Comp not immune to effects of social inflation: Panel

ORLANDO, Fla. — From nuclear jury verdicts to an increasing number of class-action settlements in the millions, social inflation has become a major concern for the property and casualty insurance industry and is now being felt in workers compensation, panelists said Monday.

“We’re now starting to see a trickle-down effect from social inflation getting into our world of workers compensation,” Dennis Tierney, Norwalk, Connecticut-based national director of workers compensation claims for Marsh, said at the Workers’ Compensation Educational Conference.

Workers comp claim severity has increased, partly because of medical providers expanding claims, “influenced” by the liability environment, he said. Exclusive remedy defense is also an area to watch, he said.

“Plaintiff attorneys continue to look for ways to get certain claims outside of the workers comp arena and into the tort arena because there they know they have the potential to get one of those nuclear verdicts,” Mr. Tierney said, referring to the trend of more workplace injury claims turning into negligence lawsuits, a weakening of exclusive remedy allowable in some states under certain conditions.

There has been some “carving out” of employer liability claims in workers compensation, said Bill Liebler, New York-based chief claims officer for North America at Marsh. “Stay alert in that regard, because that’s where the real money is for the plaintiffs attorneys,” he said.

Mr. Tierney cited a $411 million jury award to a Texas scaffolding contractor worker who was severely injured at a refinery in Louisiana. “That started as a workers comp claim,” he said of the April verdict, which faulted the company.

“Attorneys representing workers, they’re adapting their strategies to the current legal environment, focusing on that emotional piece, which is again, something that’s driving social inflation in the nuclear areas,” Mr. Tierney said.

Several factors are driving social inflation in workers comp, according to Patrick Hiles, corporate senior vice president, workers compensation claims, for Safety National. As the top three, he listed social media, a plaintiffs bar that heavily advertises services for injured workers and “unrealistic expectations of the workers compensation system.”

Lawyer involvement in a comp claim can lead to a 60% increase in indemnity and medical costs, not including defense-related expenses and plaintiffs attorneys fees, and can lengthen the average claim duration from 300 days to 900 days, according to Mr. Hiles, who added that attorney involvement can lead to more “complex” settlements, life-care plans and mental health evaluations.

“It does have the potential to grow the claim and create more complexity,” he said.

Regulatory changes are driving up comp claims costs, according to Mr. Tierney, who said one example is the expansion of presumptions, especially for mental injury claims historically not compensable. Connecticut and New York in recent years have expanded mental injuries in their workers comp regulations.

Given the challenges, employers can manage the risk to their workers comp program with enhanced safety protocols, culture and wellness programs and better coordination with third-party administrators managing claims, according to the panelists. Data analytics, which can predict claim severity and complexity, also should be a focus, they said.

Using predictive modeling, “we can pretty quickly understand the DNA of a claim that is going to be a bad one,” Mr. Liebler said.

Such claims are the ones “you probably ought to keep an eye on,” said Mike McCool, Atlanta-based U.S. chief casualty claims officer, Marsh McLennan.

Taking concrete, well-established “actionable steps” in managing such claims is key, Mr. McCool said, adding that they “need to be managed well, from the moment that claim is identified until the date of that claim is settled.”