Gain the Competitive Edge by Strengthening Your WC Subrogation Results
By Kathleen Smith CSRP & Donna Geraghty
The degree of difficulty for many Workers’ Compensation claims adjusters to focus on the subrogation aspects of the claims assigned to them is rather high. Subrogation recognition and Third-Party recovery are definitely areas often missed by over-burdened Workers’ Compensation claim handlers tasked with making sure statutory medical bills and indemnity payments are paid timely, or argued in front of the WCB. Time management allocation is relegated to determining ANCR (Accident, Notice and Causal Relationship) to validate whether an injury is compensable and takes precedence over investigating who or what may have been responsible for the employee’s injuries. While Claim Executives have a thorough understanding of how the subrogation process impacts loss ratio and Workers’ Compensation premiums, and unanimously agree a strong Subrogation Program has immense value, but unless there is a dedicated subrogation unit most struggle with having the resources and/or workforce to dedicate to subrogation identification and pursuit. They must resort to assigning recovery efforts to their Workers’ Comp Adjusters who often have little experience in identifying negligence or a liable third party.
Workers’ Comp Recovery is Complex and Varies from State to State
While Workers’ Comp recovery is statutory in all 50 states the rules for recovery are different in each state. Every state allows the employer/workers’ comp carrier to pursue a lien against the proceeds of a third-party recovery, but not without many intervention rules, recovery limitations, differences in future credits and of course a myriad of formulas that are applied to each settlement. It becomes an unrealistic challenge for the Worker’s Comp Adjuster to be aware of all the jurisdictional rules, especially with carriers that write in many states.
For example, Direct Actions are permitted in virtually all states with the exception of West Virginia and perhaps New Mexico, in which it is currently reimbursement only. To complicate matters even further, in some states there is no waiting period to file Direct Actions, but more often there is a waiting period ranging from a few months to a year from the loss date for the carrier or self-insurer to commence a Direct Action. Indiana appears to be the most generous with its statute providing carriers up to one-year post statute to file an action.
When Should the Subrogation Process Begin on Workers’ Comp Claims?
So, when is a good time to begin the subrogation investigation on a Workers’ Compensation claim? Does the Workers’ Comp claims handler first investigate how, when, and why the injury occurred? Or is it more prudent to first assess the degree and severity of the injury, set a proper reserve, reach out to the employer to validate the loss and employment, followed by contact with the employee to discuss their injuries and treatment? Without question, early identification of a subrogation opportunity greatly increases the likelihood of a favorable outcome. Witnesses and critical evidence tend to disappear with time. Unfortunately, it is sometimes more important to determine compensability and severity rather than delve into the specifics as to who may be responsible for the loss, which often leaves many of the loss facts undisclosed and the investigation trail cold.
Technology Facilitates the Identification of Subrogation Opportunities
Engaging technology can be extremely valuable in the early identification of Workers’ Compensation claims to maximize the greatest recovery potential, which is a key element of success in strengthening your subrogation results. It can also lead to shorter cycle times for recovery which can lead to lower loss adjustment expenses, better customer experience, a lower loss ratio, and of course financial stability. In an interview with Alistair Shaw, Chief Technology Officer at AMSoft Group, a multinational software development company providing innovative solutions for insurers, he stated, “Deep Learning and Natural Language Processing and other advanced data-mining techniques will allow us to discover subrogatable claims that we never knew existed…”
Scenarios which may indicate there is a liable third party include:
- Motor vehicle accidents
- A faulty product or machinery which causes an injury to the employee
- A premises liability loss where the employee was injured on another party’s property
- Construction related accidents
Key words and/or exclusion rules for these types of losses can be programmed into a claims or subrogation identification platform to efficiently improve the identification of new losses which require further investigation to determine the recovery potential. The identified claims should be reviewed and evidence preserved early in the claims process, most likely before claim payments are made, with an eye towards a recovery.
First Notice of Loss Subrogation Program
Spartan Recoveries, a leading provider of subrogation solutions, has designed their First Notice of Loss Program (FNOL) for those Workers’ Comp clients who wish to get a jump start on identifying cases with a subrogation opportunity. A FNOL approach promotes the early investigation of the facts of the loss and allows the Recovery Specialist at Spartan to promptly send Notices of Lien, Subrogation Notices and Demands in most instances before any payment is made toward medical expenses or indemnity. The program allows the Workers’ Adjuster to focus on getting the injured employee back to work. There is no extra charge for taking advantage of the FNOL Program, and the standard contingency fee applies once a recovery is made.
A Spartan client who participates in our FNOL program was extremely pleased with our recovery results on a Workers’ Compensation loss which occurred on February 12, 2019 and was identified as having recovery potential by Spartan on March 5, 2019. Injuries to the employee were sustained while driving a motor vehicle in New York while in the course of their employment. The other vehicle involved tried to change lanes and lost control, causing a head on collision with the employee’s vehicle.
As the loss occurred in New York, Spartan immediately began their investigation, gathering supports, to determine whether or not Loss Transfer Subrogation would apply in this instance. All evidence was gathered and it was determined the insured’s vehicle weighed over 6500lbs, therefore qualifying the WC file for recovery against the Loss Transfer portion of the Adverse Party’s insurance policy. Even while the WC file was still open, a loss transfer demand for the Medical and Indemnity paid by our client (Carrier for the Employer) was sent to the Adverse Carrier.
Spartan continued to monitor for additional payments for recovery. On April 15, 2019, just two months after identifying and pursuing recovery, Spartan received their first payment from the Adverse Carrier for $1,090.11, which was the amount that had been paid in WC benefits up to that date. As the client WC file remained open, Spartan continued to monitor the WC file for additional payments, and sent supplemental Demands to the Adverse Carrier resulting in three additional payments received on April 29th, June 25th and September 4th collectively totaling $13,878.39.
The FNOL process established by Spartan was not only instrumental in identifying a Loss Transfer recovery often missed by Workers’ Comp carriers, but through aggressive claims handling was successful in obtaining a full settlement within 6 months of identifying the opportunity.
Capturing Missed Subrogation Through Closed File Reviews
Recovery opportunities can also be captured during the tedious task of conducting frequent closed file reviews. As these reviews are conducted, it is very often recognized that too many Workers’ Compensation claims with viable recoveries are closed without recovering the Lien, whether by aggressively protecting the Lien by staying on top of claimant counsel and the adverse carrier, or by pursuing the at-fault party or adverse carrier directly. Once the recovery opportunity has been recognized and the claim facts reviewed, any missing evidence and investigation must be obtained, which can be a futile effort if there has been a long lapse in time since the occurrence. Only then can the proper involved parties be identified and placed on notice, and further steps taken such as Notices of Lien, Demand Letters to adverse parties, carriers and legal representatives and either file Special Arbitration or retain the services of reputable Workers’ Compensation subrogation counsel to begin the process of initiating a Direct Action.
The investigation process after the medical and indemnity have concluded, and the workers’ comp case has been closed does often lead to viable recoveries, but are not nearly as successful as on those cases being recognized early in the life of the Workers’ Comp claim. There is no substitution for early recognition, identification and aggressive pursuit of a recovery, long before the file is closed.
Due to the arduous tasks involved in an internally conducted Closed File Review many carriers choose to outsource this function. In addition, having the workforce and/or resources to pursue recovery on low dollar work comp claims without engaging advanced technology to relieve the burden of manually reviewing every claim remains an issue for many carriers.
A Closed File Review (CFR) conducted by Spartan Recoveries for a regional Workers Compensation carrier identified a missed subrogation opportunity to recover nearly $21K in paid medical and indemnity payments. The client initially reviewed the claim for subrogation but abandoned its efforts due to what they felt was a lack of evidence and other legal issues. The claimant never pursued a third-party action. Despite the above difficulties, Spartan pursued the claim via a Direct Action and ultimately obtained a 100% recovery settlement of all payments made from the insurer of the contractor.
Outsourcing the Workers’ Compensation Subrogation Process
Many carriers recognizing the strain put on their Workers’ Comp claim staff to be responsible for the subrogation process have chosen to outsource some or all of the process to a third-party vendor such as Spartan Recoveries. Developing and implementing successful subrogation strategies has been the hallmark of our success at Spartan Recoveries. Identifying recovery opportunities early, and understanding the nuances of subrogation for all lines of business, especially for tough lines of business like, Workers’ Compensation has enabled Spartan to design and develop processes, and technology which lead to increased recoveries for our clients.
A recent claim referral to Spartan by one of its self-insured clients involved a motor vehicle loss in California where the employee was operating a vehicle when sideswiped by an adverse vehicle. Review of the claim indicated that the statute of limitations had expired, however there was a third-party action pending. During the investigation it was determined that the third-party action filed by claimant counsel did not include the Workers’ Compensation lien. After placing counsel on notice of the statutory lien, counsel advised they had no intention of protecting the client’s lien when settling their claim with the adverse carrier for their bodily injury action.
As such, Spartan immediately discussed the matter with subrogation counsel and assigned this matter to them to file an intervention to protect the lien totaling $23,186.00. Within 4 months of the intervention being filed, settlement mediation took place in which all parties involved negotiated a settlement of the personal injury claim for a total of $70,000.00. An offer was made to resolve the lien for $15,000.00 which was rejected. Additional negotiations ensued between all parties and ultimately Spartan was able to recover 100% of the client’s lien and secure full recovery within six months of the referral.
Having Access to Updated Recovery Rules, Strong Processes and Educated Staff Lead to Success
Because of the complexity of the rules in each state, Spartan feels strongly that our recovery staff must have accurate, updated information available in our recovery platform and be accessible from within each case file. It has always been Spartan’s position that becoming aware of and getting involved in every case soon after the loss has occurred is the best way to control the investigation, monitor the direction the case is taking, and jumping in as early as possible to place all parties on notice.
Successful Workers’ Comp recovery requires education for the Recovery Professionals handling those cases. Spartan Recoveries seeks to continually educate their staff members on the subrogation rights for all lines of business and in the various states in which our clients conduct business.
Regardless of which stage subrogation is recognized, it remains important to aggressively pursue the recovery by asserting a lien or pursuing through a direct action, inclusive of filing Special Arbitration if permissible.
Preventing an actual Worker’s Compensation loss from occurring, even with a myriad of safety precautions, may not be possible, but understanding the recovery statutes governing the states where employer policyholders conduct business, and pursuing recovery opportunities is very possible and will make a significant contribution to the financial stability of the Workers’ Compensation carrier or Self-insured Direct Writer.
Identifying recovery potential as early as possible through programs offered by Spartan Recoveries are conducted at no cost to the client and utilize adaptive algorithms to identify claims with the highest recovery potential. It is a Spartan client favorite. Promptly getting the recovery opportunity assigned to a trained Recovery Specialist gives Spartan the competitive edge in delivering successful subrogation results to our clients. 2022 is slipping away, and time lost to jump on boosting your results to get the most out of your Workers’ Comp subrogation program.
|About UsFounded in 2010, Spartan Recoveries LLC has proven to be an indispensable claims cost management partner to our clients. We have developed tools and strategies that enable us to review large quantities of claim data and quickly exclude cases where no subrogation opportunity exists, while including those that will potentially generate recoveries.Spartan has assembled a cutting-edge solution to capture often-missed or not-fully-realized claims recoveries in automobile, property, workers compensation, cargo and fidelity subrogation. Our powerful identification platform, combined with our proven recovery strategies, leads to shorter recovery cycle times, reduced expenses and a significant increase in net recoveries for our clients. Whether you choose us to conduct Claims Audit, First Notice of Loss, Referral or Overflow recovery programs, Spartan’s powerful automation in combination with our staff’s experience ensure that we significantly exceed client expectations.To learn more, visit us at https://spartanrecoveries.com|