Claims Advisor Winter 2011

claims

WINTER 2011

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advisor

Information for today’s claims professionals

More for the Brain trauma could be the asbestos of professional sports.

The wrap up Issue Workers’ Comp Strategy Trust but Verify Whose Line Is It? Wind Energy Loss Using Social Media Hoarder Claims Art Theft on the Rise change service requested 186 Industrial Center Drive Lake Helen, FL 32744

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Contents in this issue winter 2011 18

38 12

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8 Workers’ Compensation Medical Bill Compliance There is a silver lining in federal healthcare administrative simplification.

By Tina Greene

Cover Story

24 More Buck for the Bang Brain trauma could be the asbestos of professional sports.

By annmarie Geddes lipold Claims advisor

Mitchell International

12 Whose Line Is It? Learn to determine when a claim is a general liability claim or a professional liability claim.

By Lawrence D. Jackson

32 Adjusting Wind Turbine Losses The field is developing fast, which makes valuing losses and finding replacement parts difficult in some situations.

By Patrick Jeremy, CPCU, AIC, RPA PowerGen Claims, LLC

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Nelson Levine de Luca & Horst

The Power of the Pen

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One wrong word can mean the difference between effective claim resolution and litigation.

Trust‌but Verify Build confidence with claimants through a transparent process of validation.

By George E. Reede Jr., Esq., / Niles, Barton & Wilmer, L.L.P. and Gary P. Sullivan, CPCU, AIC, AIM, AIS/ Erie Insurance group

By Donna J. Popow, J.D., CPCU, AIC The Institutes

cover: shutterstock

CLAIMS ADVISOR | WINTER 2011

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Contents in this issue, winter 2011

50

cont’d...

56 Chief Concerns Liberty Mutual’s George Neale EVP, Commercial Market General Manager, Claims

By Bevrlee J. Lips

42

50

48 32

The Flap Over Scrap: Theft and Vandalism in Exterior Sculptures The rise in the value of metal prices is accelerating loss trends for public sculptures.

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By Christopher A. Marinello and Jerome Hasler

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42

Art Loss Register

46 Searching Social Networking Sites 42

Investigators can use information gleaned from social media, but the Bar and the law have strict rules about it.

46

By Deborah A. Lujan and Tracey M. Bobo Collins, Einhorn, Farrell & Ulanoff, P.C.

50

in every issue Edit: Letter from the Editor Slice Pulse Poll Global View Cool Linx

6 49 60 61 62

Write Stuff Event: Industry Calendar Source: Advertiser Directory Interview

63 64 65 66

Hoarding: An Investigative and Insurance Policy Challenge A water loss in a house affected by hoarding can be a major challenge to adjusters.

By Ralph E. Moon, Ph.D., / HSA Engineers and Scientists and Gina Clausen, Esq / Groelle and Salmon

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www.claimsadvisor.com

By Bevrlee J. Lips

edit letter from the editor

The new asbestos Asbestos. Just the word makes us shiver. Since 1929, there have been over 600,000 asbestos-related claim files, and, according to a recent report by U.S. insurers, claims are once again on the rise.

While currently not to the scale of asbestos, sports brain injury cases may be the new “asbestos” for the insurance industry. In this issue’s feature article, we take a look at professional football and drill down into why 3,000 former professional athletes who suffered concussions during their career have filed workers’ comp claims in California.

We may be seeing just the tip of the iceberg. Not only are professional athletes chiming in, but reported injuries among high school, and even junior high school, athletes are increasing. Many assume a concussion is like a brain bruise, but generally an injury occurs when the head is accelerating rapidly and then is stopped or spun. In basic terms, the violence of that movement within the skull causes the brain cells to depolarize and their neurotransmitters to fire all at one time. The result can be confusion, blurred vision, nausea, memory loss and unconsciousness. Neurologists say that once a person suffers this type of event, it significantly increases the likelihood of a second, and it will take less of a blow to cause future injury and more time to recover.

Universities are conducting research to gain a better understanding of the effects repeated concussions have on athletes. For example, Stanford is currently testing high-tech mouthpieces on its football team that measure brain impacts during play, and Boston University has partnered with the Sports Legacy Institute to create the Center for the Study of Traumatic Encephalopathy. One thing is certain, we will see much more on the subject in the months ahead.

Big Changes for 2012 The only thing constant is change...and that’s a good thing. This coming January you may notice something a bit different in your mailbox—the arrival of Claims Management magazine.

Claims Advisor will be rebranded as of the new year and will also become a monthly print and online publication. Your subscription will continue to be complimentary (for claims, risk and litigation professionals), and you’ll get even more great information to help you stay on top.

Claims Management will be part of the offerings from the Claims and Litigation Management Alliance (CLM). Visit www.theclm.org for developing information and to sign up as a fellow and begin receiving all the benefits available to you.

“I always look forward to

From the team at Claims Advisor, we want to add a special thank you to our readers, writers and advertisers for your part in making the magazine an impactful and well-respected publication in the claims industry. I trust we will continue to serve you well.

Until next time...

Bevrlee J. Lips / Publisher & Editor editor@claimsadvisor.com

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receiving [Claims Advisor].

It’s the first publication that I have read where every article is relevant to what I do every day. It has not only helped me with my understanding of the insurance industry and my development, but it is great to keep up on trends and other news in the industry. [It] keeps me ahead of my game.

Thanks!”

Comment from the 2011 Reader Survey.

Information for today’s claims professionals

Winter 2011 VOLUME 5. NUMBER 4

Publisher & Editor Bevrlee J. Lips/editor@claimsadvisor.com Editorial Advisory Board Glenn T. Gibson

Crawford & Company International

Patrick Harmon

IMACC

Patrick Jeremy

PowerGen Claims, LLC

James R. Jones

Katie School of Insurance and Financial Services, Illinois State University

Robert Kelso Thomas W. Mallin

Kightlinger and Gray Property Loss Research Bureau

John McHale

Erie Insurance

Donna J. Popow

The Institutes

Claims Advisor Staff Managing Editor/Maureen Latimer VP Finance/Michael Marsh VP Information Technology/Michael Kay Web Site Associate/Chris Walters Project Associate/Amanda Pierce Warren Editorial Assistant/Paige Kay Database Associate/Sheila Hoyer Database Associate/Mandi Emery Design Assistant/Ashley Jones Design Assistant/Richard Shivers Human Resources/Shannon White Advertising Sales For advertising information, call 407.331.5477 or e-mail advertise@claimsadvisor.com.

Photography unless otherwise indicated: Shutterstock Volume 5, Number 4, Claims Advisor (ISSN 1940-0993) is published in print four times a year in February, May, August and November by Claims Advisor, 186 Industrial Center Drive, Lake Helen, FL 32744. Printed in the U.S. Copyright ©2011 by Claims Advisor. All rights reserved. Reproduction in whole or in part without permission is strictly prohibited.

No charge for subscriptions to qualified property and casualty insurance claims adjusters and professionals. Annual rate for subscriptions to nonqualified individuals is $46 USD. Canadian $70 (in U.S. funds). For individual issues, $12 USD. For reprints, e-mail the editor at editor@claimsadvisor.com.

POSTMASTER: Send address changes to Claims Advisor, 186 Industrial Center Drive, Lake Helen, FL 32744.

Founder/D. Scott Plakon

Claims Advisor

186 Industrial Center Drive, Lake Helen, FL 32744 office 866.276.7970 | fax 866.276.7972

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COMPREHENSIVE VIEW | MEETING MANDATES

Workers' Compen

Medical Bi Complian

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Quick Look

nsation

CC Federal healthcare reform carries with it some positive mandates that will improve business practices.

ill nce

CC A reduction in workers’ compensation claims processing costs could result from implementation of mandated medical bill procedures.

CC E-billing is one of the cost savers that is already widespread at best-in-class companies.

There is a silver lining in federal healthcare administrative simplification.

By Tina Greene

There are major healthcare regulatory mandates going into effect at both the federal and the state levels that will significantly impact workers’ compensation insurance medical bill payers. The Administrative Simplification provisions of the Federal Health Insurance Portability and Accountability Act of 1996 (HIPAA, Title II), states’ mandates for workers’ compensation e-billing, and targeted regulatory initiatives are forcing payers to implement new processes and technologies in order to be compliant.

Few insurers are truly ready for this compliance challenge, and many fail to recognize that the real cost of non-compliance is lost opportunity cost, not penalty dollars.

Federal healthcare administrative simplification offers payers a rare opportunity to prepare for compliance while meeting cost containment and operational efficiency objectives,

empowering workers’ compensation payers to prepare for an all-electronic American healthcare future.

Payer Challenges The workers’ compensation insurance industry is experiencing a number of challenges in the current economy, a circumstance that is unlikely to change anytime soon. In addition to recent increases in claims and lower investment returns for insurers, there is a very real fear that federal monetary policy may spark inflation. Medical cost inflation is now a quantifiable factor in the workers’ compensation marketplace, and rising costs in the U.S. healthcare system are set to continue for demographic, liability and other largely intractable structural reasons. The only way insurers can directly address these challenges is to control workers’ com-

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COMPREHENSIVE VIEW | MEETING MANDATES

pensation costs by managing claims and medical costs.

Reducing workers’ compensation claims costs is necessary to procure the best possible outcome for the injured worker, employer and insurer. Insurers are starting to deploy the tools and technologies that help them deliver quality medical outcomes cost-effectively while reducing medical bill processing costs. The best claims management solutions enable insurers to select providers most likely to produce the best medical outcomes and optimize bill review to ensure that appropriate billing practices and fee structures are implemented. As the workers’ compensation market continues to face challenges on multiple fronts and federal healthcare administrative simplification efforts increasingly emphasize the need to leverage technology, the use of technology solutions to reduce costs and improve medical outcomes will continue to expand.

Meeting today’s compliance standards and maintaining operational efficiency goals can be achieved with a complete understanding of the implications of healthcare administrative simplification initiatives and the state mandates that are underway. A commitment to putting into place the technology capable of optimizing medical bill handling environments will help payers create claims cost containment opportunities out of compliance requirements.

Opportunity in the Challenge There are three federal mandates that will significantly impact the workers’ compen-

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sation industry in the future: 1. Health Insurance Portability and Accountability Act (HIPAA, Title II). First adopted in 1996, HIPAA essentially provides administrative simplification for electronic data interchange, establishes the standards to make electronic transactions possible and mandates the privacy and security of protected health information. In 2009, new transaction sets and ICD-10 data sets for all HIPAA-covered entities were adopted with required compliance dates of January 1, 2012, and October 1, 2013, respectively. Compliance requirements under HIPAA 5010 and ICD-10 compliance requirements are a huge undertaking.

2. American Recovery and Reinvestment Act. The HIPAA expansion of February 2009 extended the privacy and security requirements to “business associates” (who, on behalf of a covered entity, perform certain functions or services involving protected health information of covered entities). Civil and criminal penalties were expanded to “business associates” as well.

The act includes grants and funding for expansion of electronic health records, plus incentives for their “meaningful use” by healthcare providers.

3. Patient Protection and Affordable Care Act. The healthcare reform act of March 2010 includes considering whether the standards and operating rules should

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apply to property and casualty insurance lines of business, including workers’ compensation programs, among other non-covered programs.

Looking on the Bright Side There are benefits to complying with upcoming federal mandates. Take ICD10: HIPAA-covered entities must comply with ICD-10 and are required to make a “clean cut” switch from ICD-9 to ICD-10 for dates of service on and after October 1, 2013. Believe it or not, there is a silver lining to the expanded data set of diagnostic codes (to 69,000 from 13,000) and procedure codes (to 72,000 from 4,000). Payers and providers will be able to obtain a more comprehensive and detailed diagnosis and a more accurate one, too.

Benefits are also expected to include improved communications and improved cost-estimate accuracy.

What happens if HIPAA 5010 is not implemented?

Process inefficiencies come to mind, as well as the potential for fines (in Minnesota and Texas it is mandatory for the provider to send e-bills, and payers must have the ability to receive them electronically).

But the real losses will come from opportunities forgone.

TABLE 1

Adopting workers’ compensation e-billing to satisfy HIPAA 5010 requirements offers another good example of meeting compliance directives today to cut costs and improve outcomes tomorrow.

Industry estimates indicate that administrative work related to healthcare provider billing and collection efforts represent about 10% of gross collections. Clinicians (not including back-office staff) spend 35 minutes per day on insurancerelated tasks. This represents a cost of approximately $200 billion per year for administrative functions. Electronic transactions can reduce this cost from 10% to 1%. Additionally, administrative simplification and electronic transactions can reduce costs for the payer and provider.

In addition to the significant federal moves to simplify the nation’s healthcare system, there have been a number of initiatives, at both the state and federal levels, that have identified the need to expand health information technologies, emphasizing how electronic medical records and payment systems are key to successful healthcare simplification. Payers will benefit by establishing workers’ compensation e-billing best practices now when there are few penalties associated with non-compliance.

Although workers’ compensation is just a small sliver (see Table 1) of the overall medical cost pie, it will likely be a significant burden for medical bill payers and providers to comply with entirely separate standards for workers’ compensation versus other healthcare sectors.

There is true efficiency and cost savings in adopting the HIPAA 5010 standards for electronic healthcare transactions.

Note that, in creating standards based on 5010, practice management systems will be updated to 5010 requirements.

Since workers’ compensation is typically less than 3% of a doctor’s office business, the same dynamic applies here as in the medical cost arena. Taking the time and the opportunity offered by impending federal healthcare simplification initiatives, payers will avoid having the tail wag the dog when it comes to the costs of doing business in the workers’ compensation medical bills marketplace.

Tina Greene is the regulatory affairs specialist at Mitchell International.

It’s really pretty simple. When you’re more knowledgeable you make better business decisions. And better business decisions yield measurable and meaningful results.

The Institutes’ proven knowledge will help you achieve powerful results with a variety of flexible, customer-focused options, including: © 2010 American Institute For Chartered Property Casualty Underwriters

Complying Correctly Requires Good Partners Keep in mind that most entities have already implemented electronic transactions in healthcare. The tools to accelerate adoption are already available and tested. Consistency is the key to efficiency and reduces the need for federal oversight. For example, in complying with state e-billing mandates, payers must work with a vendor offering best-in-class technologies, including bill review vendors, clearinghouses, e-bill agents, and others with the compliance expertise to stay on top of requirements and understand changes.

To best meet and leverage the opportunity inherent in federal healthcare administrative simplifications, exploit the knowledge and expertise of your technology vendors. Look for those with release cycles that address regulatory compliance issues in an up-to-date and comprehensive manner. Look for a workers’ compensation medical bill vendor that can be your business partner in preparing for regulatory compliance—not only with respect to current requirements, but also with regard to each change to the regulatory landscape implemented thereafter. cA

Knowledge is power.

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Quick Look CC If policy language isn’t tight, the court may rule that claims from outside parties or for seemingly outrageous behavior are covered.

CC Even with anti-stacking provisions, a client could have coverage under its GL and professional policies.

CC Courts consider both the actor and the nature of the conduct when determining coverage under professional insurance policies.

By Lawrence D. Jackson

General liability policies are designed to cover ordinary risks, those common to most businesses, so they contain exclusions in an attempt to rein in extraordinary exposures. One such exclusion is the “professional services” exclusion, which is often added by endorsement when the policyholder is a professional. Professional liability insurance is designed to fill the gap created by the professional services exclusion in the general liability policy.

One problem that arises in settling claims is that general liability and professional liability policies make little effort to define the term “professional services.”

As a result, it is sometimes difficult for the claims professional to determine whether a claim is properly covered

under the professional’s GL or professional policy.

Sexual Misconduct in Therapeutic Settings Sexual assaults committed by a professional are generally not considered by the courts to fall within the realm of professional services. Often, however, a different standard applies to psychologists and psychiatrists when it is alleged that the therapist mishandled the patient’s transference. The transference phenomenon is the process by which a patient’s emotions and desires toward one person, such as a spouse, are unconsciously shifted to another person, usually the analyst. Numerous courts have held that a therapist is engaged in a professional service when the

Whose Learn to determine when a claim is a general liability claim or a professional liability claim.

Part two of a two-part series. Be sure to check out part one online at www.claimsadvisor.com.

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e Line Is It?

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claim alleges an improper sexual relationship with a patient suffering from the transference phenomenon because the sexual conduct is related to the therapy and the transference phenomenon renders the patient particularly vulnerable.

For example, in L.L. v.

Medical Protective Co., a psychiatrist engaged in sex acts with a patient during therapy sessions. The court held that the professional liability policy covered the doctor’s conduct because “a sexual relationship between therapist and patient [suffering from the transference phenomenon] cannot be viewed separately from the therapeutic relationship that has developed between them.”

Thus, the sexual conduct had such a strong tie to the therapy that it was covered by the doctor’s professional liability policy. Similarly, in St. Paul Fire & Marine Ins. Co. v. Love, a psychologist and his patient engaged in a two-month sexual relationship. The court held that the doctor’s actions were covered under the professional liability policy because the “sexual conduct between the therapist and patient arising from the transference phenomenon may be viewed as the consequence of a failure to provide proper treatment of the transference.”

Non-Professionals and Non-Clients Covered Sometimes actions of non-professionals are held to constitute professional services. This is because the nature of the conduct (and not the job position of the actor) ultimately controls the outcome. Utica Lloyd’s of Texas v. Sitech Engineering Corp. dealt with an excavation

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project in which engineering and non-engineering personnel were working together when a trench caved in, killing an employee. The court held that the “professional services” exclusion in a general liability policy applied to both the engineering and non-engineering personnel because the corporation, as a unit, was engaged in the “professional service” of excavation.

In certain circumstances, coverage may extend to claims of non-clients when it is established that the claim arises from the insured’s rendering, or failure to render, professional services. This arises often in the context of financial lines coverage, such as directors and officers liability insurance and professional liability policies for investment bankers and underwriters. In some policies, however, the professional services definition may limit coverage for claims asserted by non-clients. When the definition does not, it is possible that there will be coverage for these claims.

Harad v. Aetna Casualty and Surety Company involved a malicious prosecution claim filed against an attorney by a non-client. The court held that the claim constituted a professional services claim because the policy definition did not limit coverage to claims of clients and because the claim arose from the attorney’s rendering of professional legal services.

Coverage Under GL and Professional Sometimes an insured will hold both a general liability policy and a professional liability policy, but the general liability policy doesn’t contain a professional services exclu-

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sion. In this situation, a problem arises if the policyholder files a claim that could lead to coverage under both policies. The outcome of such situations may depend on the court’s interpretation of the language in both policies and other clauses, such as antistacking provisions, that may be contained in the policies.

In Royal Ins. Co. of America v.

Hartford Underwriters Ins. Co., a nursing home was insured by both Royal and Hartford, and both policies offered primary general liability and professional liability coverage. But the general liability policy did not include a professional services exclusion.

A wrongful-death claim was made against the insured, which potentially triggered coverage under both policies. The claimants in the underlying suit alleged that the defendants failed to properly render appropriate medical and nursing care in a timely manner.

The threshold issue for the court was whether the claim was covered by the general liability coverage or the professional liability coverage. The court held that the professional liability policy applied. The court applied a common sense approach, stating that the general liability insurance applied to accidents like slips and falls on the nursing-home premises, while the professional liability coverage applied to claims based on medical negligence occurring at the nursing home.

The court reached the opposite conclusion in U.S. Fire Ins. Co. v. Scottsdale Ins. Co. U.S. Fire issued the insured nursing home a liability policy containing both a general liability coverage form and a professional liability

coverage form. The general liability coverage form, however, provided liability limits of $2 million, while the professional liability coverage form provided liability limits of only $1 million. As in the Royal case, the general liability coverage form didn’t include a professional services exclusion.

A coverage dispute arose in the context of a wrongful death claim filed against the insured after U.S. Fire paid only its $1 million limits under the professional liability portion of the policy.

U.S. Fire argued that it would be unreasonable to afford general liability coverage to a professional liability claim because that would render the entire professional liability coverage form superfluous.

Scottsdale, the excess insurer, argued that the wrongful death claim triggered both coverage parts and that, therefore, the claim was subject to the $2 million general liability limit.

The court rejected U.S. Fire’s contention that the professional liability coverage alone should apply to the underlying claim. First, the court observed that the underlying claim fell within the literal terms of both the general liability and the professional liability coverage parts. Second, the court reasoned that the general liability policy did not render the professional liability coverage superfluous. The court cited examples of certain claims that would fall under the professional liability coverage but not the general liability coverage.

Third, the court declined to insert an exclusion into the general liability coverage that simply wasn’t present. And finally, the court held that the

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anti-stacking provision in the professional liability coverage part clearly indicated an awareness by the parties that the coverage provided by the professional liability coverage form could overlap with coverage provided by other forms within the same policy.

Separate and Independent vs.

Concurrent Causation Making things somewhat more complex, lawsuits against professionals typically allege multiple acts of negligence, some of which might involve professional services and others of which may not. When an act of negligence that is covered by the general liability policy and an act of negligence that is excluded by the professional services exclusion combine to cause a plaintiff’s injuries, some courts distinguish between “separate and independent” causation and “concurrent” causation to determine if the insurer is required to provide coverage.

In cases involving separate and independent causation, the covered event and the excluded event each independently cause the plaintiff’s injury. In such cases, some courts have held that a general liability insurer must provide coverage despite the existence of the professional liability exclusion in the policy.

For example, Guaranty Nat’l Ins. Co. v. North River Ins. Co. involved the claim of an estate of a deceased psychiatric patient who committed suicide by jumping from a hospital window. The claimant alleged that the hospital’s failure to properly secure its windows and its failure to properly supervise a psychiatric patient led to

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the patient’s death. The hospital’s GL policy contained a professional services exclusion. The court held that the failure to supervise the patient was a professional service and that the failure to secure the windows was a ministerial task, but because the two events separately and independently led to the patient’s death, the insurer was required to provide general liability coverage despite the presence of the professional services exclusion.

In cases involving “concurrent” causation, the covered event and the excluded event combine to cause the plaintiff’s injuries.

Because the two causes cannot be separated, the professional services exclusion may apply to preclude coverage.

Utica Nat’l Ins. Co. v.

American Indemnity Co. involved claims of patients who were injured by the administration of contaminated anesthetics. The plaintiffs alleged that a technician employed by the insured surgical center contaminated ampoules with a syringe he had used on himself. The technician had hepatitis C, which was subsequently transmitted to the plaintiffs.

They alleged negligence in (1) the storage of the ampoules and (2) the administration of the drug by the physicians.

The court determined that the general liability insurer had a duty to defend because the plaintiff alleged both general negligence (storage of the ampoules) and professional negligence (administration of the drug). It also held that a fact issue remained as to whether the patients’ injuries were caused at least in part by professional negligence. The court determined that the in-

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surer would not have a duty to indemnify if a jury ultimately were to conclude that both negligent acts combined to cause the claimants’ injuries.

Evaluating the Claim In evaluating professional liability claims, insurance professionals should not focus exclusively on the title of the person who committed the act or omission because: (1) there is room for argument over who is or who is not a professional; and (2) that is not how the courts decide this issue. Although the identity of the actor matters, it is not by itself a determinant; not everything a professional does is a professional service.

When assessing whether or not something constitutes a professional service, most courts focus on the nature of the conduct, not just on the title or position of the actor. That is, the question of coverage usually turns on the nature and context of the alleged conduct. Professional services involve the use of specialized training or knowledge and do not typically involve physical endeavors. Further, the

courts distinguish between whether the claim arises from a “professional” or a “commercial” activity. Marketing and administrative activities don’t generally constitute professional services. Conduct may be a professional service even if performed by non-professionals, paraprofessionals, or independent contractors. Additionally, claims of non-clients may involve professional services.

Keep the policy’s language front and center. The context in which the policy uses the phrase “professional services” can make a difference in how a court interprets and applies it. Courts usually read insuring agreements broadly, in a way calculated to broaden coverage. Exclusions, on the other hand, are usually read narrowly and strictly. The precise definition of “professional services” can make a difference.

Lawrence D. Jackson is an attorney and partner with Nelson Levine de Luca & Horst, a firm solely dedicated to protecting and building the insurance industry’s business practices. (215) 358-5080; nldhlaw.com

Be sure to check out parts one and two of this series online at www.claimsadvisor.com.

Look What’s Coming in

January

A New Resource from a Trusted Team Through the acquisition of Claims Advisor, the Claims and Litigation Management (CLM) Alliance will launch Claims Management, a new monthly magazine for claims, risk and litigation management professionals. Produced by a team with nearly 50 years of publishing experience, Claims Management will focus on the issues, trends, products and services impacting the management of successful claims resolution. You can rely on Claims Management to deliver the information you need to succeed in your career.

Join CLM and subscribe to Claims Management — all at no cost!

Fellows of CLM are individuals who participate in claims management, adjusting and claimsrelated litigation. Benefits of fellowship include a subscription to Claims Management, access to courses for CE credit, educational and networking events held throughout the U.S., web seminars, speaking opportunities and other valuable benefits.

Sign up to become a Fellow by visiting www.TheCLM.org and clicking on Membership.

per f ecting the art | chec k , p l ease

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Quick Look

Trust…

CC Trust is the essential component in the claims professional’s relationship with the insured.

CC Trust, however, doesn’t imply blind acceptance.

Verification is part and parcel of the process.

but Verify

CC It takes a long time to build trust, but it can be destroyed in one interaction.

Build confidence with claimants through a transparent process of validation.

By Donna J. Popow, J.D., CPCU, AIC

Whom do you trust, and who trusts you? As a claim professional, trust plays an enormous role in your work life. It begins with the policyholder, who trusts the insurer to make good on a promise to pay when the need arises. Trust continues with the company giving you settlement authority and trusting that you will use it wisely, then providing you with access to proprietary information and

trusting that you will keep it confidential.

Trust moves forward with policyholders and claimants supplying you with personal information and trusting that you will use it only for its intended purpose. Yet, once a claim is filed, does your trust start to waiver? Are you the type of adjuster who mistrusts every part of a claim, or are

you the type of adjuster who “trusts but verifies”?

When you start to think about trust and the claim profession, things start to get muddy. Like many, you may have started your career believing that everyone is basically honest. A few years in claims causes you to start believing that everyone is dishonest.

When it comes to claims, you start to question everything

and everyone. And the more you mistrust the policyholder or claimant, the more they mistrust you. Eventually, the mistrust will start to color how you view almost everything.

Over the years, scholars with differing points of view across all disciplines—from social science and philosophy to psychology and economics—have advised that trust plays a central role in well

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functioning, healthy societies.

In other words, as social psychologist David Good has said, “Without trust, the everyday social life which we take for granted is simply not possible.”

Think about it. Every time you get into your car to go to work, you trust that the other drivers will drive responsibly. But you also know not to trust blindly.

You pay attention and drive defensively to avoid the driver who is speeding and wildly making lane changes.

From the perspective of the individual, trust allows the establishment of relationships with others. Although some risk must be taken, the mutual gain that is inherent at the heart of trust is one reason why it is so extraordinarily important and valuable. Trust is a survival mechanism—a building force that is nurturing. From an organizational standpoint, trust is a strategic resource that upholds a company’s reputational value and brand identity in the court of public opinion, and that strengthens its competitive position in the marketplace.

Undeniably, the insurance industry is recognized as being founded on mutual trust and benefit. Yet a breakdown in confidence and a lack of public trust in insurers is still capturing national and international headlines. At the same time, insurers experience a loss of trust from the steady increase in questionable policyholder claim filings, fraud cases and other insurance-related crimes.

An overwhelming amount of survey data from various organizations reveals a prevailing public mistrust in financial services generally and in the insurance industry specifically.

On the 2011 Edelman Trust Barometer Executive Summary, a global survey of trust, the U.S. has undergone a down-

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turn in public trust across the board—from government and the media to businesses and NGOs. And on the Edelman Trust in U.S. Financial Services 2011 Survey, trust in propertycasualty insurance companies to do what’s right is held by only 37% of respondents.

Accenture Research’s April 2009 Global Consumer Behavior Study produced similar results, with only 40% of responders indicating a trust of insurers. And according to the March 2011 Chicago Booth/Kellogg School Financial Trust Index, trust in America’s financial system has slipped to 20%.

Meanwhile, according to a 2010 Accenture Insurance Consumer Fraud Survey, more than 68% of respondents believe insurance fraud occurs because people believe they can get away with it, and more than half of U.S. adults say poor service from an insurance company is more likely to cause an individual to commit fraud against that company.

Have we actually become less trusting, or is it just that we say we are less trusting?

Cambridge philosophy professor Onorio O’Neill, in her inaugural BBC Reith Lecture in 2002, coined the term “ a culture of suspicion,” which she describes as one in which we are facing breaches of trust rather than experiencing deepening mistrust. Although trust is earned slowly and lost suddenly, it can be eventually reinstated. The ability to establish, grow, extend and restore trust is not only vital to our personal and interpersonal well-being, it is the key leadership competency of the new global economy.

What Is Trust?

“Simply put,” says author Stephen Covey, “trust means

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We will handle claims wisely and manage risk well if we ask the right questions and analyze the answers.

confidence.” The Oxford Dictionary defines trust as a “firm belief in the reliability, truth, ability or strength of someone or something.” Merriam-Webster Dictionary says, “assured reliance on the character, ability, strength or truth of someone or something.”

Internationally renowned social theorist Piotr Sztompka characterizes trust as “a bet about the future contingent actions of others.” It is an active choice based on assessing risk rather than passively accepting certainty. And because there are no absolute guarantees, we need to carefully consider our options. Covey calls it “smart trust”—you need to combine the propensity to trust with the analysis to manage risk wisely.

Stanford University professor Roderick Kramer says that to survive as individuals we need to learn to trust wisely and well. He calls this “tempered trust.” According to Kramer, tempered trust doesn’t come easily, but if you diligently ask yourself the right questions, you can develop it.

Whether you call it “smart trust” or “tempered trust,” for claim professionals it comes down to trust but verify. We

will handle claims wisely and manage risk well if we ask the right questions and analyze the answers. We will trust that the answers we get to our questions are truthful, but we will also verify that they are.

The Dynamics of Trust The benefit of trust is that it creates a climate that encourages cooperation and collaboration, stimulates open communication, increases motivation and consequently increases the efficiency and productivity of the claim handling process.

If there is a mutuality of trust between you and the policyholder or claimant, which is based upon a shared interest in resolving the claim fairly and in a timely manner, then the balance of power between the parties will be shared. Add the trust-butverify concept to the mix, and you have the necessary safeguards in place to manage the risk of fraud. Remember that trust-but-verify works on both sides of the claim. While you trust the policyholder or claimant to be forthright with you, at the same time you are verifying the facts as present-

ed to you. Likewise, the policyholder or claimant will be doing the same.

Destination:

Your Customers’ Satisfaction

How Do You Lose Trust?

Trust is fragile. It takes a long time to create and can take only a second to lose.

Covey says that reputation is brand, and brand is trust within the marketplace.

Organizational reputation is an extremely valuable asset. According to the Reputation Institute, “[people] are more likely to buy the products of companies they trust, work for the organizations they respect, and recommend companies they admire.

As claim professionals, we operate in a business environment that has had its reputation tarnished in the recent past.

Recall the outrage over how claims were handled after Hurricane Katrina and the public outcry over the actions of AIG. Add to the mix the rise of consumerism and the easy access to information via the Internet, and it is no wonder that the public does not trust insurers to keep their promise.

Service Quality Strengthens Your Bottom Line— We Can Help

© 2011 American Institute For Chartered Property Casualty Underwriters

How Do You Restore Trust in the Claim Handling Process?

A contract of insurance may be defined as “a contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss.” Its principal function is the acceptance of risks transferred to it by others. Insurers and policyholders must trust others to fulfill their respective promises and to behave in predictable and appropriate ways.

Initially, policyholder trust can be shaped by positive experiences discovered at the beginning of the insurer’s new business continuum. For some prospective buyers, it could be a TV ad or a website; for others, it may be the guidance provided by a knowledgeable agent/ broker or sales representative. For the insurer, trust is driven by the applicant’s truthful responses to a request for a quote or accurate completion of a new business application or renewal.

In return for premiums paid by insureds, insurers promise to pay for the losses covered by the insurance contract.

Insureds trust that during the claim process, the insurer will uphold the promise made at the time of policy issuance.

Therefore, claim handlers are placed in the bright glare of the “trust” limelight because

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of their direct relationships with claimants.

Covey points out that trust can be both created and destroyed, and although difficult, in most cases lost trust can be restored. One way to restore trust in the claim handling process is to apply transparency and disclosure when dealing with the policyholder and claimant. The clearer you are about the process—how it will be accomplished and in what time frame it will be carried out—the more cooperation and trust you will get from the policyholder or claimant. Verification provides the transparency needed to build the trust that diminishes the likelihood for misunderstandings and miscalculations.

Regulatory compliance mandates much of the communication and disclosure in the claim handling process, but to restore trust you need to go further.

Make communication with the policyholder and claimant a tool to further their trust in you. This means going beyond what is required by the regulations and making sure that your position and intentions are understood.

Knowledge is one of the biggest individual factors leading to greater trust and success. A claim professional who demonstrates superior technical claim handling skills and has an enhanced understanding of claim principles and practices increases customer satisfaction. Additionally, effective communication and negotiation skills lead to good-faith claim handling and strengthen the policyholder’s confidence in the claim process. An insurance professional designation raises the trust quotient even higher in the eyes of the consumer.

Finally, adhering to the ethical guidelines of your organization and your personal code of ethics will further enhance the trust that is placed in you. The fact that you have arrived at an opinion through an ethical analysis will make people respect your opinion even if they disagree with it.

Focusing on customer service is another way companies can build trust and enhance customer satisfaction. An example of one measurement of trust/satisfaction in claims is the survey conducted annually by the global marketing information services company J. D. Power and Associates, which uses the following six factors: first notice of loss or injury; service interaction; appraisal; repair process; rental

experience; and settlement.

Following the concept of trust-butverify will change the way you think and the way you handle claims. Its importance to success is undeniable. Over time, it will enhance your personal credibility, and in the long run it will benefit your employer and the industry. In his book The Way Up, Donald Hurzeler, who was the 2004-2005 president of the CPCU Society, devotes a whole chapter to trust-but-verify. “So how do you turn this good advice into a business tool

that you can use to advance ahead of the competition?” he asks. “The best place to use trust…but verify is in every single management job you’ll ever have.”

Hurzeler ends the chapter with: “To trust…but verify gives you a competitive advantage. Use this tool wisely.” This is cA good advice!

Donna J. Popow, J.D., CPCU, AIC, is senior director of knowledge resources and ethics counsel for The Institutes in Malvern, Pa. popow@TheInstitutes.org.

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More for the 24

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Quick Look CC Players are flocking to California to file workers’ comp claims.

CC There are some game-changing cases regarding filing status and long-tail liability that have yet to be decided by the courts.

CC Some players are seeking compensation via the tort system and have requested class status.

By Annmarie Geddes Lipold

Brain trauma could be the asbestos of professional sports.

Over the past 36 months, more than 3,000 former professional athletes from all over the country have filed workers’ compensation claims in California. In 2011, an average of 100 new claims— worth around $200,000 each—are being filed each month by ex-NFL players alone, says Alex Fairly, a consultant with Global Sports Services, a Willis subsidiary.

“Other sports are experiencing similar filing trends.”

Tim Peterson, a Los Angeles attorney, estimates that currently there are “thousands” of players who have filed cumulative trauma cases long after their professional careers have ended. Peterson represents all 30 Major League Baseball teams and about 20 NFL teams. Ex-players, some who played decades ago, are also seeking relief for workrelated occupational injuries outside of workers’ compensation in the tort system.

Why the “gold rush” in

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the Golden State? Peterson points to California’s generous benefits, its “toothless” statute of limitations, the acceptance of post-employment cumulative trauma claims and loose law concerning which states have claims jurisdiction as just a few of the reasons.

The uptick in claims began around 2006, Peterson says. He believes it stems from plaintiffs’ attorneys who encouraged workers to file.

California does have on its books a one-year statute of limitations. However, in cases of occupational disease or cumulative injuries based on employment, a claim can be filed within a year of the date of injury or when the employee became aware of it.

So, in the case of cumulative injury claims, the statute of limitations does not begin to run until the date the injury’s effects are established.

Retired players seeking financial relief may consider attorneys a godsend. And indeed, many retired players settle for six-figure cash awards. But in doing so, they give up their rights to future cash benefits and medical care for their work-related ailments. The trouble is that medical costs can easily exceed

the lump sum amounts over the long term. Many players will need surgeries, hip and knee replacements, treatment for permanent brain damage, ongoing pain management and pharmacy coverage.

Reversing the Trend Peterson is trying to tighten up case law concerning jurisdictions in which a workers’ compensation claim can be filed. He is behind two court rulings designed to narrow eligibility in California by jurisdiction based on 3600.5(b) in the California Labor Code.

Peterson argues that, under the statute, players whose employment is primarily based out of state and who are not regularly employed in California should not have the right to file claim

Currently under appeal, the rulings stopped former Cleveland Browns and Cincinnati Bengals players from continuing to receive benefits. Potentially, these are “landscape-changing cases,” Fairly says.

As the home state of the Browns and the Bengals, Ohio bases claims on the location of the employer. Back in 2008, several Cleveland Cavaliers filed for workers’ compensa-

...This case has a potential value of more than $1 million and will set a precedent in case law regarding long-tail liability for the NFL.

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tion benefits in California.

Like some others, the Buckeye State has a two-year statute of limitations on claim filing.

Also, it generally does not honor post-employment softtissue injuries. Its maximum weekly benefits run lower than in California. So it’s easy to see why the ex-Cavs gave California a shot.

Compensation for Head Injuries While players are filing in droves for workers’ compensation in California, the most headline-generating concern stems from the long-term effects of player head injuries.

In early 2010, workers’ compensation attorney Ron Feenberg filed what is considered a seminal case to determine the NFL’s liability for dementia experienced by retired players. He represents plaintiff Eleanor Perfetto, who is suing on behalf of her husband, Ralph Wenzel, an ex-lineman for the Pittsburgh Steelers.

The suit represents a significant shift from the routine, lump-sum settlement cases.

This case has a potential value of more than $1 million and will set a precedent in case law regarding long-tail liability for the NFL. Feenberg likens head trauma to asbestos exposure, a workplace injury that can take 20 to 40 years to become known. “Having a judge deem this [to be] work-related would move this forward and keep it very visible,” Perfetto told the U.S. House Judiciary Committee in 2009.

Meanwhile, other players are seeking relief in the tort system regardless of whether or not they have received workers’ compensation benefits. Last summer, two tort class-action lawsuits were filed to provide reparation for

former football players suffering the long-term effects of traumatic head injuries. The lawsuits bypassed workers’ compensation by seeking reparations for a class of players by going after the entire NFL rather than the teams. Among other charges, the lawsuits allege the NFL is at fault for the long-term effects of players’ head injuries because it encouraged players to tackle with their heads and, thereby, did not provide proper training. The suits also charge that the NFL provided players with helmets that offered insufficient protection against the countless blows to the head players receive.

The first lawsuit, filed in California in July, involves about 75 players. Since then, more suits have been filed. All will be joined together and involve some 220 players, says attorney Tom Girardi.

The other case, filed in federal court in Philadelphia, makes very similar assertions, but it has the potential to be more damaging because, if it is certified as a class, it could include thousands of retired NFL players who claim to suffer neurological injuries after playing for the NFL, wrote Mike McCann, a sports law professor and director of the Sports Law Institute at Vermont Law School and a blogger for Sports Illustrated.

“The potential damages in such a suit could rise to the hundreds of millions of dollars and primarily reflect health care costs unpaid by the league and the pain and suffering caused by neurological injuries,” he wrote in a blog post.

But where does workers’ compensation fit into this?

Neither Girardi nor Larry Coben, who filed the Philadelphia case, could answer. Both

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say they do not know much about workers’ compensation.

Players are not barred from receiving workers’ comp benefits and later bringing a tort action against an alleged third party, says Roger Thompson, author of the monograph entitled, “Recovery Available Following Sports-Related Injuries and the Potential Implications for the Workers Compensation Program,” which was published through the American Society of Workers Comp Professionals.

If a tort action is successful, the payor of workers’ compensation benefits would be entitled to recovery of any payments that have been made as well, Thompson, retired director of the workers’ compensation unit of Travelers Insurance, says. Exclusive remedy is applicable only for the employer when workers’ compensation benefits have been paid. “Once players go after the NFL, it is a whole new ballgame where they need only establish negligence on the part of the third party,” Thompson says.

The NFL and the helmet manufacturers are third parties that played a role in the situation, Girardi argues.

Coben agrees: “The NFL has always maintained that the repercussions of concussions are unrelated to playing football.” The NFL, however, did begin acknowledging a connection last year. The league did not respond to interview requests from Claims Advisor.

For his part, Coben says his clients are not getting much in terms of benefits.

Professional athletes receive salaries and benefits, including healthcare, short-term disability and long-term disability through collective bargaining and individually agreed-upon contracts.

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such possible sources depends on the player’s individual circumstance. Whatever the case, bypassing the workers’ compensation system and addressing work-related ailments in the tort system reintroduces the very issues that led to the formation of the exclusive remedy doctrine in the first place.

Workers’ compensation removes from the argument the concept of causation, or who is at fault for the workrelated ailment. A century ago, if a worker made a poor decision at work that caused an injury, the worker suffered all the consequences without relief from the employer. It was difficult for workers to win tort suits because few could afford legal counsel as their employers could.

This move outside workers’ compensation also introduces assumption of risk on the part of players,

“Once players go after the NFL, it is a whole new ballgame where they need only establish negligence on the part of the third party.”

which is not a consideration in workers’ compensation. In this instance, it means that professional football players took a risk they could get hurt and that this risk could cause lifelong problems.

While the courts sort through the complexities, players are likely to be compensated differently depending on various state

laws and the skill and success of their attorneys. And this inconsistency that professional athletes experience in the tort system will be every bit as tragic as the stories they tell of their lives after they have played their last games. cA Annmarie Geddes Lipold is a contributing writer to Claims Advisor.

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Of course, all workers are entitled to workers’ compensation benefits, but players have even more possibilities. Professional football players may be entitled to benefits from the NFL Player Care Foundation that include limited annual benefits for custodial care through the “88 Plan,” Thompson says. That plan, funded by the league’s 32 clubs, provides in-home care for up to $50,000 a year or assisted living benefits up to $88,000 annually for former players diagnosed with dementia. To qualify, players must be vested under a collective bargaining agreement by playing a minimum number of NFL seasons. “These additional benefits available today are a reflection of increased awareness of the dire circumstances being experienced by some of the former players,” he says.

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With MBA classes freshly under his belt and the drive to start a side business, he soon began renovating the older, company-owned mobile homes adding furniture, housewares and appliances. His new product was named Corporate Relocation We contact your Specialists (CRS). policyholder within After marketing new product of each request. this to local business managers, feedback was the same, they would not put their visiting executives in a mobile home park. They did however add, “Come back if you have something next to our office.”

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within the adjusters parameters. Our goal is to have a family moved into their temporary home within 72 hours of the initial service request. We also have an array of specialized services that sets CRS apart from our competitors. Our emergency hotel service is available around-the-clock to place families in comfortable accommodations within an hour or less of the initial request. Understanding that every policyholder’s needs are different, CRS also provides mobile homes and travel trailers. When a catastrophe strikes, CRS delivers on our promised metrics to ensure seamless relocations despite the influx of high volume situation.

As the pioneers of the temporary housing industry, CRS Temporary Housing has seen the industry evolve and is proud to continue blazing the trail. With new programs and innovative technology, we make the relocation process simple, quick and cost effective for our insurance industry partners. CRS has been successfully relocating policyholders and adjusters coast-to-coast for over 22 years. With a 94% policyholder satisfaction rate, we set the industry standard in customer service.

Disasters don’t know what time it is but your customers sure do. That’s why CRS now boasts an industry leading, 24/7 availability—our door is always open. So whether it’s 2 a.m. or 2 p.m., our customers have a person available on the other end of the line. No holding or prompts, Customers give us a just CRS employees When CRS services were answering your call advertised in the paper, one of We set the no matter the time the first calls came in from an industry standard in customer service. of the day. CRS also insurance adjuster. The adjuster provides one point utilized CRS housing for a family that had suffered a house fire. From the start, claims adjusters of contact for adjusters and policyholders to help streamline communication and provide the ability to customize services loved the idea and CRS had its first customers. The chance to meet each customer’s needs. interaction led to refining the process and customizing services for insurance housing. With hard work, dedicated We want to thank our customers in the insurance industry employees and growth driven by a need for temporary for their continued business, dedication and partnership. It housing for policyholders, CRS went from a single office is these strong relationships that have made CRS Temporary in a mobile home park to the leading national supplier of Housing a preferred provider. We’re proud of our past and temporary housing to the insurance industry. look forward to the industry’s future by continuing to lead the way in temporary housing.

Today, CRS is an expert in both short and long term relocation. As the nationwide choice of the industry, we understand that every minute counts when a family is displaced from their home, which is why we contact every policyholder within 20 minutes of receiving a request for housing. When a long term solution is needed, CRS works quickly to locate single family homes, apartments, condos and townhomes with one month lease terms or beyond.

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on the hori z on | d u tch treat

Adjusting Wind Turbine Losses The field is developing fast, which makes valuing losses and finding replacement parts difficult in some situations.

By Patrick Jeremy, CPCU, AIC, RPA

Renewable energy is in the news, from the federal government to town halls. As more emphasis has been put on renewable energy resources, none has taken on more development and growth than wind.

There are more than 25,000 wind turbines installed in the U.S. They are capable of producing in excess of 42,500 megawatts of electrical power, and they produce 2.3% of the country’s electrical consumption. This does not

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include the 4,000-plus wind turbines under construction that will provide another 7,300 MW of electrical energy.

And that’s only the beginning. The U.S. is estimated to have the wind resource potential to produce 10.4 million MW on shore and another 4.15 million MW off shore. The goal of the industry and government is to supply 20% of the nation’s electrical power through wind by 2030, and they are ahead of schedule.

We now find wind farms throughout

Quick Look CC Wind energy is targeted to produce 20% of U.S. electrical power by 2030.

CC With the rapid development of technology, some parts are scarce, and some turbine generator models are already obsolete.

CC Valuing losses can cause turbulence if cost factors aren’t accounted for in the policy.

most of the country (38 states have utility -scale wind farms). A surprising fact is that wind energy is showing up in some unusual places. In addition to the large wind farms owned and operated by utilities and independent power producers, cities, schools and even manufacturing

d Š Patrick Jeremy

facilities are all installing wind turbine generators (WTGs). The use of this type of renewable energy is being looked upon as a cost-effective addition or alternative to traditional forms of power.

The Basics A wind turbine consists of a tower, rotor and nacelle. The tower supports the rotor and nacelle. The rotor, which encompasses the blades and hub, catches the wind and coverts the wind’s energy to mechanical energy.

Within the nacelle, you will find the major components used to convert the mechanical energy to electrical energy.

The wind energy industry got its start with the use of various types of

wind generators that were capable of developing between 50 to 250 kilowatts (kW) at peak output. The technology continued to develop to the present day, when we see offshore WTGs in the five-megawatt range, with larger ones under development. For statistical comparison, one home (as a very rough average of electrical usage) is equivalent to approximately 3.5 kW.

The insurance industry is still working to develop insurance products that will address the unique risks associated with renewable power, including wind farms. ISO and AAIS are in the early stages of developing standard forms for both property and liability coverage.

Several insurance companies and manag-

ing general agencies have developed their own specific forms for the different types of alternative energy risks, including wind. These specialized forms address some of the unique risks and coverage issues, but not all.

Availability of Parts When investigating and adjusting a property loss on wind turbines, there are several facts that must be considered. If a damaged WTG falls into either the Generation 1 or Generation 2 category (see sidebar, page 34), new replacement parts are usually not available. There may be parts available on the secondary market, typically from WTGs that have been decommissioned. Finding these secondary

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of the current model in production and is likely to increase. what modifications would be required to If a complete replacemake the new WTG compatible with the ment WTG is required, wind farm systems. other factors will come Total maximum height 405 ft. including tower, into play. Since Generation roter and foundation.

1 and Generation 2 WTGs Valuing a Payout 400’ What do you do if the insured elects not are no longer in comThe Statue of Liberty to replace the WTG? This will usually mercial production, there stands at 305 ft.

350’ Rotor Diameter from ground to torch. happen when the damaged WTG belongs 285 ft. are no replacement units About 40 people can 300’ fit in her head. in the Generation 1 or Generation 2 available.

There are some 250’ category. Most policies state that the manufacturers produc200’ valuation will be actual cash value and ing small wind turbine 150’ should be based on replacement cost, less generators that may be an depreciation. But in this case, there is no alternative for Generation 100’ replacement WTG on which to base the 1 units.

These are usually 50’ under 250 kW. In the case replacement cost.

In some of these cases, underwriters of Generation 2 WTGs, have used the valuation of $1,000/kW there are a couple of to value the replacement cost of small manufacturers producing WTGs and have assigned a life expecmarkets is not easy, and the quality of the WTGs in the 600-800 kW range. These tancy of 15 to 20 years. Most of them put units will usually require a new tower parts can be compared to parts found at a cap of 50% to 70% on depreciation. and foundation. Installing a larger WTG an auto salvage yard, usable but used.

This method appears in the policy as an for a Generation 2 replacement may not One might assume that locating parts for endorsement to the Valuation Condition. be feasible due to sighting requirements, a Generation 3 WTG would be an easier permitting, or power purchase agreement Another method used, on a limited basis, task, but this isn’t necessarily the case. is an “agreed value,” under which the restrictions.

What were new units in 2004, just seven policy covers repair costs up to the agreed

If a new Generation 3 WTG is years ago, may not be available in 2011. value for a particular make and model of required, the particular model may not This generation of WTGs is in constant WTG. If the WTG is a total loss, then the be in production. If the manufacturer development and revision due to the agreed value is used as the replacement is willing to build a replacement for the competition between manufacturers. value with no depreciation taken. model that was damaged, it will usually The manufacturers are constantly trying

A rule of thumb that can be applied be more expensive and take longer to to increase turbine efficiency and reduce to Generation 2 WTGs (500-900 kW) receive. As an alternative, it may be more downtime and maintenance costs. This is the new construction average cost per advisable to look into the compatibility can result in changes to components that make them incompatible with already installed WTGs.

Acquiring a replacement part for a These are units that produce 50 kW to 500 kW and were installed in WTG is only one part of the equation. the late 1970s up through the late 1980s. Most of these WTGs are very simple machines Getting the part delivered to the site is with fixed blades. They sit on top of a tower (usually between 50 and 100 feet high). another issue. Estimated delivery time These WTGs are no longer being produced or supported by the manufacturer, and most can be extended if the size or weight of have reached the end of their design life. the replacement part requires special permits to be obtained. Availability and transportation of a crane to the site, These units produce 250 kW to 750 kW and are more advanced. Most which may be needed to facilitate the have variable pitch blades and computerized controls and were located on taller towers. repair, could also be another concern.

These WTGs were installed from the late 1980s through the late 1990s. These WTGs are During the winter months, some rural no longer in commercial production, and few are supported by their manufacturer. The roads may be load-restricted (possibly for majority of these units are coming up to the end of their design life. months), thus further delaying the repair.

Another vital component that needs : These are the large (greater than one megawatt) wind turbines that we to be considered is the wind. Depending see today.

They are very sophisticated and highly engineered. The land-based units range on the piece of equipment being lifted by a in output from one to three megawatts and sit on towers that can exceed 300 feet. The crane, the actual lift can be delayed (possirotor diameter can reach over 90 meters, which is equivalent to the length of a football bly for days) due to wind speeds in excess field. The Generation 3 WTGs have been installed since the early 2000s and continue to be of safe crane operating conditions. Remember, they put WTGs in windy places, installed today. The uniqueness of this group of wind turbines is that they are engineered and as long as the crane is on site, the cost and manufactured by companies that have the resources to continue needed research and development. There have been numerous revisions to the Generation 3 units.

Perspective: Turbine size can be deceiving

Generation 1:

Generation 2:

Generation 3

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13th Annual

Windstorm Insurance Conference January 30 - February 2, 2012 Buena Vista Palace Hotel • Orlando, Florida Don’t Miss the 2012 WIND Conference!

Registration Opens Fall 2011 n Only conference devoted solely to windstorm insurance issues n Affordable registration fees n Numerous CE offerings for multiple states and disciplines n Nearly two year’s worth of CEs, filed at no additional charge! n Educational sessions on windstorm insurance hot topics and issues n NFIP, WIND Umpire, Appraisal Certifications, software training classes n Networking with hundreds of windstorm claims professionals n Exhibitor and sponsor opportunities n Golf tournament at one of Orlando’s premier courses

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Visit www.windnetwork.com for more information or call 850.473.0601.

on the hori z on | d u tch treat

MW. This amount is currently in the $2 million per MW range. Prorate the replacement costs based on the rated output of the damaged unit. WTGs of this size have a projected life expectancy of 20 to 30 years and are now just reaching their end of life.

There is no hard and fast rule, though. The best approach is to discuss this issue with the insured upfront, before the loss, and get the underwriter to put it into the policy.

In looking at the time element (business interruption) portion of the loss, pay particular attention to the Power Purchase Agreement (PPA). The PPA will tell you how much the owner of the wind turbine will be paid by the utility that is purchasing the electrical power. If the WTGs were installed after 2000, you will also need to look into production tax credits. Even though most insurance policies do not address income tax or loss of income tax credits, the insured will usually consider this a source of income and include it in the annual values for business interruption.

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Production tax credits run for 10 years from the date the unit is placed in commercial production and are based on the actual amount of energy (kilowatts) produced. An insurance payment on a business interruption claim is considered income to the insured and must be recorded as such on their books. If the insurance company pays a loss of production tax credits, it is also considered an income for accounting purposes.

To make the insured whole, the production tax credit must be grossed up to cover the taxes the insured will be paying on the recorded income. The current production tax credit is $22 per megawatt hour. When grossed up for a corporate tax rate of 35%, for example, the reimbursement becomes $33.85 per MWh ($22.00 /1-.35).

There are very few avoided or noncontinuing costs associated with utility scale wind farms. The largest is usually the production royalties paid to the landowner, though not all leases have these production royalties. If you are looking to retain consultants, either for engineering

or accounting, be sure they have worked with wind energy and understand the nuances of this industry.

Looking Forward The wind power industry in the U.S. currently centers on onshore production, but a move to offshore facilities will occur in the near future since 30% of the country’s wind resource potential exists there. Adjusters and underwriters alike will have to deal with the emerging issues particularly associated with offshore wind risks. Some of those issues include the law under which the facilities will fall (admiralty or common) and the conditions under which repairs would need to be made (not only wind but sea conditions as well). For starters, insurers can look to Europe, which already has developed their offshore wind industry, to get a picture of what may lie ahead. cA Patrick Jeremy, CPCU, AIC, RPA, is president and executive general adjuster at PowerGen Claims, LLC. (925) 776-2381; www.PowerGenClaims.com

Š Patrick Jeremy

Property Loss Research Bureau Liability Insurance Research Bureau

Educational Opportunities

2012

Claims Conference & Insurance Services Expo April 15 - 18

Orlando World Center Marriott

Orlando, FL

Attend the industry’s largest educational conference and expo, hosted in 2012 in Orlando, Florida.

More than 90 educational sessions addressing the wide expanse of adjusting challenges will be offered, including adjusting property, commercial time element losses, casualty claims, large loss, property coverage, claims management, special investigation/fraud, subrogation, and technology.

The Insurance Services Expo offers an opportunity to visit with and compare the offerings of hundreds of the country’s leading property and casualty insurance service providers.

We hope to see you next year at the Claims Conference & Expo in Orlando. www.claimsconf.org

Regional Adjusters Conferences & Expositions Eastern Central Western

June 26 - 27 September 5 - 6 November 13 - 14

Rhode Island Convention Center Renaissance Schaumburg Omni Dallas

Providence, RI Schaumburg, IL Dallas, TX

These Conferences are geared for front-line adjusters, supervisors, and managers and are held in three easy-to-reach locations. The conferences include 28 property and casualty insurance topics that provide up-to-date information on critical claims issues. Approximately 700 insurance professionals attend each Regional Adjusters Conference.

The exposition includes 80 to 100 regionally-focused service providers, with claims-specific expertise. The expo will provide valuable contacts and resources to improve claim outcomes.

Come network with some of the top service providers in our industry. www.plrb-lirbregionals.org

Large Loss Conference

October 29 - 31

Washington Marriott Wardman Hotel

Washington, DC

This Conference explores claims issues associated with the largest property and casualty losses.

The audience includes general adjusters, EGAs, complex and large loss claims managers, and service providers who partner to effectively adjust these claims of $100,000 or more.

Workshops include personal lines property, commercial lines property, and casualty claims. www.plrblargeloss.org

For more information and to register, please visit www.plrb.org, or call 630-724-2200.

www.plrb.org

per f ecting the art | C ompose s u re

The

Po

One wrong word can mean the difference between effective claim resolution and litigation.

By George E. Reede Jr., Esq., and

Gary P. Sullivan, CPCU, AIC, AIM, AIS

In theory at least, communication is a simple matter: the exchange of information from one person to another—and, for our purposes, in written form. Yet we all know that written communication is anything but simple in practice. In the current insurance environment, one wrong word can mean the difference between effective resolution of a claim and litigation.

By way of cautionary tale, take the case of Granneman v. Columbia Ins. Group. A commercial building was vandalized while under renovation, having

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been unoccupied for months due to code violations. The policy explicitly excluded such losses from coverage “if the building(s) have been vacant or unoccupied beyond a period of 30 consecutive days,” but a building in the process of construction, by definition, was not considered vacant. When the time came to deny the claim, the sole basis for denial referenced in the response letter was “vacancy” with no mention of the lack of “occupancy.” Fortunately for the adjuster involved, the court concluded that waiver and estoppel did not apply

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on the facts of the case, and denial of the claim was upheld. But the point is this: One word—“vacant” instead of “unoccupied”—meant the difference between an obvious result and a close call in lengthy, and no doubt expensive, litigation.

Verbal, Written—Or Both?

The first decision is whether to communicate in writing at all. Verbal communication is sometimes necessary and far better. Some situations simply require a more personal touch. Denying coverage for a devastating loss via a letter

alone may seem easier for the messenger at first, but it could prove disastrous in the long run. Often, verbal and written communication will complement each other, with a combination of both being most effective.

Of course, in many instances written communication is mandatory. For example, in some states, by statute or regulation, the following may need to be in writing: • Claim acknowledgement within seven to 15 days of receipt of the claim from the insured • Notification of the

e

Quick Look

ower

CC Written communication yields a permanent record.

E-mails and text messages fall into this category.

CC Careful with informal speech; courts consider every word.

CC Shooting from the hip and responding emotionally are out; clarity and concision are in.

of the

Pen

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per f ecting the art | C ompose s u re

• •

•

applicable statute of limitations for filing suit against the insurer Caution as to the consequences of submitting a fraudulent claim Notification of the status of a claim pending after a given time—30 or 45 days, for example—and the reasons why the claim remains open Reference to, or quoting of, the policy language relied upon for a claim decision.

In other instances, written communication is a must, for your own protection and the protection of the insured, whether or not a statute or regulation requires it. We often think of keeping contemporaneous records of our communications with the insured, both through claim notes and correspondence, because of the potential for mischaracterization of our own statements. That is important, and many adjusters have learned the lesson the hard way, with words and actions falsely attributed to them and nothing but their own word to protect themselves. However, following

up verbal communication with a letter recounting your understanding of what was said can also avoid innocent misunderstandings and give the insured an opportunity for clarification. Regular written communication can ensure that you and the insured truly understand each other.

The Perils of E-mail and Text Messaging With e-mail and text messaging in regular use between adjusters and insureds, the danger of using these modern means of communication warrants a word of caution. The fast pace of e-mail and texting is the enemy of thoughtful communication. In another era, when a letter arrived via first-class mail, there was time to give careful thought to the response and avoid an immediate emotional reaction. Now, it is all too easy to react via e-mail—perhaps with the caps lock key on— only to immediately regret the response after sending the message.

Simply put, take the time to think. The fact that an immediate response is

( ( To avoid problems

stemming from written communication, know the facts and

coverage in play...

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possible does not mean an immediate response is necessary or appropriate. In most jurisdictions, insurers have at least 10 working days to respond to written communication from the insured, whether received electronically or otherwise. With that standard in mind, adjusters have every reason to take the time necessary for careful, deliberate communication with an insured.

Ten Common Elements of Effective Written Communication Once you have decided that written communication is necessary, consider these common elements of effective written communication: 1. Clear Goals

Before putting pen to paper (or more accurately, before the first key stroke), ask yourself: Why am I writing this letter or recording this activity? What does the reader need to know or understand? The letter or claim note needs a purpose. Know what you are really trying to communicate before you attempt to do so.

2. Choose the Author With the future in mind, who should write the letter and sign it? The person sending the letter should be the one most familiar with the facts and circumstances of the claim and best equipped to testify in a deposition or trial in case the claim comes to that. By default, this usually means the adjuster or claim representative dealing directly with the insured, but think this through based upon the

facts and circumstances of each claim.

3. Focus on Your Audience

Who will read this letter or claim note? A letter written to an attorney or public adjuster familiar with the claims process and conversant in insurance lingo should be written quite differently from a letter written to a retired couple with no real understanding of insurance. Choose your words accordingly.

4. Accuracy

Know the facts and make sure they are written correctly. What are the names, history and numbers involved in the claim? In a settlement letter, including one too many zeros in the settlement offer will be hard to explain—and escape.

In claim notes, if the expectation is that all significant events should be recorded, omission of a critical event will prompt a challenge to the adjuster’s credibility.

5. Make Only Those Promises You Can Keep

Trust is critical and often difficult to earn in your working relationship with an insured.

Make only those promises you know will be kept and usually only those that are within your own control. If you must rely on others to fulfill obligations, such as issuing a check, plan accordingly, and build in the necessary time when giving an expected date for receipt of the check. An insured will not forget a broken promise.

6. Brevity

To quote Proverbs,

“When there are many words, transgression is unavoidable, but he who restrains his lips is wise.” Say only what needs to be said—nothing more, nothing less.

Unnecessary words only heighten the risk of misunderstanding.

7. Careful Selection of Words

Words are subject to perceptions, connotations and emotional interpretation. First, know how your audience perceives you and take that into account.

Often, your relationship will define their interpretation of what you say. Second, know that, while words have clear dictionary definitions, they may be received very differently in the real world. The word “misrepresent” can mean a mistake, not just an attempt to deceive, but your audience will likely hear only “lie.”

Third, keep in mind that some words gener-

ate emotions that are not constructive. Think of your own reaction if an insured writes that you have “delayed” their claim. There are perfectly acceptable reasons why resolution of a claim takes longer than expected, but the word “delay” is still heard as an accusation and generates resentment accordingly.

Choose your words carefully with these principles in mind.

8. Documentation and Support

With the goal being effective communication, think of how best to bolster your credibility and persuasiveness, and do it creatively. If coverage is being denied based on the input of an expert, consider attaching the expert’s report to the letter. The decision is now not yours alone; it is based on the expertise of a mechanical engineer, for example. If a claim

is denied based upon submission of fraudulent receipts, consider attaching copies of those receipts to the denial letter. The next reader may be a potential attorney for the insured, who will then better understand the nature of the insured’s problem and advise against pursuing the matter further.

9. Matters of Form

Proper spelling, grammar and format are far more important than most realize. In the eyes of the reader, your IQ drops a point with every error. Proofread, proofread…and then proofread again. Make a pact with the person in the adjacent office that you will proofread for each other.

10. Closure

Always consider keeping the door open to further communication. If you are denying coverage, offer the insured an opportunity to provide additional information

or documents if they disagree. This demonstrates the utmost good faith and ensures a fully informed decision.

Learning the Hard Way…Or the Easy Way We can all make the kind of mistake made by the adjuster in the Granneman case—one wrong word is all it takes. To avoid problems stemming from written communication, know the facts and coverage in play; get some rest and a strong cup of coffee; and then write your next letter or claim note with these principles in mind. Both you and your insureds may actually achieve the simple goal of exchanging information and effectively communicating with each other. cA George E. Reede Jr., Esq. is a partner with Niles, Barton & Wilmer, L.L.P., based in Baltimore, Md. Gary P. Sullivan, CPCU, AIC, AIM, AIS is vice president and manager of Illinois Claims for Erie Insurance Group.

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in f oc u s | meta l me l tdown

The Flap Ove

Theft and in Exterio The rise in the value of metal prices is accelerating loss trends for public sculptures.

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www.claimsadvisor.com

Quick Look

er Scrap

d Vandalism or Sculptures

CC Theft of metal artwork is on the rise as thieves seek to cash in on high scrap prices.

CC Cooperation between art experts and insurance pros can lead to proper valuation of losses.

CC Maybe more important, coordination between niche specialists can prevent claims in the first place.

By Christopher A. Marinello

and Jerome Hasler

Every morning on their way to the Notting Hill tube, many run into (sometimes literally) Nadim Karam’s “Carnival Elephant,” a metal elephant that idly evokes the movement of people around it with its gently revolving fan, spinning in unison with the whirlwind of activity at the Newcombe Piazza. One week, however, the fan was not moving: Some rascal had indiscriminately broken off one of the blades. The stasis caused many to wonder how and when the watchful elephant would be repaired, following the unholy act of animal cruelty visited upon it.

At the Art Loss Register (ALR), contemporary sculpture damage and theft reports have been rising for years, often in correlation with the increased value of

the raw materials involved.

In recent times, copper alone has seen an exponential rise in price, trading at over $8,500 per ton in August of this year, with gold, brass and lead also seeing increases of almost 20% in 2011 alone. It seems that, during each economic downturn, thieves target increasingly more

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in f oc u s | meta l me l tdown

ignoble sources of quick cash, with public sculpture, cemeteries and even church roofs bearing the brunt of their greed.

Curators at a sculpture park in Holland have taken measures to secure public works of sculpture with modern technological resources, such as alarm systems and GPS tracking devices. But, once a sculpture is stolen, the first source of information may be scrap metal dealerships. Melissa Merz, of the Institute of Scrap and Recycling Industries in Washington, D.C., says her association strongly encourages reporting of all thefts using the group’s ScrapTheftAlert system “so scrap recyclers can be on the lookout for the statue and/or any parts of it.”

She says that criminals have been targeting heavier objects in “increasingly more brazen operations.” Back in 2005, the two-ton Henry Moore sculpture was stolen from the eponymous foundation and was reportedly sold for scrap.

The role of damage appraisal firms, and the conclusions they draw, are becoming increasingly prominent in influencing the risks insurance companies are prepared to take. A damage appraisal is a report prepared by a qualified appraiser that specifies the value of the artwork before damage, the current value in damaged condition and, where appropriate, the value after restoration. In some cases, these reports are issued for works that are total losses due to destruction or theft, and in other cases the reports are prepared for items that are partially damaged.

Typically, the appraiser

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will examine the damaged object and note its condition at the time of inspection.

Most often, the appraiser is instructed to use either retail replacement value (the estimated cost to replace the item with a comparable piece in the primary market) or fair market value (comparable to the estimated cost to replace the work in the secondary market), says Elizabeth von Habsburg of the Winston Art Group. The appraiser, she says, will also consider the previous auction and retail sales records for similar works, determining whether previous works by this artist or maker were sold in damaged condition and, if so, the effect of that damage on the sale price.

Further considerations include the current desirability of the artist or maker, the sale prices of works in the relevant medium, and the severity of the damage.

Typically, either the owner of the damaged piece or the broker, adjuster or underwriter will ask for an assessment and valuation of the work. Normally, these reports are requested in order to determine the loss-of-value payment due to the owner. On occasion, however, the owner or the

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insurer requests this report solely in order to determine the saleability of the work in damaged condition.

Artworks showcased in public places seem to be more at risk to vandalism and theft than those privately held. Underwriters are always concerned about this exposure and want to see that such works are secure in order to minimize theft, says Steven Pincus, managing director at DeWitt Stern, a fine art insurance brokerage and risk management firm.

If a work is damaged or stolen, there are many factors that have a bearing on the final outcome. For instance, Pincus says, “Is the artist alive or dead? Is there a foundation that has a say in the conservation process?

Can the artist remake the piece? These are factors that underwriters may have to deal with in the loss settlement process.”

Niche Specialist Coordination Art insurers and fine art specialists work together before the claim, as well, talking about risk management from the application for insurance onward. In order to strengthen the insurance policies issued on works in the public

criminals have been targeting heavier objects in increasingly more brazen operations.

realm, many carriers choose to be involved, often directly, from the very beginning of the work’s commission.

Even when planning and commissioning a piece of art are done apart from the insurance company, the carrier will measure the risk and demand adherence to security and safety requirements. Axa Art Insurance, for example, emphasizes prudent risk management that includes thorough research by the underwriter on both the venue and the type of work displayed, according to Colin Quinn, director of underwriting. “If the location of the work is considered a high crime area or the sculpture is not protected by a pedestal or landscaping, we would discuss the possibility of moving the work to a safer location.” Quinn sees Axa’s role as being “an unobtrusive risk manager.”

The insurance application process figures prominently in the risk management and claim scenario. The application asks a number of questions relating to security, including prior losses. Follow-through by the insured on security maintenance is critical since it’s part of the representation of risk made on the application.

As far as instructing loss adjusters to contact local scrap yards and metal dealerships to locate and recover stolen work, Axa works with local law enforcement, who will provide the name and contact information for scrap dealers and foundries, says Quinn. “We will provide them with a detailed description of the sculpture and request they contact us with any relevant information. If we receive credible evidence from our sources, we will

© Notting Hill Gate Improvements Group

© Henry Moore Foundation/PA

© Sam DCruz

metal attraction: Exterior sculptures add beauty and whimsey to outdoor locations, but have become tempting targets for thieves seeking to cash in. Some tantalizing examples include (L-R) Nadim Karam’s “Carnival Elephant,” Henry Moore’s two-ton “Reclining Figure,” and the “Three Ladies” sculpture in Montreal.

work with law enforcement to recover the item. The key is communication.”

What’s in Store?

The rising price of raw materials used in sculpture could very well affect the cost of creating some pieces, but—if underwriting keeps up with their duties—there shouldn’t be any discrepancy between policy limits and the artwork’s value. In vandalism cases, though, it

could be difficult to match the metal precisely, so those kinds of costs would have to be factored in.

Axa’s Quinn says the insurer turns first to the artist and/or studio. “Fortunately, we have had great success in gaining the cooperation of the artist to restore damaged artwork; this ensures the work is restored to its original intent. This approach allows the artist to maintain artistic control of the work,

and the artwork can continue to be exhibited. All parties involved are satisfied with the results.”

The demand for highvalue raw materials will only increase with greater consumption in the eastern markets, driving up the price of metals such as gold and copper, the cost of which continues to rise at a staggering rate. Communication between industries is the key to overcoming those issues

threatening the continuation of public commissions and public display. cA Christopher A Marinello is the executive director and general counsel of the Art Loss Register in London. chris.marinello@artloss. com. Jerome Hasler is a student of the Courtauld Institute of Art, London, and intern with the Art Loss Register. jerome.hasler@ courtauld.ac.uk

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LEGAL EASE | BE MY FRIEND?

Searchin Social Networking 46

WINTER 2011 |

www.claimsadvisor.com

Quick Look CC Claimants often post information on social networking sites that belies the condition for which they seek compensation.

CC If a lawyer or investigator wants to gain access, they must not violate practice standards or the law.

CC Some of what is obtained may be inadmissible, but it could lead to other avenues of investigation.

Investigators can use information gleaned from social media, but the Bar and the law have strict rules about it.

ng Sites

By Deborah A. Lujan and Tracey M. Bobo

Investigators and adjusters today are asking a common question: Is information on social networking sites useful for lawyers and investigators?

The answer is yes, but obtain and use with caution.

In 2010, Facebook surpassed Google as the most popular website, according to Experian Hitwise.

Facebook reports that it currently has over 800 million users. User pages often contain photos, videos, messages, and a list of friends; thus, it is likely that access to claimant, witness or employee pages will reveal valuable information.

This information can be helpful in preparing for depositions, mediation and trial, even if not ultimately admissible—inadmissible evidence can lead to the discovery of admissible information. But issues may arise in connection with the access to, and use of, information published through social networking sites.

Public vs. Private Information and the Federal Stored Communications Act An issue to consider is user privacy interests. If a person’s Web page is open to Internet users indiscriminately, there is generally no expectation of privacy. In Moreno v. Hartford Sentinel, Inc., the court found no reasonable expectation of privacy in an article the user posted on MySpace because it was “available to any person with a computer.”

In Beye v. Horizon Blue Cross Blue Shield of New Jersey, the court stated that “[t]he privacy concerns are far less where the beneficiary herself chose to disclose the information.”

However, many social networking sites contain “private” information that is unavailable to the public. Additionally, a user can send private messages to others through the websites. The Stored Communications Act (SCA) is a

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LEGAL EASE | BE MY FRIEND?

federal statute that prohibits third parties from accessing private electrically stored communications without proper authorization. Specifically, an offense is committed if anyone: “(1) intentionally accesses without authorization a facility through which an electronic communication service is provided; or (2) intentionally exceeds an authorization to access a facility; and thereby obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such system….” Note that the SCA does not apply to an “electronic communication [that] is readily accessible to the general public.”

The SCA may prevent providers of electronic communications from complying with a civil subpoena for a user’s private information.

For example, courts have held that the SCA prohibits providers, such as Google Mail and Yahoo Mail, from releasing the contents of a customer’s e-mail account (see Bower v. Bower). In Crispin v. Christian Audigier, Inc., the court quashed subpoenas to Facebook and MySpace, holding that some of the content hosted on their sites is protected under the SCA; i.e., private messages sent through the sites were “inherently private” because they were not readily accessible to the general public.

But some courts, without addressing the SCA, have held that social networking sites must divulge information pursuant to a civil subpoena.

In Ledbetter v. Wal-Mart Stores, Inc., the court found that subpoenas to Facebook, MySpace and Meetup.com that sought information about the personal injury plaintiffs were relevant and reasonably

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calculated to lead to the discovery of admissible evidence.

Ethical Considerations If a lawyer is prohibited from engaging in contact with a claimant, so is a private investigator or third party.

Attorneys can be disciplined for getting a third party to “friend” a witness or claimant on a social media site. State and national bar association rules of professional conduct prohibit attorneys from engaging in activities that could be viewed as dishonest or fraudulent or that are a misrepresentation. They prohibit an attorney from making a false statement of material fact to a third person, and they prohibit communicating with persons known to be represented by counsel.

However, in York City Bar Opinion 2010-2, the ethics committee concluded that an attorney “may use her real name and profile to send a ‘friend request’ to obtain information from an unrepresented person’s social networking website without also disclosing the reasons for making the request. While there are ethical boundaries to such ‘friending,’ they are not crossed when an attorney or investigator uses only truthful information, subject to compliance with all other ethical requirements.” In Philadelphia Bar Association Ethics Op. 2009-02 (March 2009), the committee stated that a lawyer may “forthrightly” ask an unrepresented person for access to his social networking site, but the lawyer’s agent cannot make that same contact because the unrepresented person might be more likely to grant access to someone he does not associate with the lawyer and, thus, be deceived.

In Barnes v. Cus Nashville,

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LLC, the court indicated that it was willing to create a Facebook account and send a friend request to the plaintiffs “for the sole purpose of reviewing photographs and related comments in camera” and then “disseminat[ing] any relevant information to the parties.”

Admissibility Issues – The Bottom Line for Use The rules of evidence govern the admissibility of information from social networking sites. Like all evidence, the proponent has to demonstrate that it is relevant. The court may conduct an in camera review to make this determination. Its probative value must outweigh the danger of unfair prejudice, confusion and misleading the jury.

There are also issues of hearsay, as noted in Maldonado v. Municipality of Bareceloneta.

In Miles v. Raycom Media, Inc., the court stated: “Because the Facebook page and the comment to the article constitute unsworn statements made by third parties that are offered to prove the truth of the matter asserted, they constitute inadmissible hearsay….”

However, the contents of a social networking site may be admissible under the rule providing that admissions of a party-opponent are nonhearsay. In Telewizja Polska USA, Inc v. Echostar Satellite, the court held that archived contents of a skinhead organization’s website that posted the name, address and picture of the victim, along with a call to attack him, “may be considered an admission of a party-opponent, and are not barred by the hearsay rule.”

Several other hearsay exceptions may apply, such as a “statement describing or explaining an event or condi-

tion made while the declarant was perceiving the event or condition, or immediately thereafter” (Fed. R. Evid. 803(1)).

Consider also Fed. R. Evid. 801(21), “reputation of a person’s character among associates or in the community.”

Social media must be properly authenticated. In Griffin v. State, the court held that a MySpace page wasn’t properly authenticated because the prosecutor didn’t ask the witness if the page was hers and if she had authored the contents.

The picture of the witness on the page, her birth date, and her location were not enough given the “potential for abuse and manipulation of a social networking site by someone other than its purported creator.”

Fed. R. Evid. 901 provides that the requirement of authentication “is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims.” Tips for authenticating information from social networking sites include providing testimony of the person who created the Web page; information regarding when and how the Web page was created and/or maintained; affirming that printouts from the website provided are accurate (i.e., accurate to what appeared on the Internet); and/ or subpoenaing the material directly from the source. cA Deborah A. Lujan and Tracey M. Bobo are attorneys with Southfield, Mich.-based Collins, Einhorn, Farrell & Ulanoff, P.C. www.CEFLawyers.com

Get online and get social with cA!

The Claims Advisor website is loaded with the information you need to stay on top of today’s most challenging issues.

And now you can get “social” with Claims Advisor by following us on Twitter or LinkedIn. Or “Like” us in Facebook. Check out articles and news and share comments with fellow claims pros.

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November 30: Atlantic Hurricane Season Ends

55.3

Just 55.3% of people ages 16-29 are employed, according to Census Bureau data. Compare that to percent 67.3% in 2000. The data represents the lowest level since World War II. Additionally, one in five young adults live at the poverty level.

Perhaps it’s time to check out the insurance industry!

A soft business environment, workforce issues and technology challenges—all exacerbated by an unstable economy—are among the major concerns for claim officers, according to a survey conducted by global professional services company Towers Watson.

The survey reveals that claim officers are finding planning more difficult and that they are expected to meet performance goals with fewer resources.

Visit www.towerswatson.com for more information.

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Is “Big Business” bad?

No way. The property/ casualty insurance industry contributed over $500 million million to charitable causes in 2010.

The bulk of the support went to education, health and social services, and community and economic development, according to a report by McKinsey & Company.

Apple sold more than 4 million iPhone 4S smartphones within just 3 days of its launch.

Some statistics show it as the number one smartphone in the world.

fruitcake

slice

84,907

insurance jobs

No jobs? Check out the insurance industry. A quick search on CareerBuilder.com using the keyword “insurance” got a response of nearly 85,000 available jobs. The insurance industry remains one of the best places to seek vocational opportunity. ClaimsPages.com has nearly 40,000 claims-related jobs alone.

To list open positions free or to search on a position, check out ClaimsPages.com.

There have been 19 earthquakes above in 2011 to date that have registered 7.0 or more on the Richter scale, six in Japan. The largest of the bunch—measuring 9.0—was on March 2, 2011, off the coast of Japan, according to the USGS.

7.0

19

TOP STORIES The most popular articles over the past six months according to online readers when visiting www.claimsadvisor.com

1.

2.

3.

4.

1 5.

6.

Visit www.iii.org for more information.

Holiday season is upon us again and that means the return of the fruitcake. While the theory that only one actual fruitcake exists and is constantly passed from one person to another has been found to be a myth, the other theory that no one has actually ever eaten a fruitcake is another matter altogether.

Fun information bites, less fattening than pizza.

Chief Concerns: Claims Executive Focus. CNA’s George Fay, executive vice president, Worldwide P&C Claims, at CNA. Secondary Payer Protection by John D’Alusio/ MEDVAL. Medicare as a secondary payer must be protected for all liability claims, in and outside workers’ comp.

Chief Concerns: Claims Executive Focus. Michael Prandi, National Claims Leader/Westfield Insurance Workers’ Compensation: A Ticking Time Bomb

by Judith Vaughan, CPCU, AIC/The Institutes. Is the imploding economy blowing up the workers’ compensation system?

Understanding Anti-Subrogation Legislation Trends

by Daran Kiefer, Esq./Kreiner & Peters Co. & Kammy Poff/Allstate Insurance. What you don’t know can cost your company.

Damage Occurring from Theft of Copper by Wayne D. Taylor, Esq. & Ruth M. Pawlak/Mozley, Finlayson & Loggins L.L.P. Is the damage covered as vandalism or excluded as theft?

deeper detai l s | over - st u f f ed

Hoardi 50

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ing:

Quick Look CC Hoarders’ belongings obscure water damage.

CC The environment inside the home is conducive to microbial growth.

CC It’s often difficult to tell if the damage predates the claimed loss or resulted from it.

A water loss in a house affected by hoarding can be a major challenge to adjusters.

by Ralph E. Moon, Ph.D., and Gina Clausen, Esq.

Hoarding is a concern to homeowners insurance and renters insurance providers, especially when damages or problems related to hoarding are not excluded in the policy. There are several important risks associated with hoarding.

• Excessive contents storage creates a trip hazard for the insured and their guests.

• Contents obstruct pathways for egress in case of an emergency.

• Fire hazards and increased fire risk are created by accumulated paper, plastic and flammable materials.

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deeper detai l s | over - st u f f ed

PHOTOS 1-4: Progression through the house of a hoarder. You can see clearly that determining the origin of damage in an environment in this state is challenging. The determination of when microbial growth occurred may require additional expertise. Special care should be taken when communicating with policyholders under these conditions.

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•

•

•

•

•

[

•

[

When hoarding occurs, it is difficult to accept that microbial growth did not occur well before a recent water loss.

Accumulated organic matter creates foul and putrid odors.

Hoarders tend to conduct limited or delayed maintenance on critical roof, plumbing, electrical and mechanical systems.

Excessive contents obscure water losses, roof leaks and exterior moisture penetration, causing extensive and longer-term damage.

When a water loss is discovered, differentiating between pre-existing and new damage may be difficult if not impossible.

Excessive contents diminish ventilation, limit evaporation, encourage moisture retention and microbial growth, and support insect and rodent populations.

Indoor air quality is impaired, creating health concerns that the insured may associate with a loss rather than with preexisting conditions.

Investigating a Water Loss in a Hoarder’s Home Most homes experience several isolated areas of water damage over one or two decades of ownership. Homes containing excessive contents pose an additional concern

because the water loss is obscured and physically difficult to find. Investigative methods using visual clues, flashlights, moisture meters and infrared cameras are rendered ineffective when potentially damaged floors and walls are inaccessible. Under these circumstances, the investigator should begin by conducting an inventory of probable areas of water release. Bathroom vanities, kitchen cabinets, refrigerators and air handling units are likely candidates because they are frequently surrounded by contents and infrequently serviced (as in many homes).

Once a source is identified, however, hoarded contents often prevent access to adjacent areas and stymie an evaluation of the damage.

Furthermore, most investigators do not intend to conduct extensive moving, categorizing or organizing of contents in an effort to delineate the damage. As a result, the investigator may overestimate the impact of a release or fail to differentiate between new and pre-existing damage. This dilemma can often lead to disputes over the extent of cleaning and restoration needed.

When the losses are interpreted as covered by the

policy, an insurance provider may be compelled to repair, clean or replace the affected contents. However, determining the extent of cleaning and restoration needed is often imprecise without the removal of all contents. The impact of a water loss on porous or fabric-covered materials, for example, is complicated by pre-existing air quality conditions. Oftentimes, the home has experienced a restriction in air circulation, sustained humid conditions and other circumstances that favor evaporation and dehumidification. When the operation of an air conditioning system is limited or the unit is completely turned off, the interior space becomes damp, often attaining conditions near the dew point temperature during winter months. When this occurs, the impact of a short-term event can be misinterpreted because of long-term moisture accumulation and microbial growth. Differentiating between new and old damage can quickly evolve into a debate among experts.

There are a number of techniques available to determine the duration of water loss; most require careful examination of contents, building materials and fungal

CLAIMS ADVISOR | WINTER 2011

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[

[

deeper detai l s | over - st u f f ed

Hoarding is recognized as an obsessive-compulsive disorder (OCD) and, as such, could be included under federal law as a disability.

populations. Home interiors that experience sustained conditions of elevated humidity can support excessive microbial growth even when they do not contain excessive contents. When hoarding occurs, it is difficult to accept that microbial growth was not initiated well before a recent water loss.

A competent restoration plan requires unimpeded access to the damaged areas of the home. Accumulated items must be removed and categorized, and often a large percentage must be discarded. This becomes a delicate issue requiring cooperation and understanding among all parties and can be particularly nettlesome in a hoarding situation. From the perspective of the insurance provider, patience and respectfulness translate to time and added expense.

Implications of the Federal Fair Housing Act In circumstances where the insured— the hoarder—is a tenant, the property owner must address problems of hoarding carefully because, under the Federal Fair Housing Act (FHA), the tenant may be entitled to protection no matter how the lease agreement is drafted. Two critical elements of the FHA are whether a tenant has a handicap or disability and whether the landlord discriminated against the tenant.

The FHA makes it unlawful to discriminate in the rental of housing or to otherwise make housing unavailable to a renter because of the renter’s handicap. A handicap is a mental or physical impairment that substantially limits one or more of a person’s major life activities. This definition is purposefully broad because even the perception of a handicap is enough to meet the definition of disability under FHA. Hoarding is recognized as an obsessive-compulsive disorder (OCD) and, as such, could be included under federal law as a disability.

Policy Coverage Concerns In addition to the concerns surrounding the investigation of a loss, hoarding may give rise to potential coverage implications based on an insured’s failure to comply with the policy’s post-loss obligations. Standard homeowners policies contain defenses and exclusions to

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coverage based on an insured’s neglect, failure to protect the property or improper maintenance. If the investigation of the loss reveals that the damage was caused or exacerbated by the hoarding, it may provide sufficient evidence to defend or exclude coverage for the loss. For example, if an insured suffers a water loss but neglects to remove any of the excessive contents in the property, it could lead to microbial growth as the excessive contents diminish ventilation, limit evaporation and encourage moisture retention.

When investigating such situations, it is important that the adjuster or an engineer document the damage at the time of the loss to later compare with any future damage that may have resulted from the insured’s failure to remove the excessive contents.

Further, when dealing with a hoarder, it may be difficult to determine whether the loss occurred within the policy period or pre-dated the policy’s inception. With the excessive contents contained in the property, a loss may not be revealed until months or years after its initial occurrence. For an insurer, the investigation of the loss by a qualified individual is critical, as are a thorough review of any prior claims and inquiry of the insured to determine a specific timeline of events cA related to the loss.

The History of Hoarding Hoarding has been an attribute of mankind for centuries and is defined by Frost and Gross as the excessive collection of useless items of limited value and the inability to discard them. References to hoarding occur in the earliest literature—for instance, in Dante Alighieri’s 14th century poem Inferno. In the poem, Dante and a guide descend through nine circles of Hell, each involving increasingly harsh punishment. As they enter the fourth circle, two armies form a circle and clash, crashing stones against each other only to retreat and taunt, “Why do you hoard?” while the other side responds, “Why do you waste?”

Charles Dickens seems to define hoarding in Bleak House, where in the shop, “Everything seems to be bought and nothing sold.”

Hoarding is recognized as an obsessive-compulsive disorder (OCD) that afflicts between 4% and 5% of the U.S. population. Normal behavioral sequence events are recognized as early as the age of two when children develop the rituals of eating, toilet training, and dressing. By age three, nearly 80% of children develop bedtime rituals of going upstairs, brushing their teeth, getting into bed, pulling down the window shade, kissing and saying “good night.” Later, children establish regular sequences or the need to arrange items “just right” to satisfy a symmetrical pattern. This stage is followed by concerns for dirt and germs and, ultimately, the necessity to collect and store items of interest.

These behaviors are normal and culminate at the age of three. The characteristics of hoarding are different and tend to increase until age six,

Ralph E. Moon, Ph.D., is with HSA Engineers and Scientists in Tampa, Fla. Gina Clausen, Esq., is with Groelle and Salmon in Wellington, Fla.

when as many as 60% of children display this trait. The hoarding behavior is

The authors would like to thank the following colleagues who provided research support and editorial comments: Cathy Wilson, John Barkey, Jeff Wilemon and Brett Davis.

occurs more often in men than women.

typically manifested around age 14 when the behavior is mild. By the 20s and 30s, hoarding progresses to a moderate concern, becoming more severe in the 40s and 50s. Although women develop hoarding earlier than men, hoarding

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CHIEF CONCERNS | GEORGE NEALE/LIBERTY MUTUAL

Claims Exec

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cutive Focus: George Neale

EVP, Commercial Market General Manager, Claims for Liberty Mutual

By Bevrlee J. Lips

Can you share a bit about your childhood and where you grew up?

George Neale: I grew up in what I would classify as the real inner city of Washington, D.C. My sister and I went through the public school system where there was a lot of opportunity to go the wrong way. We were lucky to have a father that would probably have knocked us in the head if we went too far astray, and that’s what made the difference for us.

You attained the role of senior vice president at the youngest age in Travelers’ history. What do you think contributed to reaching that level of responsibility so quickly?

Neale: Even though we were in a pretty tough environment, one of the things instilled in us was to achieve as much as possible, to give all of our energy to do well in school and whatever we did. We saw passion all around us; my father was really big about that.

He started off as a bicycle messenger

profile Name: George Neale Current Position: EVP, Commercial Market General Manager, Claims for Liberty Mutual Size of Claim Organization: 3,500 Years in Current Role: 1 Years in Insurance Industry: 31 Originally From: Washington, D.C. First Claims Job: Multi-line Representative, Travelers Insurance Other Interests: Published Author, Jazz Pianist, Avid Tennis Player

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CHIEF CONCERNS | GEORGE NEALE/LIBERTY MUTUAL

in the Pentagon making $50 a week. When he retired 30 years later, he had top secret clearance and received awards from the Secretary of the Air Force. You didn’t have many men raising families by themselves at the time, but he worked hard and stayed on top of us. It was a big part of what set the standard of expectations for my life.

What can you share from your book, Straight Talk on Getting There, that would apply to how you inspire your team?

Neale: The book is very simple and was meant to be directional for at-risk inner city youth. The most significant point was that everybody has something in them that they can be excellent at. You have to find that thing, and once you do, you have to nurture and develop it. Find what you’re good at and become an expert. That’s the thing that really creates value for you.

You have had the rare privilege of playing with some of jazz’s all-time greats.

How have those experiences affected your development as a leader and how you inspire others?

Neale: With Dizzy Gillespie, it was almost like Michael Jordan having a pickup game and asking you to come and play. Our band played with Dizzy several times, as well as with Benny Carter and Mary Lou Williams. Mary Lou was the coolest because she was the first black female to ever play in a big band.

She played piano with Duke Ellington. I would sit in the room with her and play, and

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she’d say, “You’re playing it, but you’re not playing it.

You know, you don’t have the passion yet.” Then a day came and I knew I was feeling it, and she said, “Yeah, you’ve got it now.” Those are pretty special moments you don’t ever forget.

In Malcolm Gladwell’s book Outliers, he talks about the magical 10,000 hours it takes you to get to great. I play a lot of tennis, and one day I sat down and calculated it out. If you take someone who starts at age seven who plans to be on the pro tour by 20 years old, it converts to about six hours per day of practice— that’s a lot. So what you see in these guys is that kind of commitment.

Can you name a person who has had a tremendous impact on you as a leader?

Neale: One of the first guys I worked under when I started my career at Travelers couldn’t have been more different than me. He’d tell you himself that he was a 6’ 5” redneck from North Carolina. He was the best guy for me possible. He always got excellent results and had the best claims office in the country for Travelers. He taught you about execution, service and taking care of your customers. But the most important thing that he did for me was let me make mistakes. He was able to look at the greater good.

He could see past those and not see what you were but what you could be. It takes a special person to do that.

Every time there was a pro-

www.claimsadvisor.com

motion, he advocated me for that job. Now at 78 years old, he always introduces me as his boss when he left Travelers. While it’s true that ultimately I became his boss a couple of levels up, I was that for about a year, while he was my boss for 10 years.

You can read all the right books, look polished and think you know all things, but leadership comes from how you get people to do the things you need them to do, and he had a knack for doing that. If not for him, you wouldn’t be having this dialogue with me.

Companies can have a tendency to dampen the flow of inspiration. How do you encourage creative thinking within your organization?

Neale: When you have several layers of management between you and the front line, the free flow of information and ideas can be cut off at any layer. What we’re in the process of doing right now is developing an Internet site just for claims that will be a resource library.

Part is going to be kind of an “Ask George,” anonymously of course. There will also anonymous suggestion boxes and a blog where we can exchange information back and forth. But, I’ll tell you, the challenge is even getting your managers into a freeform exchange of ideas. We also have employee opinion surveys to get feedback and

end up reading over 3,000 comments. We find out what the common ones are so that we can respond.

Liberty Mutual’s current messaging is “What’s your policy?” which ties in to the responsibility initiative. How does that align with what you do?

Neale: For insurance carriers, claims is the product, and we always ask people to manage claims in a fair and equitable way—to really understand responsibility.

Our CEO, who has recently retired, always emphasized the responsibility of getting good outcomes on claims but not to the detriment of a claimant. A good outcome in a workers’ compensation claim is good for everybody—good for the injured worker, good for the customer because they get their employee back to work and good for us because claims costs are reasonable. We work hard to manage claims by working with treating physicians and understanding what they’re prescribing to ensure our claimants don’t end up with a dependency on narcotics.

What advice would you give someone going into a claims leadership position for the first time?

Neale: I think one of the mistakes people make in the claims world is that

“For insurance carriers, claims is the product.”

they become claims experts exclusively. They don’t understand how claims fits into the business of insurance.

If you want to be an effective claims leader and you want to drive the best claims organization, you have to understand how it affects the whole business—how outstanding service affects retention and customer loyalty, how superior execution leads to great outcomes on claims which translates into better financials, and better financials translate into a better opportunity for you to compete price-wise.

I learned enough about the actuarial piece of insurance to be able to speak about it and intelligently drive metrics. Actuaries are the ones who drive the fundamentals of the insurance business, so if you can’t have a dialogue with them, you really can’t be an effective leader because you don’t understand the right metrics.

A person who is going into a claims leadership position needs to understand how underwriting, actuaries, and marketing work. When we interview people for a claims leadership position, we make sure they understand broadly what insurance is about. You have to understand how you fit into the equation—how you can help it or you can hurt it.

For younger professionals entering the claims management arena now, what do you think are the biggest roadblocks to success? What should new professionals be focused on?

Neale: Technology is a facilitator in what we do, but it also has made us a little bit lazy. We think it’s

as simple as opening an app and letting it do everything for us. You know you can’t have technology do everything. You still have to pick up the phone and answer it, you still have to manage your workload. Maybe lazy is a bad word, but when we came up through the ranks without much technology, we learned how to manage a lot of things differently. We learned how to multitask and have an organizational system that was efficient. One of the challenges today is reaping the benefits of technology but not letting it become a dependency.

Also, look to the people in your office who are doing the job exceptionally well.

That’s who you need to talk to about learning the things you need to be effective and efficient—what the little tricks are, what the shortcuts are and things you can do that don’t harm the result of the claims but may help you be a bit more efficient.

Spend time around folks who are really successful, learn who those people are and emulate what they do, even if it is as simple as listening to how they talk to people on the phone, manage the conversations, create empathy and build trust.

One of the biggest challenges we have now, not only in claims but in business in general, is using technology to enhance communication.

We’ll send 20 e-mails back and forth but won’t get up and talk to people. That

happens with supervision of people as well, but you can’t use technology to manage people. It can, however, facilitate interactions, particularly with people who are remote through video conferencing. We’re starting to explore decentralizing our

ful in the current position.

Instead of saying they need to improve this or that, you say, “These are the things you need to prepare for the next level.”

The most important thing I ask is, “Do you know when you’ve arrived at be-

“I’ve never seen an effective micromanager.” ranks and allowing more people to work at home; however, we are going to require human interaction and people still having that supervisory touch.

There are a lot of intangibles around what makes you decide to promote someone. You need to have interaction, see how people conduct themselves and so forth. While we allow people to work remotely, we’re going to leverage video conferencing and things like that to have virtual human interactions. You can’t just send someone a note in a claim file that says you didn’t do certain things. That’s not training and development.

The whole essence of management and leadership is getting in front of people and having dialogues, sitting at someone’s desk or sitting in a conference room and helping them understand how you’re going to help them do better. The approach I take is to focus on the things they need to do to get the next job. The reality is that you’re not going to get there unless you’re success-

ing an effective leader and manager? Answer: It’s when you’re bored.” When I’m bored, it is because everyone under me is clicking on all cylinders—they’re doing their job, I believe in them, I have confidence in them, they’re delivering results, and everything is working the way it’s supposed to.

I’ve never seen an effective micromanager. They may be good at what they do, but they’re not effective, and they are never bored. As you come up in your career, you’ll have many different bosses—some great, some good, some horrible. But even the horrible ones you can learn from because you learn what not to do.

With every level, you want to get bored. And when you get a little bit bored, then you get to spend some time learning underwriting, actuarial, distribution, and the things that will round you out and let you prepare for a broader job. That’s my mantra, “Get bored.” cA

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pulse Poll

Reader responses to monthly poll questions.

Claims Advisor Pulse Poll

Have the covered weatherrelated claims you handle increased this year?

— September

Is your company hiring additional claims personnel?

Yes, but it has been tough to find good people

Yes

43%

79%

& October 2011

No, but we need more people 23%

No, but we don’t need more people 16%

No

18% Stayed about the same 9%

Yes, it has been relatively easy to find good people 4%

Yes, other 4%

No, other 7%

Take this month’s Pulse Poll online at www.claimsadvisor.com

Chat Us Up There are more ways than ever to get connected with your colleagues and with us. @claims_advisor claimsadvisor claims advisor

Or e-mail letters and comments to editor@claimsadvisor.com

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What is that thing?

QR codes, those crazy looking boxes, are showing up everywhere these days—at restaurants, Home Depot, trade shows, in print ads (some in this issue!), and in our Advertiser Index. Are they a fad? Not likely.

These 2D codes store addresses and URLs that take you to information specifically created for your needs, often with special offers and content only available by using the code.

How can you read them? If you have a smartphone, you can simply download a reader—many are free—then scan away!

Better Safe Than Sorry Think twice before migrating data to the cloud.

Unless you’ve been living off the grid, you are no doubt aware of the buzz surrounding cloud computing: Internet- or other network-based services in which hardware, software and information are “rented” to clients on the basis of demand. The customer pays only for resources used and the vendor maintains the network hardware and software.

The cloud concept is not new. However, advances in Internet technology and network and storage capacity have made it possible to realize significant economic value from the model. According to one source, organizations in the United States will spend more than $13 billion on cloud computing and managed hosting services by 2014, compared to $3 billion today.

So far, insurance organizations have only dabbled in cloud solutions. “To date, the adoption of cloud computing in the insurance industry is in its early stages, with only a handful of emerging vendors offering vertical industry-focused cloud computing services tailored to the needs of insurers,” the global consulting and services company Accenture said in a 2010 white paper.

However, that situation is starting to change, Accenture said, as “advances in the industry have already underlined the potential of cloud.” In addition to a number of solutions for general business use, key applications such as risk management information systems (RMIS) already can be provided via cloud, both public and private.

The reality is that cloud computing has introduced a different technical and economic model for delivering and managing information technology (IT), offering significant benefits in a number of areas, including startup costs, scalability and maintenance. Arguments in favor of the cloud model can be compelling for any industry, including insurance, particularly when comparing its costs to more traditional IT models.

However, it is also important to note that the cloud comes with risks and shortfalls that organizations need to carefully consider before implementing cloud solutions.

Those risks include potential difficulty in integrating with in-house and other IT resources and little to no portability should a business decide to change vendors.

global view

By Jeffrey T. Bowman

Data security: cloud’s biggest challenge For the insurance industry, though, the greatest risk might manifest itself in one mission-critical area: data.

Uncertainty over the location, ownership and security of data, along with questions about compliance, privacy and legal issues, have insurers and others thinking twice before moving strategic applications that deal with key data to the cloud. In our view, this caution is well-placed.

In the increasingly regulated environment of data privacy, storing sensitive data in the cloud presents challenges to accountability. Sometimes this risk is mitigated by contractually transferring the financial risk of data breaches to the vendor, but this does not necessarily clear the client of potential outcomes, including harm to reputation.

Data challenges may be even greater for international businesses, including the global insurance industry.

Data transfer between nations can be a critical issue for organizations operating in more than one country. Some cloud implementations do provide the ability to define safe zones, explicitly setting constraints on where data is stored and transmitted. This functionality should be mandatory for any services provided by cloud vendors that may move data and processes in and out of a country.

Do risks outweigh benefits?

Because of its many advantages—particularly economic ones—cloud computing is here to stay. As with all technology implementations, however, the benefits need to outweigh the risks. Since critical data usually requires tight control, it typically is better suited for storage and access using the traditional in-house model, or, at best, a private cloud. Technology trends come and go, but one constant applies in the world of data: “Better safe than sorry.”

Jeffrey T. Bowman is president and CEO of Crawford & Company, the world’s largest independent provider of claims management solutions. He also serves on the board of directors of The Institutes, the organization that develops courses and confers the CPCU designation. He can be reached at info@us.crawco.com.

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cool linx Audacity

With a full set of features, including noise remover and multi-track editing, Audacity is a great tool for working with audio files on Windows, Mac and Linux computers. Although it’s not compatible with proprietary formats such as WMA, it does allow you to import, revise and export WAV, AIFF and MP3 files. You can even capture audio from the microphone, line in and sound card. Although a bit intimidating at first, you don’t have to be an expert to use this free software.

http://audacity.sourceforge.net

CopyTrans

If you have ever had a computer meltdown with all of your synced iTunes music and videos, you know what a pain it is to transfer those files to a new computer. CopyTrans just made that job easier with their suite of backup and recovery tools for retrieving music, videos, ratings, playlists and more from iPods, iPhones and iPads. It can even rebuild the iTunes library. Talk about a disaster recovery plan.

www.copytrans.net

FreeOCR

Although not as sophisticated as some OCR (Optical Character Recognition) software, FreeOCR is a simple way to convert a scanned image, photograph or PDF file to text using a Windows computer. FreeOCR supports most TWAIN scanners, and the results can be exported to MS Word. Now you can stop copying those copies of copies and make an original again.

www.paperfile.net

Glary Utilities

This robust set of free Windows utilities can delete temporary files, clean the registry, manage startup programs, defrag the hard drive and optimize memory. You can even recover a file that you deleted, even after your recycle bin has already been emptied. Now if only I could get it to make me dinner and take my trash bin to the curb.

www.glaryutilities.com

Klout

Do you have clout in your sphere of influence? There’s one way to find out. Klout measures influence online.

When you create content or engage socially, you impact others. Klout analyzes that impact to find your Klout Score, influential topics, and your influencers. The Klout Score measures influence on a scale of 1 to 100, with 100 being the most influential.

www.klout.com

MP3 Skype Recorder

The MP3 Skype Recorder allows you to record Skypeto-Skype and Skype-to-Landline calls as individual MP3 files. They can be recorded automatically every time you make or receive a call, or started manually from the icon in the system tray. Just keep in mind that some telephone recording laws require consent by both parties.

http://voipcallrecording.com

PROskore

PROskore is currently the largest social network in the world strictly dedicated to measuring professional influence.

Members of PROskore are ranked according to their overall reputation—which includes their popularity across other networks (LinkedIn, Facebook, etc.) as well as their professional experiences and engagement within the PROskore community. Members benefit from their ranking through new business opportunities with other PROskore members. www.proskore.com

TeamViewer

If you’re technically inclined and find yourself always being asked to “fix” a computer for a relative or a friend of a friend, you’ll love this software. With TeamViewer, you can remotely access any PC, Mac, Linux or mobile device with an Internet connection.

There’s no configuration needed for your network or firewall. Just start the TeamViewer program on both devices, log in with your friend’s partner ID and password, and take control. Best of all, it’s free!

www.teamviewer.com

To receive Claims Advisor Live!, update your subscription to include your e-mail address at:

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By Gary Blake, Ph.D.

The Most Commonly Misused Words in Insurance Is the written word under attack these days? It seems so. Degradation may be due to the proliferation of e-mail, texting and social media communication or simply due to ever-tightening schedules. We’re all in a hurry, and keeping up writing skills is a clear challenge.

ability, capacity Ability means the state of being able or the power to do something. For example, “A computer has the ability to create graphics.” Capacity is the power of receiving or containing. For example, “The computer has the capacity to hold five plug-in boards.” about, approximately About is inexact; it indicates a rough estimate. For example, “We are about halfway there.” Approximately implies accuracy. For example, “There are approximately 1.06 quarts in a liter.” accept, except Accept means to receive willingly, to agree with. For example, “I accept your apology.” Except means excluding.

For example, “You’ll be reimbursed for everything except local travel.” advise, inform Advise means to offer counsel and suggestions. For example, “I advise you to buy a municipal bond.” Inform means to communicate information. For example, “I inform you that your proposal hasn’t arrived.” affect, effect Affect is a verb meaning to change or influence. Effect is a verb meaning to bring about. Effect is also a noun meaning result or outcome. For example, “The report will have the desired effect.” because of, due to Because of means by reason of or on account of. For example, “The conference was delayed because of snow.”

Due to means attributable to. For example, “Her promotion was due to her managerial style.” can, may Can implies ability; may implies permission. confirm, summarize Confirm is to verify; summarize is to make a summary. continual, continuous Continual means recurring frequently. Continuous means without interruption.

e.g., i.e. e.g. means for example; i.e. means in other words, or “that is.” farther, further Farther refers to physical distance. For example, “He is farther away from the plant than he is from headquarters.” Further means to a greater degree or extent and refers to matters in which physical measurement is impossible. For example, “Further research would be helpful.” presently, at present Presently means soon; at present means now.

write stuff

To give your writing skills a tuneup, here are some of the words and phrases that are perpetual problems for insurance professionals.

principle, principal A principle is a fundamental truth. Principal used as a noun means the head of a school, a main participant, or a sum of money. For example, “The principal investor was Bob.” should, will Should implies ought to, a belief; will is a prediction. strategize This use is awkward. Use “make strategies” or “plan.” that, which Ideally, that is used with a restrictive clause, a clause absolutely necessary to the meaning of the sentence. For example, “This is the project that will launch your career.”

Which is used with a nonrestrictive clause, a clause that is parenthetical and is not necessary to the meaning of the sentence. For example, “The executive committee, which is made up of vice presidents, has not discussed the problem.” unique No superlatives are needed since unique means one of a kind. Therefore, really unique, so unique, most unique, and similar constructions are grammatically incorrect.

Gary Blake, Ph.D., is director of The Communication Workshop, a company that offers on-site writing seminars throughout North America. For information about Dr. Blake’s claims writing seminars and webinars, call (516) 767-9590 or e-mail garyblake725@gmail.com.

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2011 11/-3 Haag Certified Roof Inspector

event

Haag Education, Kevin McCormick, 214-614-6550, kmccormick@haagengineering.com, Kansas City, MO, www.certifiedroofinspector.com

11/10 Personal Lines Toys CPCU Society, Mark Dolinski, 800-932-2728, ext. 2748, mdolinski@cpcusociety.org, The Farmington Club, Farmington, CT, www. cpcusociety.org

11/3 Ethics with a Capital “I”

11/14 -15 2011 Advanced Insurance

Program - Residential

-- Integrity and the Insurance Professional

CPCU Society, Mark Dolinski, 603-6251100, mdolinski@cpcusociety.org, USI New England, Monadnock Room, Bedford, NH, www.cpcusociety.org

11/3 -4 PAIIA Fall Meeting & Seminar Pennsylvania Association of Independent Insurance Adjusters, Peter J. Schreier, Executive Secretary, 302 239-6404, pschreier1@aol.com, Eden Resort and Suites, Lancaster, PA, www.paiia.com 11/3-5 Annual Claims Conference &

Designation Reception

American Educational Institute, 908-766-5920, jchiara@eioclaimslaw.com, Buena Vista Palace Hotel & Spa, Lake Buena Vista, FL, www.sclasociety.org

11/3 -6 NAIC Fall 2011 National

Meeting

National Association of Insurance Commissioners, NAIC Meetings Department, 816-783-8100, meetingsmail@naic.org, Gaylord National Resort & Convention Center, Washington, DC, www.naic.org

Fraud Seminar

National Society of Professional Insurance Investigators (NSPII), Mary Beth Robinson, 888-677-4498, nspii@nspii.com, Hilton Chicago Indian Lakes Resort, Bloomingdale, IL, www.nspii.com

11/15 Becoming an Active Listener Chartered Property Casualty Underwriters (CPCU), Member Center, 800-932-2728, membercenter@cpcusociety.org, Online Webinar, www.cpcusociety.org 11/15 -17 Haag Certified Roof Inspector Program - Commercial

Haag Education, Kevin McCormick, 214-614-6550, kmccormick@haagengineering.com, Tampa, FL, http://www.certifiedroofinspector.com

11/16 Dynamic CE Seminar for

Insurance Adjusters

Texas Independent Insurance Adjusters Association & Rimkus Consulting Group, Jan Payton, 972-930-0261, jan@tiiaa.net, Brookhaven Country Club, Farmers Branch, TX, www.tiiaa.net

& Research Conference

Workers’ Compensation Research Institute, Sarah Murphy, 617-661-9274, smurphy@ wcrinet.org, Boston Park Plaza Hotel & Towers, Boston, MA, www.wcrinet.org

11/6 -9 NASP 2011 Annual Conference National Association of Subrogation Professionals, Registrar, 412-706-8000, Gaylord Palms, Orlando, FL, www.subrogation.org

12/7-9 Haag Certified Roof Inspector

11/8 -9 2011 Western Regional

Adjusters Conference

Property Loss Research Bureau, 630-7242200, conference@plrb.org, Sacramento, CA, www.plrb.org

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Conference & Expo

International Disaster Conference & Expo, Jenna Evans, 404-418-4990, jennaevans@ internationaldisasterconference.com, Ernest N. Morial Convention Center, New Orleans, LA, www.internationaldisasterconference.com

1/30- 2/2 Windstorm Insurance

Conference

Windstorm Insurance Network, Michelle Griffin, 850-473-0601, mgriffin@windnetwork. com, Buena Vista Palace Hotel, Orlando, FL, www.windnetwork.com

2/8 -10 NAMIC Claims Conference &

Exhibit Show

National Assn of Mutual Insurance Companies, 800-336-2642 Ext 1055, lspencer@namic.org, Savannah International Trade & Convention Center, Savannah, GA, www.namic.org

2/16 -17 Xactware User

Conference 2012

Xactware, Koral Reid, 801-932-8478, user_ conference@xactware.com, Grand America Hotel , Salt Lake City, UT, www.xactware.com

3/12-14 2012 Combined Claims Conference: A Roller Coaster Ride

Combined Claims Conference, 714-321-3847, info@combinedclaims.com, Long Beach Convention Center, Long Beach, CA

11/16 -17 WCRI 28th Annual Issues

11/6 -7 TSLA 2011 Annual Meeting Texas Surplus Lines Association, Inc., Jean Patterson, 512-343-9058, jptsla@tsla.org, Four Seasons Hotel, Austin, TX, www.tsla.org

11/8 Arson and the Insurance Contract CPCU Society, Mark Dolinski, 800-9322728, ext. 2748, mdolinski@cpcusociety. org, Milrose Restaurant & Brewing Co, South Barrington, IL, www.cpcusociety.org

1/17-19 International Disaster

Program - Commercial

Haag Education, Kevin McCormick, 214-6146550, kmccormick@haagengineering.com, Chicago, IL, www.certifiedroofinspector.com

2012 1/15-19 36th Annual NACA Convention National Association of Catastrophe Adjusters, 817-498-3466, naca@nacatadj. org, SouthPoint Hotel & Casino, Las Vegas, NV, www.nacatadj.info

3/22-25 NASP 2012 Subrogation

Litigation Skills & Management Conference

NASP, 800-57-9961, Sheraton Wild Horse Pass Hotel, Phoenix, AZ, www.subrogation.org

6/18 -21 75th Annual NAIIA Conference National Association of Independent Insurance Adjusters, Brenda Reisinger, 800-638-5066, brenda@naiia.com, Wyndham Rio Mar Beach Resort , Rio Grande, PR, www.naiia.com 6/27 -29 16th Annual America’s

Claims Event

ACE, 800-831-8333, summitevents@sbmedia. com, Mandalay Bay, Las Vegas, NV, www. americasclaimsevent.com

7/22 -25 TSLA Mid-Year Meeting Texas Surplus Lines Association, 512-3439058, jptsla@tsla.org, Four Seasons Resort Biltmore, Santa Barbara, CA, www.tsla.org

source advertising directory CRS Temporary Housing

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SalvageSale

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The Institutes - Destination customerservice@theinstitutes.org 800.644.2101

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Windstorm Insurance Network

www.pattonryan.com 312.261.5160

800.644.2101

www.theinstitutes.org/AIC

www.katieschool.org

Claims Pages www.claimspages.com

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Claims Advisor Reprints

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850.473.0601

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Property Loss Research Bureau (PLRB) www.plrb.org 630.724.2200

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Claims Advisor will relaunch in January 2012 as Claims Management. For a media kit, contact Harry Rosenthal at harry.rosenthal@theclm.org or call 859.261.1256.

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What makes you tick?

Claims adjusters have one of the most interesting and demanding jobs in the insurance industry. Here you get to tell us about the job and how you make it part of your life.

interview

Vicki C., Staff Claims Adjuster/Appraiser Santa Cruz, CA How long have you been in the business? For 32 years, which is weird because I’m only 39.

Did you originally plan on getting into insurance?

No. My mother was a claims adjuster and used to regale us with horror stories of the claims department. I knew I’d never do that job. I was going to be the best darned secretary ever.

How did you become an insurance adjuster?

I was bored being the best darned secretary ever, so I applied for an entry-level claims job at the invitation of my neighbor who was a claims supervisor at a start-up property and casualty company near my home.

What do you do to stay on top of your e-mail?

Is that even possible? I sort by sender to view what I know is important, I flag it accordingly, and set myself diary items. I try to set expectations for others so they don’t send me a second e-mail on the same item before I’ve had time to reply to the first one. Keeping myself accountable and building trust helps allay the fears that motivate people to send multiple inquiries. When I get behind, I’ll just block out some time and turn off my phone, which allows me to do nothing but address the e-mails as needed.

How has the nature of your work changed in the last 5-10 years and how do you foresee it changing in the future?

I have begun working from home two days per week. I’m able to use technology, such as online meeting software and attending webinars, to decrease the amount of work-related travel. I see incorporating more of these tools in the future to contain and reduce costs to the company, and wear and tear on my body.

Do you have an example of a huge process change in your job and how you handled it?

We switched to an [almost] paperless claims environment, which involved a lot of training, trial and error. I enjoy my position on the claims process committee that has structured how the document management system functions and is still working on needed modifications and enhancements.

What do you need to be more effective?

Our technology piece is awesome already, second to none. A lighter workload would be great. I worry sometimes that my workload impedes my ability to deliver the level of customer service my insured members count on and deserve. My company is good about measuring and responding to increased workload demands, and the ability to work remotely helps me a lot in being able to keep up with the ebb and flow.

Do you see your company using increased decision making technology to handle claims with fewer people?

Perhaps eventually. I am not employed at the management level, but do not think technology can ever replace the most important thing my company delivers which is personal and compassionate customer service.

Where do you see the future pool of new adjusters coming from?

From other carriers, mostly. My company is unique; we’re a liability risk pool and have no stockholders. Our “investors” are our nonprofit members. Because of our niche market of serving the nonprofit sector alone, we are a great alternative to the corporate claims grind so that any claims job opening is likely to, and does, interest a lot of good adjusters who may be looking to make a change, particularly if they’re set adrift from a company that is downsizing.

What is your typical routine on Friday afternoon?

Subject to the workload, Friday afternoons are about the same as every other day, really, except that it is one of my work-from-home days.

I try to finish up by 5:00 p.m. so that I can decompress and enjoy the weekend with family and friends.

Anything you’d like to add?

I really love my job. Even at its most difficult, it is extremely rewarding to know that, at the end of my day, I’ve made a difference in the lives of people who are serving other people.

Are you interesting? Tell us all about yourself.

Be sure to fill out the complete form to be considered.

Visit www.claimsadvisor.com/contactcA/Interview

NEXT ISSUE:

Claims Advisor will be rebranded as Claims Management starting January 2012. With the new year, you’ll also get a new subscription to Claims Management, which will be published monthly, both in print and online. Get more articles and information sure to make you even more successful in the year ahead. Check www.theclm.org for developing information.

Read this issue online at: 66

WINTER 2011 |

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The Katie School of Insurance and Financial Services www.katieschool.org • Nationally ranked insurance program • Nearly 300 insurance majors and minors • Over 90 companies recruiting students • Excellent faculty/smaller class sizes • Scholarships/Honors program • Preparation for professional designation exams • Internships/domestic and international • Active industry involvement • Gamma Iota Sigma insurance fraternity • Highly successful career placements • Articulation agreement with Bermuda College

The Katie School attracts the best and the brightest students who are pursuing careers in the insurance and financial services industry.

To learn more about what the Katie School has to offer, contact: Deborah A. Babcock, Associate Director (309) 438-3368 Debbie.Babcock@ilstu.edu