While tools are handy, their functionality depends on them being used wisely. For instance, my chainsaw can help clear a driveway of a fallen tree limb. Used carelessly, it can also perform DIY amputations. A hammer can help me hang that picture in the foyer. A careless move, though, can cause it to smash my thumb. The tool isn't the problem; it is how you use (or misuse) it.

Independent medical exams (IMEs) can be powerful claims management tools for adjusters. They can prove instrumental in exposing suspect claims, challenging dubious causation factors, or detecting malingering. However, like other tools, IMEs are subject to the garbage in/garbage out principle. If the adjuster selects an IME physician who is vulnerable to impeachment, then this does not help the cause of the adjuster, the defense attorney, or the insurance company for that matter. It also poses a setback to claimants or plaintiffs, who may consequently sue the insurance company for bad faith if they feel the adjuster has gamed the IME process in order to reap financial rewards.

What due diligence, though, should adjusters conduct on IME doctors? Beyond credentials and specialization, should insurers or adjusters do any due diligence to see if a proposed IME doctor is genuinely impartial and not just a handy “robo-witnesses” for insurers and the defense bar? If defense counsel nominates the doctor, then must the adjuster do anything further to validate the choice?

Is “Advice of Counsel” Enough?
Many believe that adjusters are entitled to rely on the advice and recommendation of defense counsel. After all, if the IME physician is good enough for the lawyer, shouldn't that be sufficient? If the doctor passes muster by the defense lawyer, then should the adjuster second-guess the attorney?

Bad-faith claims may confront adjusters, claims departments, and insurance companies that botch independent medical examinations, however. Plaintiffs may assert that the insurance company acted in bad faith by selecting an IME physician who was not independent and who was biased towards the insurance company. They may claim inadequate credentials. They may claim that the doctor's financial ties to the insurance industry and defense bar tainted the physician's opinion. They might point to a record of the “independent” specialist always issuing pro-defense opinions. Perhaps a claimant/plaintiff feels the insurance company is engaged in a sham by sending claimants to such a medical practitioner. Any or all of these claimant perceptions may spawn bad faith allegations. Regardless of whether such claims have merit, they cost significant sums to defend.

For this reason alone, insurers must manage the bad-faith risks by adopting reasonable procedures in selecting physicians for independent medical examinations. Beyond this, however, do adjusters have a duty to go beyond rubberstamping the defense lawyer's recommendation?

Does defense counsel's imprimatur, by itself, insulate an adjuster from doing due diligence on a doctor's bona fides, objectivity, and independence?

“Bad-faith litigation examines claims via 20/20 hindsight, as if each claim occurs in a vacuum,” says Michael Spence, a seasoned claims professional from Buffalo, New York. “Blindly agreeing to counsel's expert choice is never a good move and would not help the overall impression of how well the adjuster protected the insured's interest, especially if the insured had no role in selecting counsel.”

Mike Magulick, a partner at Wayman, Irvin & McAuley (Pittsburgh), believes that much hinges on the degree of trust between the claims adjuster and defense counsel. If there is a long-standing relationship where they trust each other's judgment, then he sees no need for any vetting, other than making sure a doctor's specialty coincides with the injures alleged.

Trust … But Verify
Debbie Barlow, claims manager/VP of operations for Paul Frank + Collins Insurance Services (Vermont), agrees that trusting defense counsel is key. However, she still requires a complete C.V. and analyzes counsel's suggestion to use a particular doctor. Barlow also asks how the doctor would present because he or she will likely be an expert witness. She also probes to see how often the doctor testifies for each side (could it appear that most of his business is through a testifying-expert mill?), and so on.

“Adjusters do not have time to babysit their defense counsel,” Barlow adds. “If they need babysitting, [then] they should not be retained.”

A happy medium exists in adjuster “activism” between the extremes of babysitting defense counsel and rubber-stamping every attorney recommendation with the mantra, “We rely on our defense counsel.” Barlow suggests not blindly signing off on every counsel recommendation. In fact, she sometimes discovers information during discussions that indicated the doctor was not the best fit.

There comes a point, however, when the claims adjuster cannot question everything counsel recommends. They (adjusters) will actually try the case. “Remember that defense counsel represents the insured, not the carrier,” Barlow cautions. “So it can never come down to complete direction by the adjuster, as this could spawn a bad faith claim with the argument the adjuster impeded a case's proper defense.”

Third- Or First-Party IME?
Adjusters can use IMEs on third-party liability losses. They are frequently tools in workers' compensation cases. These are third-party contexts. Adjusters can also use IMEs in first-party settings: uninsured motorist (UM) claims for bodily injury, underinsured motorist (UIM) claims and no-fault personal injury protection (PIP) claims. Here, on first-party cases and workers' compensation cases, may lie greater bad-faith risks to adjusters in forgoing due diligence with regard to the suitability of an IME physician.

In first-party cases, adjusters deal with an insurer's own policyholder. Courts can be more exacting in judging whether an insurer acted in good faith by sending the policyholder to a genuinely objective physician or instead, funneling the insured to a “yes-man” practitioner.

One tip is this: Understand the kind of claim you are dealing with when selecting the IME doctor. Regardless of the type of claim, do not waste time, money, or risk bad-faith claims by scheduling exams with doctors about whom you have given very little thought (and about whom you have done zero due diligence).

Does it matter whether the IME issue arises on a third-party versus first-party (for example, UIM) claim? Does a carrier have an added obligation when dealing with its own insured to ensure that the IME doctor suggested by counsel truly is independent and objective?

Spence thinks courts could distinguish between the degree of care the adjuster should take in vetting IME doctors in first-party versus third-party claims.

“Courts allow IMEs because they offer a probative value,” he explains. “An adjuster taking 10 to 20 minutes to discuss with counsel and five minutes to document the thought process seems like prudent due diligence.”

From a good faith prospective, no carrier or claims handler should rely too much on “hired guns” just to save a few hundred dollars and/or always support the carrier's position.

Assess your organization's current use of IMEs. Be sure to think them through to make the best choice as an effective instrument in your claims management toolbox.

Special Reports /

Building Your Silver Linings IME Playbook

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