Public Risk January 2013 by Moire Marketing Partners

Published by the Public Risk Management Association

www.primacentral.org

JANUARY 2013

THE AGING WORKFORCE The Good, the Bad and the Expensive

PLUS PRIMA Institute 2012 has Largest Attendance in the Program’s History

The State of Workers’ Compensation Claims—

BACK TO BASICS

ARE YOU COMMUNICATING? How Claims Professionals Can Help Risk Management

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Volume 29, No. 1 | January 2013 | www.primacentral.org

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.

PRESIDENT Dan Hurley, CSP, ARM-P, MS Senior Director, Risk Management & Safety Norfolk Public Schools Norfolk, VA

CONTENTS

PAST PRESIDENT Cindy B. Mallett, AIC, CWCP, ARM-P Risk Manager City of Gainesville Gainesville, GA PRESIDENT-ELECT Betty Coulter Director of Risk Management and Insurance University of North Carolina at Charlotte Charlotte, NC

5 PRIMA INSTITUTE 2012 HAS LARGEST ATTENDANCE IN THE PROGRAM’S HISTORY

By Marilyn L. Rivers, CPCU, ARM, AIC, and Jessica Konrath

The Good, the Bad and the Expensive

By Kevin Glennon, RN, BSN, CDMS, CWCP, QRP

Dean Coughenour, ARM Risk Manager City of Goodyear Goodyear, AZ Michael Fann, ARM-P, MBA Director of Loss Control TML Risk Management Pool Brentwood, TN Matt Hansen, MPA Director, Risk Management Division City & County of San Francisco San Francisco, CA

6 THE AGING WORKFORCE:

DIRECTORS Ed Beecher Risk Manager City of Pompano Beach Pompano Beach, FL

Amy Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN Regan Rychetsky, ABCP Director, HHS Enterprise Risk Management and Safety Texas Health and Human Services Commission Austin, TX

10 The State of Workers’ Compensation Claims— BACK TO BASICS

EXECUTIVE DIRECTOR Marshall W. Davies, Ph.D. EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org

By Lauren Hilan

ADVERTISING Donna Stigler 888.814.0022 • donna@ahi-services.com

14 ARE YOU COMMUNICATING?

How Claims Professionals Can Help

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org

Risk Management

By Joseph T. Peckham, Esq.

14 IN EVERY ISSUE

Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314. Copyright 2013 Public Risk Management Association Reprints: Contact the Reprint Outsource at 717.394.7350.

4 News Briefs | 19 Advertiser Index | 20 Chapter Spotlight

JANUARY 2013 | PUBLIC RISK

PRIMA’s 2013 Annual Conference

HOLDING RISK

JUNE 2–5, 2013 | TAMPA, FLORIDA

Registration Opens January 8! For more information, visit http://conference.primacentral.org.

Message from PRIMA President Dan Hurley

PREPARING FOR A NEW YEAR, DISASTER PLANNING IS A PRIORITY

s we start our New Year, we must stop to reflect on 2012 with its series of natural disasters, not only from Hurricane Sandy on the east coast but also other violent storms as well as droughts across much of the country. As Secretary of Defense Leon Panetta noted recently, “Rising sea levels, severe droughts, the melting of the polar caps, the more frequent and devastating natural disasters, all raise demand for humanitarian assistance and disaster relief.” Although the cause of climate change is still under some debate, there is no question that we are experiencing radical changes in the weather. Insurance companies recognized this change some years ago and have introduced new risk models that affect many of our public entities, particularly in coastal regions and in other high risk areas. Droughts were so severe in the Midwest that the Mississippi River is experiencing unheard of shallow areas that impede barge traffic, leading to discussions of opening dams along the Missouri River to raise water levels. Hurricane Sandy was a massive storm, its size beyond the scope of previous known storms, devastating areas along the northeast coastline that normally never experience such high winds, heavy rain or massive erosion. We also had very large, rapidly moving wildfires that devastated many homes, thousands of acres, and even threatened the Air Force Academy near Colorado Springs. The frequency and magnitude of these natural disasters require constant updates to our emergency management/

disaster plans. As we experience these disasters across our nation, each event becomes a learning experience, pointing to critical areas in our own communities that need to be bolstered or addressed. We are already hearing of rising sea levels, such as the area around New York City that is projected to have more than a foot rise in ocean water levels within the next 70 years. Droughts may continue to be severe in the Midwest, requiring a reconsideration of the allocation of our water resources. All of these issues require extensive long-term planning, including a constant look at how public entities can mitigate the effects of a natural disaster. Experts who work with disaster planning consider an emergency/disaster plan to be a ‘living document,’ always a draft, constantly requiring revision. I wish us all a better year in 2013 in regards to the safeguarding of our communities. Best wishes for a Happy New Year. Sincerely,

The frequency and magnitude of these natural disasters require constant updates to our emergency management/ disaster plans. As we experience these disasters across our nation, each event becomes a learning experience, pointing to critical areas in our own communities that

Dan Hurley, CSP, ARM-P,MS 2012–2013 PRIMA President Senior Director, Risk Management and Safety Norfolk (VA) Public Schools

need to be bolstered or addressed.

JANUARY 2013 | PUBLIC RISK

News Briefs

NEWS

BRIEFS ONLY THREE MAJOR U.S. CITIES SEE ECONOMIC RECOVERY: STUDY Retailers moving into old downtown buildings, an abundance of freshly planted green spaces and a stream of new jobs in Knoxville, Tenn., are all signs to Mayor Madeline Rogero that for the last year, prosperity has been blooming in her city. "We feel very good about how we're coming out of this recession," Rogero said. "We see new interest. We see new development that's occurring. We're optimistic that this recovery is going to continue."

CITY’S LIABILITY PREMIUM $20,000 MORE THAN EXPECTED Mitchell, South Dakota’s liability insurance premium increased about $26,000 this year, forcing the city council to provide a supplement to the budget to cover it, reports the Daily Republic. “The premiums were $20,000 higher than we budgeted,” said Human Resources Director Billie Kelly. The city paid $279,604 in 2011 but saw the premium increase to $305,600 in 2012, according to Kelly.

Knoxville is a member of a very small club, reports Reuters. Three and a half years since the 2007–09 economic recession ended, only three major U.S. metropolitan areas are experiencing an economic recovery, according to the Brookings Institution.

“What we did not get is what’s called a ‘loss ratio credit,’” she said. “That was because of our claims experiences. And I’m sure part of that is just general cost increases.”

The Washington-based research group has also deemed Dallas and Pittsburgh in recovery after analyzing their employment levels and gross domestic product per capita.

The premiums are based on a three-year average of claims made by a customer. The city had three auto liability claims in 2009, five in 2010 and six in 2011, Kelly said.

The United States has the most major metropolitan economies of all countries—76— according to an annual report on the 300 largest metropolitan economies worldwide that Brookings released in December. "It was still better than last year when the U.S. had no metro recoveries," Brookings Associate Fellow Emilia Istrate said.

“Yes, it was more, but they weren’t real significant claims,” she said. The city had 65 employees take defensive driving classes in 2012, she said. It’s a four-hour class. “We do take measures when we see a trend like this,” she said.

Istrate said the three cities had two features in common: strong local services such as healthcare, and business and financial services that cater to specific industries. The recession came late to many city budgets. Their primary revenue source—property taxes—took time to fall because of lags in real estate valuations. By the time they dropped, cities were also contending with falling sales and income taxes resulting from job losses. Many of the splinters the downturn drove into their budgets remain deeply lodged, and cities of all sizes worry about federal spending cuts that are part of the "fiscal cliff." "Cities are emerging slowly from the Great Recession," said Robert Zahradnik at Pew's American Cities Project, which tracks fiscal conditions and budgets. "In many cities revenues are gradually recovering but there are still some risks out there."

PUBLIC RISK | JANUARY 2013

In addition, there was extensive property damage in a wind storm in 2010, which also cost the city in the insurance ranking. On Nov. 19, the Mitchell City Council adopted Ordinance 2417, which included a supplemental appropriation of $20,000 for liability insurance. Kelly said the city received the insurance bill in January and paid it months ago, but the Finance Department asked for the supplement now to balance its books. She said the premium will probably remain at or near that level next year, since the city is unlikely to receive the loss ratio credit.

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PRIMA INSTITUTE 2012 has LARGEST ATTENDANCE in the PROGRAM’S HISTORY By Marilyn L. Rivers, CPCU, ARM, AIC, and Jessica Konrath

“I have participated in prior Institutes and even the old GRMS, this was the best I’ve been involved with—great speakers, facilitator and audience/participants!” “I felt like I was in a hole in my position. The new information and networks I was able to build gave me a new, fresher perspective that re-energized me.” “PI not only provided a great educational opportunity but also opportunities for networking with social functions included. I attended and not only benefitted from the program, but also enjoyed meeting and interacting with my peers.” In November, risk managers from 23 states, gathered in Charlotte, North Carolina, to welcome the return of PRIMA Institute, the industry’s premier risk management training program for public entity professionals. Back from a one-year hiatus, PRIMA Institute 2012 (PI 12) boasted more than 100 attendees including nine seasonedspeakers from companies and public entities that lead the public sector risk management industry. The risk managers in attendance came from different backgrounds including law enforcement, human resources, finance, universities and school pool administration; their experience ranged from less than a year to more than eight years.

PI 12

PRIMA INSTITUTE 2012

The participants attended 12 100-level educational sessions on topics such as defining the total cost of risk, marketing your insurance program, cyber liability, basic enterprise risk management and safety leadership. Attendees also participated in case studies where they discussed real-life risk management challenges and brainstormed ideas on how best to successfully work through an issue while building strategic partnerships. The ability to share different geographical and socioeconomic perspectives in the problemsolving exercises helped attendees understand the complexities of their role in their local government structures. PI 12 attendees enjoyed networking during two social events with fellow risk management colleagues and PI 12’s industry-leading presenters. PRIMA sends a special thanks to the North Carolina PRIMA Chapter for its hospitality and to all those state and regional PRIMA chapters who graciously supported their members by providing scholarships to this educational event. PRIMA is excited to offer this program again in 2013. PRIMA Institute 2013 (PI 13) will deliver a similar 100-level curriculum in addition to offering a 200-level curriculum that builds upon the 2012 program. PI 13 is scheduled for November 4–6, 2013, in Milwaukee, Wisconsin.

THANKS TO THE PI 12 SPONSORS:

JANUARY 2013 | PUBLIC RISK

THE AGING WORKFORCE THE GOOD, THE BAD AND THE EXPENSIVE By Kevin Glennon, RN, BSN, CDMS, CWCP, QRP

Itâ&#x20AC;&#x2122;s no surprise that the workforce is aging. People are living longer, many enjoy better health than their parents and many more recognize the benefits of staying active and engaged. The recent recession, banking-housing crisis and severe hits to retirement accounts have pushed many to work well past the age of 65 and forced retirees back into the workforce. Everything points to this trend continuing. Studies conducted by AARP and Wells Fargo Securities show that between 70 and 74 percent of Americans plan to work past the age of 65 with 39 percent indicating they need to keep earning and another 35 percent saying they want to stay employed and mentally active.

PUBLIC RISK | JANUARY 2013

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The bad news is that older workers are more injury prone and take longer to recover when injured. Anyone over 40 knows that the body’s biological and physiological properties change The good news is that employers benefit from having a skilled, knowledgeable workforce. Baby Boomers, which comprise the largest segment of the American workforce, are hardworking and entrepreneurial. The bad news is that older workers are more injury-prone and take longer to recover when injured. Anyone over 40 knows that the body’s biological and physiological properties change with age. Reflexes slow, muscles weaken and visual problems—especially depth perception—occur. Balance issues, poor hearing, memory problems and joint pain are common. Older people often take multiple medications that can have side effects, can have trouble sleeping and may not eat balanced diets. All of this can lead to confusion, agitation and manic behavior—recipes for injury. The Bureau of Labor and Statistics states that older employees’ injuries are more severe than those of younger workers. Claim severity for older workers (45–64) is more than 50 percent higher than younger employees for both indemnity and medical, according to NCCI Holding’s Research Brief, “Workers Compensation and the Aging Workforce” (Dec. 2011 by Tanya Restropo and Harry Shuford).

WHY SO HIGH? The type of injuries incurred by older workers drives some of the costs. While younger workers suffer more back and ankle sprains, older workers have more rotator cuff and knee injuries, lumbar disc displacements, hernias and carpal tunnel syndrome. Areas that take more wear and tear as we age, including shoulders, upper arms, knees and hips, tend to fail. Falls are the big concern. Osteoporosis (reduced bone mass) weakens bones, which then require less mechanical force to break. Muscle weakness, balance issues, vision problems and side effects from medicines make falls more likely, and the elderly have less effective protective reflexes to cushion the impact of a fall. The incidence of fractures of the wrist, upper

arm, lower leg, hip, pelvis and vertebrae is low until the sixth and seventh decades of life, when it increases dramatically. To make matters worse, older individuals are more adversely affected by the secondary effects of fractures. For example, patients with hip fractures are at high risk because of the combination of trauma to the lower extremity, forced immobilization for several hours or even days and surgery. Immobilization can cause joint stiffness and enforced bed rest predisposes patients to pulmonary complications, thromboembolism, disorientation and musculoskeletal weakness. Of functionally independent patients who lived at home before the fracture, 20 percent required institutional care for more than one year, and 30 percent depended on mechanical aids or assistive personnel. Even minor fractures of the wrist or shoulder can disable formerly independent older people, who now may require personal assistance in activities of daily living (eating, dressing and bathing) for many months. The elderly are especially vulnerable to certain complications, including stiffness, swelling, pressure sores and functional impairment.

with age. Reflexes slow, muscles weaken and visual problems— especially depth perception—occur… All of this can lead to confusion, agitation and manic behavior— recipes for injury.

Of course, recovery from everything from wounds to respiratory infections takes longer as one ages. Older bodies process medications more slowly, and it takes longer for tissue to heal. Older claimants need more time off work than younger colleagues with the same injury. A claimant under 40 will recover from a rotator cuff strain in four-to-six weeks, while it can take 12-to-36 weeks for someone over 40 to recuperate. More lost-time and higher wages for older workers means higher indemnity costs. Additionally, the claim may require a higher level of staffing. Many older people have lost their life companions and live alone and need additional home health care and other providers. Then there are comorbidities. Older workers likely have blood pressure, high cholesterol, diabetes, pulmonary

JANUARY 2013 | PUBLIC RISK

The Aging Workforce: The Good, the Bad and the Expensive disease, and/or cardiovascular disease and these comorbidities take their toll on their claims costs. Wounds take much longer to heal if oxygen isn’t reaching the site efficiently; patients with diabetes have a 42 percent higher risk of complications (McCormick and Leith) and a 32 percent higher risk of infection (Flynn, et al.). A recent NCCI Research Brief, “Comorbidities in Workers’ Compensation” (October 2012 by Chris Laws and David Colon), said that claims with a comorbidity diagnosis have about twice the medical costs of other comparable claims. And, that’s any claim, not necessarily an older employee’s claim.

Look and listen for signs that workers need accommodations and solicit feedback from supervisors and co-workers. Supervisors should hold occasional meetings to see what concerns employees have and check out their ideas on improving the workplace.

Older claimants usually receive more treatments and need more costly attention. Claims managers, adjusters, medical providers and caregivers need to invest more time with older patients. Since elderly patients can be easily confused and distracted, it takes longer to explain treatment, medication and allay concerns. Managers need to check in regularly to ensure they are following the treatment plan, taking medications properly, complying with other therapy and address their fears. By the way, that fear is visceral. Older workers are not just worried about getting back to work; they are worried about being able to care for themselves and not going into a nursing home. Fear and depression shut some people down; they won’t do anything. Others try to do too much too soon and hurt themselves again or get sick. It’s extremely important to acknowledge and address the older patient’s fears and set realistic expectations, saying something like, “By this date, you will probably be feeling this,” or “It will take a few weeks before you can walk this distance.” Let patients know what they are experiencing is normal; others their age have recovered and they need to pace themselves.

WHAT CAN EMPLOYERS DO? First, employers must recognize that claims involving older employees will be more expensive than those involving younger employees and set reserves accordingly. Then, employers should look for ways to facilitate their return to work. This could take the form of special equipment, like a tilting chair for a nurse who breaks her hip and can no longer keep her hips at 90 degrees, or replacing the shaky step ladder with a much sturdier way for the 78-year-old accountant to reach files on a top shelf. Employers can take the opportunity to transition the injured employee into a different role that takes advantage of her knowledge base and experience. We worked with a police officer in Maryland who chased a suspect over a fence and landed wrong, severely damaging his back and

PUBLIC RISK | JANUARY 2013

winding up in a wheelchair. Four years after the injury, he continues to add value to his employer by training new hires and younger officers in the skills of investigation and law enforcement. He is not physically capable of doing his old job, but he is quite capable of instilling his skills and knowledge in the next generation.

PREVENTION Accommodating a recovering employee is great; preventing injuries is better. Ideally, an employer should annually assess its older employees and the physical demands of their jobs. Do you really want a 70-year-old going up and down ladders 20 times a day or lifting 60 pounds several times a day? Or climbing up and down scaffolding? Will better lighting in the stairwell or rubber strips on the steps prevent a fall? Is this 63-year-old data entry clerk able to sit at a computer for two hours at a time? Don’t expect the older workers to bring up any concerns about fulfilling their job duties, because no one wants to admit to a decrease in his/her abilities. Older individuals, in particular, have a propensity to figure out some way to do the job—whether it’s driving beyond their eyesight or lifting heavy boxes—potentially increasing their risk of injuries. If older workers are not capable of performing the physical demands of their jobs, they are bound to get hurt. However, this does not mean an end to their careers. Moving them into a training or other knowledge-based position increases their productivity and value to the organization. Introducing a new piece of equipment could enable the 60-year-old to continue to lift 40-pound boxes, while boosting the productivity of his younger co-workers as well. Encouraging employees to participate in wellness programs, such as weight loss and smoking cessation, helps keep them in better shape to perform their duties. Look and listen for signs that workers need accommodations and solicit feedback from supervisors and co-workers. Supervisors should hold occasional meetings to see what concerns employees have and check out their ideas on improving the workplace. Using this non-threateningmeeting method, one company learned that older workers had trouble reading their small computer monitors and those doing data entry would benefit from having two screens. That was a small price to pay for increasing morale and productivity and strengthening employees’ work capabilities. Kevin Glennon, RN, BSN, CDMS, CWCP, QRP, is the vice president of Clinical Workers' Compensation Services for MSC, a One Call Care Management Company.

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THE STATE OF WORKERS’ COMPENSATION CLAIMS—

BACK TO BASICS By Lauren Hilan

As those familiar with workers’ compensation (WC) know, the fundamental purposes of the WC system are to help injured workers recover from accidents and illnesses and, when possible, achieve the ultimate goal of returning injured workers to employment. Since the beginning of the system, the bedrock of its success has been the claim handler, injured worker and treating physicians acting as a team, working together toward recovery and return to work. While WC systems vary from state to state, all systems are based on employees giving up the right to sue employers in return for payment of benefits for loss of earnings and medical care. When it comes to medical care, the injured worker receives all medically necessary and reasonable treatment without having to pay deductibles and co-pays. Sounds simple enough, though over the past few decades the medical side of the WC system has become increasingly complicated, extremely expensive and, when it comes to managing chronic pain cases, far removed from WC’s fundamental goals of recovery and return to work. Most troubling of all, it’s now becoming apparent that the necessary industry responses to controlling and addressing over-treatment and increasing drug, especially opioid, usage has inadvertently interfered with and almost destroyed the all important claim handler, injured worker and treating physician team approach.

PUBLIC RISK | JANUARY 2013

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THE ISSUES How did this happen and what can be done to return the industry focus to that recovery and return-to-work, collaborative-team approach? Reports have made it clear that for a number of years, growth in WC medical costs has been at twice the rate of health care costs and a significant portion of those increased medical care costs have stemmed from chronic pain cases. It’s obvious that treatment of injured workers now differs greatly from group health claimants in the amount, duration and mix of services prescribed and consumed. In an effort to address these continued cost increases and improve treatment effectiveness, the WC industry has spent more than a decade focusing on controlling ever-increasing medical (including drug) costs and usage by adopting statespecific laws concerning acceptable treatments and tests and implementing cost-control measures, such as establishing fee schedules for maximum payment amounts. While very important and definitely necessary to help address this difficult industry problem, the establishment of and focus on such external cost-control reforms and treatment measures gradually, and inadvertently, damaged and nearly destroyed the practice of claim handler, injured worker and treating physician working as a team focused on recovery and health. So much so that today the WC industry approaches injured workers and the medical community more as adversaries than collaborators in the injured worker’s recovery and return-to-work process. Even more troubling, the injured workers have become so removed from what little remains of the collaborative process that they have become nearly invisible. The injured worker’s treatment has become the object and the target of significant cost-control efforts but that same injured worker is no longer an active participant in his or her own medical recovery discussions and efforts. The medical community and WC industry seem to have lost sight of the fact that helping the injured worker recover is the fundamental reason for their existence.

CLAIMS SOLUTIONS The question now is, what are the ways to return focus to the WC fundamental goals of helping injured workers recover and, when possible, returning injured workers to employment? First and foremost, the claims arm of the WC industry needs to return to working more closely, and respectfully, with the injured worker and the treating physicians on developing treatment plans that focus on reducing health risks and emphasize recovery. When it comes to recovery for chronic pain, the focus of the injured worker’s treatment

needs to shift from eliminating pain to the more realistic goal of recovering functionality. In that regard, education of and communication with the claimant will be crucial. Not only should the claimant be educated and continually reminded as to how the WC system operates, the injured worker also needs to be kept informed as to exactly how his or her treatment is progressing. The aim is to make the injured worker, and his or her family, active participants in medical treatment decision making.

The question now is,

When it comes to the chronic pain sufferer, it is important for both the claim handler and the treating physicians to educate the injured worker on the principle that even though they may never again be pain-free, it doesn’t mean that they will never again be functional and, if at all possible, opioid-free. The goal should be to educate the injured worker to have a health focus, rather than a pain focus.

possible, returning

When a worker is paralyzed, for example, treatment doesn’t focus making that injured worker walk again; it is instead geared toward allowing them to recover to a new “normal” in terms of their medical health. This comes about with not only a great deal of medical treatment but with a significant amount of communication with the paralyzed individual.

or her family, active

what are the ways to return focus to the WC fundamental goals of helping injured workers recover and, when

injured workers to employment? … The aim is to make the injured worker, and his

participants in medical treatment decision making.

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The State of Workers’ Compensation Claims—BACK TO BASICS This same amount of time and communication effort needs to be taken in chronic pain cases. Along with this approach, it is important that claim handlers have improved medical training to enhance their knowledge of treatment protocols and options. Additionally, both the claim handler and the injured worker should have access to medical expertise resources.

In addition to developing medical recovery strategies for identified long-term chronic pain cases, it is becoming increasingly important for the industry to develop stateof-the-art technological risk assessment models. These will help the claim handler better evaluate and identify injured workers most “at risk” of also becoming long-term chronic pain claimants.

While communication and collaboration are essential, the reality is that to recover, many long-term chronic pain injured workers must participate in a multi-week/multidisciplinary treatment program focused on improving function and learning how to perceive pain. There are a number of excellent multidisciplinary programs available. Since the cost is paid in one lump sum, this approach is often rejected as too costly by an industry focused on cost control. The reality is that such a cost is ultimately less expensive in the long run than multiple years of claim handler-approvals for a series of drugs, diagnostics, injections, pain pumps, stimulators and surgeries. Multidisciplinary chronic pain treatment programs are necessary and generally highly effective, but they are most definitely not quick fixes and they are not inexpensive.

THE FUTURE Is there hope that the claim handler, injured worker and treating physicians will once again act as a collaborative team? I think so. Returning to a focus on communication as well as treatments that concentrate on the injured worker’s health and recovery will not only provide the industry with powerful and time-tested claims management opportunities, it will re-establish the foundation that allows the team to act together with the shared goals of recovery and return to work. Lauren Hilan is vice president and senior unit manager of the Workers’ Compensation Unit for Genesis Management and Insurance Services Corporation.

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ARE YOU COMMUNICATING? How Claims Professionals Can Help Risk Management By Joseph T. Peckham, Esq.

PUBLIC RISK | JANUARY 2013

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hat seems like eons ago, I was a county risk manager for a mid-sized county in Upstate New York. Like many readers of this magazine, I happened into public entity risk management quite by accident. I was happily building my litigation career as an assistant county attorney when the county executive asked one day, “What do you know about workers’ compensation?” The answer was ‘not much’ but at the time, the risk manager’s job represented a 40 percent increase in pay, so I promised to quickly learn about any topic I needed to understand. Thus, my career in public entity risk management was off and running.

Now before I go any further, what would a lawyer’s article be without a disclaimer? Here is mine: my goal with this article is to offer the reader perspective and advice, based upon my years of experience in the legal and public sector risk management industries. Accordingly, what I offer in the words that follow is guidance (i.e. my opinion) not necessarily founded upon specific legal research, statute, regulation or case law. To the extent that I actually bother to quote ‘real law,’ it is meant to give perspective to a particular hypothetical and cannot nor should not be construed as specific legal advice for a particular legal issue. In order to discuss risk management from a knowledgeable perspective, we first have to define ‘risk.’ According to the dictionary, risk is  A chance of something going wrong;  A hazard;  A chance of loss to insurer;  A possibility of investment loss; or  The statistical odds of danger. Those are the dictionary options. I have always explained risk as “The probability of the happening of a fortuitous event that has the likelihood of negatively impairing the mission of the enterprise.” A fundamental that a risk manager must accept (and teach others) is that risk management inherently seeks to address the anticipated but unexpected event, not the unknown. Risks are almost invariably anticipatable events; truly unanticipated events have no place in risk management— remember what Donald Rumsfeld once famously said: “We don’t know what we don’t know.” Accordingly, a truly unknown risk (if such an event exists) cannot be managed. Put another way: there are precious few risks that are truly unanticipated and usually, we in the risk management world do not look at risk as something unanticipated—ignored

perhaps, but hardly ever unanticipated. We like to think that all risks can be anticipated. However, a good risk management program does not waste its precious resources managing risks that are so remote that the happening of the risk can essentially be disregarded. So what can a claims professional do to help? One might think that a claims professional is addressing a risk that was not managed, since it has become a claim.1 But a good risk management professional recognizes that the risk management process inherently utilizes claims information as a integral part of both of the identification and monitoring steps. So, a solid claims professional will understand the fundamentals of risk management as well as know how their particular professional skills and judgment supplement the overall success of a risk management effort. Here are seven ways that claims people can help risk management people:  Don’t assume “they” know. When I was in my risk manager’s job, my safety officer and I once conducted an unscientific social experiment. We intentionally overturned one corner of a bad-weather entryway mat.2 We then watched and counted as no fewer than 11 people walked by and ignored the risk; for some of the 11 it was clearly a conscious decision, as we watched their eyes clearly pick-up the hazard and ignore it. (Some readers might castigate us for creating the hazard in the first place and you would probably be right. Nevertheless, I was seeking to make a point). My interpretation of these glances at our created risk: “Boy, somebody ought to do something about that.” It was the 12th person that finally acted. In my estimation, at least half of the 11 preceding assumed that the risk was known and certainly someone would do something about it.

JANUARY 2013 | PUBLIC RISK

Are You Communicating? This translates to the claims professional world thusly: one of the many things you can do for your client/ insured is to SOUND THE ALARM. If you see a lot slip and fall claims within the buildings and grounds team, be sure the risk manager and operations lead both know. They may not. Ignorance of claim trends can be particularly troublesome with larger entitites spread across multiple locations.3 Data simply may not be meaningfully coalesced and analyzed by one person charged with addressing risk issues.

In the world of risk management you will find that often the best risk manager is the person doing a particular job… Risk managers may specialize in utilizing risk management tools at the program level, but that does not make them experts on the details of all risks that they face. Use your store of knowledge to help the risk manager learn.

 Educate yourself. To paraphrase Socrates’ famous quote, “If there is one I thing I know, it is that I don’t know much.” In the world of risk management you will find that often the best risk manager is the person doing a particular job. To put it another way, a carpenter knows that a circular saw is dangerous, and assuredly knows which saw is safest. He also knows some injury prevention best practices. Risk managers may specialize in utilizing risk management tools at the program level, but that does not make them experts on the details of all risks that they face. Use your store of knowledge to help the risk manager learn.  Be the eyes and ears. This is a natural extension of my first two points. When you don’t assume they know and you have educated yourself, you are now much better positioned to suggest risk management strategies. Consider a claim resulting from an employee ignoring plant safety protocols that required her to use a lift aid when moving a 1,300-pound object. Notice: the employee did not use a provided lift aid. Your job, as the eyes and ears, is to ask why. Do not leap to the conclusion that injured worker is lazy, ignorant or stupid. Perhaps she was not trained. Perhaps she did not know where to find the equipment. Perhaps the equipment is not in working repair. Perhaps there is not enough equipment to go around. Perhaps she has an unreasonable supervisor imposing an unreasonable work quota. Or perhaps she was lazy, ignorant and stupid.  Don’t litigate what you can negotiate: don’t spend $10 on a 50¢ fight. This can also be stated as don’t let your emotion fuel your motions. All readers of this article have a list of three or four or 50 people that really annoy. You do your client/ insured/entity no good if you let that list be the reason why you opt to fight rather than negotiate. I concede there can be reasons why this rule does not apply to a particular instance. However, risk management can enter the claims realm here with a frequency/severity analysis: for each key claims decision, evaluate the cost of the decision against the odds of success. If you are realistic, you will become very good at keeping your litigation costs and your claims costs in check.

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 Curb your jargon. This is a variation on the ‘Don’t assume they know’ rule. This rule is particularly important for the claims professional with a new account, when an existing account introduces a new person, or the claims professional begins working with a new professional (lawyer, case manager, private investigator etc.). Everyone is the new guy some point. Everyone has feared appearing ignorant. So, when this ‘newness’ arises, slow down on the jargon: do not assume another person knows it. Many people do not. So whenever you are uncertain of another’s understanding do yourself a favor—take the time to ask.  Understand the basics of finances for your entity. There are multiple forces that drive the strategy of a claim. The Boy Scout motto is, of course, “Be prepared.” The claims professional motto may as well be, “A closed claim is a good claim.” A plan’s closing ratios is one of the key points that TPAs deliver to their self-insureds in stewardship meetings. However, there is a bigger picture that plays into claims decisions and the claims’ professional must be cognizant of those big picture items. For instance: a. When is your entity’s fiscal year end? Especially for local governments, cash can be extremely tight at fiscal year end. There may simply not be enough available to cover a carefully crafted settlement. b. How does your self-insured accrue its liabilities, especially the longer-term liabilities? Claims handling, of course, has an element of timing that plays a role in overall claims and thus risk management strategy. c. What non-mandatory best practices are the entity endeavoring to follow (e.g. GASB)? Now, I am by no means suggesting readers return to school for an accounting degree. Rather, I am suggesting for a claims professional to maximize her value to a risk management program (and ultimately the entity), she must understand how the entity incorporates these (and other) items into its practices so as to avoid undermining the overall mission of the entity.  Never, ever miss a chance to preach the gospel of safety practices and return to work. Let’s face it, a claim is a claim; there is only so much that a claims professional can do to mitigate cost. The greatest opportunity to save money on claims is for the entity to avoid claims! Once a claim happens, the facts leading to it are set. In workers’ compensation in particular, the claimant is now riding along in a no-fault system, designed to deliver a set level of benefits to an injured worker, without regard to

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PRIMA PODCASTS ARE HERE!

PRIMAâ&#x20AC;&#x2122;s Podcasts are a quick and convenient way to learn on-demand and on your own time! Meant to provide you with information on specific topics important to the public risk management sector and hot topics, PRIMA Podcasts are the perfect way to fit in education and training into your busy schedule.

Check www.primacentral.org for new Podcasts!

CURRENT PODCAST SERIES INCLUDE: Claims Contract Review Fleet Management TULIP Policies AND MORE!

Are You Communicating?

CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.

WEBINARS 2013 • January 16: Network Security and Privacy Liability • March 20: Distracted Driving: Beyond the Cones • July 17: Winning Strategies for Contractual Risk Transfer • September 18: Implementing ERM in the Public Sector: Obstacles and Opportunities

PRIMA ANNUAL CONFERENCES June 2–5, 2013 PRIMA 2013 Annual Conference Tampa, FL Tampa Convention Center June 8–11, 2014 PRIMA 2014 Annual Conference Long Beach, CA Long Beach Convention Center June 7–10, 2015 PRIMA 2015 Annual Conference Houston, TX George R. Brown Convention Center

OTHER MEETINGS November 4–6 PRIMA Institute 2013 Milwaukee, WI

negligence/fault etc. The greatest tool to mitigate claims cost is to get the claimant returned to work early and safely. Period. And the goal of all return-to-work programs should be to help the injured worker heal faster and more completely. And do not ever allow an entity to use the workers’ compensation system to solve its HR problems. Those battles must be saved for another day. To conclude, I will paraphrase one of my favorite fables: A truck in New York City gets stuck under the entrance to the Holland Tunnel. City engineers expend hours trying to figure out how to get the truck unstuck while simultaneously causing the least amount of damage. Naturally, no one can agree on what is the best course of action. It is rumored that a girl in a passing car sees the truck stuck in the viaduct, and says to her dad, why don't they let the air out of the tires? Remember: both risk and claims management are involved but neither is complicated. Never miss a chance to step back and get a different perspective. Joseph T. Peckham, Esq., is an independent attorney and consultant. He is a former member of PRIMA’s board of directors. Peckham has been a civil and criminal defense attorney, risk and insurance manager for a mid-sized county in New York’s southern tier region and vice-president of a TPA.

UPCOMING CHAPTER MEETINGS

FOOTNOTES

Chapter meetings are listed on a space-available basis. For a complete list of PRIMA chapter meetings, visit www.primacentral.org. For information on a specific meeting, please contact the chapter directly.

1 For purposes of this article, I am defining a claim as a financial loss of some magnitude, outside of routine operating expenses.

Arizona

February 7

Georgia

January 9

Minnesota Missouri

January 10 April 10

2 For those readers that have spent their entire lives below the snow-belt, these mats are a sign of winter. Usually brown in color, the mat is rubber backed and fairly pliable. Its primary function is to capture and trap snow and ice from the footwear of a building’s entrants. Unfortunately, these mats often substitute the slip/fall hazard of melting snow with a trip/fall hazard of an askew mat. 3 Of course, no public entity meets this description.

To have your chapter meeting listed on the PRIMA Web site, contact Bles Dones at bdones@primacentral.org.

PUBLIC RISK | JANUARY 2013

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Advertiser Index

ADVERTISER INDEX Aon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Back Cover DriveCam. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 9 Genesis Underwriting Management Company.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Front Cover Markel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 12 Midlands Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 16 Munich Reinsurance America.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 13 States Self-Insurers Risk Retention Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover

Has your entity launched a successful program? An innovative solution to a common problem? A money-saving idea that kept a program underbudget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

FIND US ON FACEBOOK!

Keep up with whatâ&#x20AC;&#x2122;s happening at PRIMA and connect with your risk management peers! Visit us at www.facebook.com/primacentral.

JANUARY 2013 | PUBLIC RISK

Chapter Spotlight

TENNESSEE CHAPTER CREATES “INFOMERCIAL” TO ATTRACT NEW MEMBERS From time to time, PRIMA highlights one of its chapters in a feature column titled, "Chapter Spotlight." Has your chapter: • Celebrated a milestone? • Participated in a charitable cause? • Increased participation and membership?

hile email blasts and mailed brochures are a common way chapters recruit new members, the Tennessee Chapter of PRIMA decided to create an online video to showcase its offerings in a unique way. “TnPRIMA: Your Key to a More Effective, Efficient and Professional Organization” was developed to share information about the chapter with members, potential members and affiliated associations of public entity professionals, such as the Tennessee City Management Association and the Tennessee Government Finance Officers Association.

• Held a great event? • Done something remarkable? If so, we'd like to hear from you for this exciting column, as PRIMA shines the spotlight on its chapters. To be considered for the Chapter Spotlight column, email Jennifer Ackerman at jackerman@primacentral.org.

“Many mayors, board members, city/county managers and even risk managers have heard about TnPRIMA but they often do now know or understand the benefits of joining,” said 2012 Tennessee Chapter President Michael Fann, ARM-P. “This video, produced by Chapter Vice President George Dalton, can be a quick and easy method of showing key decision-makers, who are in control of the budget and public entity operations, how participation in our organization can be beneficial.”

“Depending on resources, this type of video could possibly be developed for little-to-no cost,” he said. “The biggest cost driver is usually the time spent filming and editing. Most organizations have at least one person with a consumer-level video camera and most new computers are equipped with consumer-level video editing software.” In addition, there are various low-to-no cost video sites on the Web, like YouTube or Vimeo, where the video can be hosted. One other item worth noting, said Fann, is that this project is limited only by the chapter’s imagination. “In the future, the level of information sharing can be expanded, by possibly developing short 5-to-10 minute video podcasts promoting public sector risk management issues, new risk programs or just a ‘how-to’ video,” said Fann. The video can be viewed on the chapter’s Web site at www.tnprima.org. For more information on the Tennessee Chapter of PRIMA’s chapter video, contact Michael Fann at mgfann@thepool-tn.org.

Fann goes on to say that in the digital age, it is important for chapters to identify and embrace new and innovative ways to communicate with their members, participants and potential members. The significance of TnPRIMA’s online video is that it adds a critical, additional tool to the chapter’s communication toolbox. The chapter’s video is something that could be easily transferable to any chapter, said Fann.

PUBLIC RISK | JANUARY 2013

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JOIN US AND BECOME A PROUD

MEMBER-OWNER I N O U R N AT I O N A L P U B L I C

ENTITY RISK MANAGEMENT

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States members and staff gather with 2012-2013 PRIMA president, Dan Hurley (first row, center), also a States member, to support public entity risk management now and into the future.

We know the challenges you face... States provides its member-owners with a long and proven history of

reliability, accountability, and well-earned trust. STATES OFFERS YOU: • A broadly interpreted excess liability coverage form that is second to none in the industry. • Premium stability and sound financial results for our partner members – member premiums are investments in their own Company. • Excellent claims and loss control support, including on-site. • Specialized public entity-oriented services from experienced, service-driven professionals. FOR INFORMATION CONTACT: States Self-Insurers Risk Retention Group, Inc. at 1-800-640-0345, extension 3310, or visit our website at www.statesrrg.com

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