Claim management, as with risk management, has responded to this trend by having its focus center on all aspects of contingency planning well before a loss may even occur, at the time of loss, and as the claim moves forward. Such planning encapsulates, amongst other areas, emergency response, business resumption and disaster recovery. This focus may be termed as protecting the importance of business continuity planning.
To continually strive toward this goal, claim management seeks to create a series of different types of partnerships in order to have the necessary service providers engaged and prepared to deliver their respective services. But, such partnerships are only as strong as the partnerships created. To assess the strength of these partnerships, one must look at the type of relationship, the depth of it, as well as the defined role of the particular service required. Such a system is at its best only when there is thorough detailed and streamlined communication between the necessary partners. Yet, to protect continuity and orchestrate a series of participants, all players involved need to be connected to one another. For this reason, claim management is perhaps more accurate restated as the art and science of connectivity.
In our current economy, insurers are under ongoing pressure to limit and control the various fees and/or rates associated with its numerous service providers. As a result, insurers often approach a partnership with a narrow vision focused on cost reduction even before the insured makes a claim. However, though such an approach reflects the realities of the insurance industry, it falls short of being an appropriate standpoint from which to view all of the "pieces of the puzzle" necessary to effectively manage claims. More specifically, such a narrow approach in defining "claim management" limits not only the insurers’ opportunities to address key interests and limit exposure or maximize recovery, but also limits an insured’s abilities to communicate its interests to its insurer.
This paper is a brief overview of the importance of connectivity to assist in effective claim management. More particularly, this paper seeks to highlight the role lawyers play as one of the key connections in reaching that goal.
A. Pre-loss
A true partnership must exist before the loss occurs for a number of reasons:
- it allows for flexibility in determining various options available to an insurer when a potential loss occurs;
- it has an infrastructure in place to allow it to make strategic decisions as new information becomes available when a loss occurs; and,
- it allows for an assessment of various risk factors both in the context of the loss and in the type of loss which may not only serve to contain a loss but also minimize expense both to an insurer and its insured.
By way of example, the importance of connectivity is likely more prevalent in the context of risk management. Recently, the theme at the RIMS Canada conference held in Ottawa in September, 2011, was "Capital ConneXions". As part of the discussions regarding the effects of the 9/11 disaster, it was noted how deeply the attacks were felt in the insurance and risk management community. Some of the lessons in risk management that came as a result of that disaster showed a clearer focus on all aspects of contingency planning and, in particular, the importance of the flexibility of contingency planning so that it can apply to all types of events. Similarly, effective claim management prior to a loss is geared toward assessing the needs of all key players surrounding any particular type of event or loss. If an insurer approaches managing a claim with foresight and in communication with its lawyers many key areas of a potential claim can be assessed and planned for.
For this very reason, many businesses involved in delivering risk management services develop various types of "roll out" programs. These programs are of particular importance to insureds or potential insureds as the programs allow insureds/potential insureds to feel engaged in the risk management process. Within such a program, a law firm, having reviewed the product, may be of assistance in providing information as it relates to important legal issues raised by a particular roll-out program. One such goal would be to highlight to an insured or potential insured its relationship with the insurer. Specifically lawyers can assist in delivering a clearer understanding of the product to the insured. The benefit of this connection results not only in raising concerns and communicate them as amongst the various partners but to work toward ensuring against a communication breakdown. It is often only through such communication that dangerous pitfalls may be avoided because it allows insureds or potential insureds to consider their needs and communicate them effectively to the insurer.
Another tool to foster connectivity between insurers and lawyers at the pre-loss stage is seminars focused on delivering information to insurers about a potential litigation process as well as any particular standards or mechanisms particular to an industry. Such discussions often are of keen importance as lawyers are best suited to review such issues.
As a final point at the pre-loss stage, education is an important but often overlooked benefit. Specifically, the insurers are at an advantage to receive advance training in key areas including risk management of an insured’s type of business, response needs, business resumption expectations / limitations, as well as a clearer understanding of the insured’s business operations and their ability to recover. Whether the insured is in a motor vehicle accident or his business has suffered a property loss, the ability to have highly trained personnel familiar with both the insured’s needs as well as the potential for litigation will go a long way to avoid any miscommunications between the insurer and the insured should a loss occur.
B. Date of loss
A lawyer’s role at the time of loss may be of great assistance to the insurer in managing a claim. There are a number of scenarios where this has shown to be of assistance. For example, in a motor vehicle accident, particularly if it is significant with the potential of death or grave personal injury, the scene of an accident is paramount. Those first on the scene are rightly concerned with the safety of the travelers. However, as a result many components of the accident remain unattended to and subsequently may be lost forever.
Such a loss may cause great difficulty when an insurer is subsequently involved in defending a lawsuit, particularly in a claim that will likely breach the available policy limits of its insured. The same is true for a devastating property loss where there may be significant events resulting in environmental damage. Much information must be gathered at the scene of the loss, and if certain steps are missed or delayed they may prove costly should subrogation be pursued.
It is for this reason that systems put in place prior to a loss occurring serve to effectively manage that loss by allowing for the appropriate partners to respond to the loss as events develop, and ensure that the insured’s interests are being addressed. Whether the issue is collecting evidence by way of photographs or other means, ensuring raw data information is collected and preserved, or experts retained to assist in the management of the claim to name but a few, the strength of the claim management system depends on the infrastructure considered, proposed and arranged well before the loss. An insurer is at an advantage as it can immediately engage its lawyers in communicating its needs and assessing available resources and opportunities at the time of loss to establish a creative and pragmatic approach for its response.
It is also important to highlight that the potential quantum of a claim that may result in litigation may not always be a guiding factor in determining the extent to which an insurer ought to invest in developing response systems. Often in the insurance industry, there are numerous smaller claims that occur with fearful frequency such as burst oil tanks; hot water tanks; as well as many others. Each incident, alone, may be a "small" loss and on its own, may appear not to merit significant investigation. But, the opposite is more than likely true and in doing so, will manage such claims more prudently with an efficient and coherent response system as its tool.
C. Post-loss
Once the loss has long since occurred, and a claim, possibly already in litigation or perhaps subrogation is being contemplated, the insurer’s lawyer becomes involved. At this stage, much of the depth of an insurer’s claim’s file depends largely on the work done prior to and at the time of the loss as well as immediately following it. Too often, at the litigation stage, the insurer learns through hindsight what may have been done better or even done at all and often turns to its lawyers hoping that something may be resurrected. Whether, or more specifically, how well, such deficiencies can be rectified is often a case by case analysis. But too often the problem is as simple (and as complex) as the lack of communication between the insurer and its partners before and on the date of the loss.
A lawyer is concerned with a series of questions when managing litigation. A significant amount of time is spent ensuring that all the relevant and necessary information is gathered by all the key players in order to assess and strategize the litigation process. However, as information gathering is often an ongoing process, it is evident that the more information delivered to the lawyer at the initial stages of the loss, the earlier a developed legal opinion may be provided to the client. That benefit may not only lead to an early resolution of the lawsuit but as a result will also serve to limit the costs associated with the litigation. It is for this reason that this paper ends where it started, with a message that bears repeating: claim management is a powerful tool that allows an insurer to develop the necessary connections with all its service provides, including its lawyers, to effectively manage its insured’s losses.
