidance and tools where necessary. Their early involvement can also help reduce overall long-term claim costs.

When considering the potential for claims to develop, these types of claims should be part of an active settlement discussion:

• Litigated claims – Amid the litigation, consider the ongoing and accumulating exposure and the chance of prevailing. Exposures could include back TTD, where an injured worker is still out of work, and could potentially posture for PTD.
• Lifetime and potential lifetime exposure claims – The present and economic value versus the total lifetime payout of the claim must be weighed to determine the entire exposure.
• Claims with excessive medical costs or costs that increase annually – Medical inflation is at an all-time high with no signs of slowing, so it is realistic to expect that costs on these claims will only escalate.
• Claims involving narcotic or opioid addictions or excessive medication usage for pain management – Long-term narcotic addiction is a risk that can severely impact a return to work for an injured worker. Additionally, claim costs associated with these medications are significantly higher on average.
• Maximum medical improvement (MMI) plans do not exist – Once MMI is reached, a doctor’s disability rating can determine work restrictions, if applicable, and ongoing benefit payments may cease.

What Tools Best Assist with Settlements?

A good approach to a settlement starts with reducing medical costs, which can involve using a pharmacy benefits manager (PBM), medical management team, or a drug review. Obtaining a Medicare set-aside (MSA) early can help determine what is needed for a resolution and what should be worked on to mitigate costs.

Surveillance and social media records may be needed in some cases to confirm activity levels of the injured worker are consistent with the doctor’s notes. This should be used to reduce settlement costs and not unveil fraud, which is rarely successful. Surveillance can ensure that the specific value of the settlement aligns with what the injured worker is claiming.

Self-insureds should work with their team to determine what is important to the injured worker and understand the settlement’s value to make a fair offer.

What Barriers Exist to Prevent Settling?

Often an injured worker will not understand how the value of a settlement is determined, but using a bipartisan party to help break it down can help. While the process may be simple to the attorneys, TPAs, and insureds that are often involved in these types of cases, it is critical to remember that this is likely all new to the injured worker. Conversations should be led with empathy and thorough explanations. Other barriers can include the following:

• Jurisdictional restrictions – Some states, like New Jersey, Texas, and Massachusetts, will not allow medical claim closures. Cost of living adjustments in California, Massachusetts, and Maryland also vary from other states.
• Injured workers may want the security of lifetime payouts – In this instance, consider a structured settlement, which may provide more financial security over time.
• Insured lacks funds available to cover the settlement – The carrier should review their current policy, and try to find a resolution or a way to expedite the reimbursement to the insured.
• Personal conflicts – Empathy toward an injured worker is necessary, but sometimes an insured or an adjuster can get too close to the injured worker’s situation, making it more difficult to put feelings aside and view the situation objectively. The carrier should remind them of the goal to recover the injured worker’s needs and move to resolve.