Proactive Management of Mold Claims Needed Mold claims have become a runaway crisis in todays property-casualty industry, with an explosion of new cases, legal developments and scientific theories that insurers must analyze and address to ensure the most favorable outcomes.
These claims are often complex in nature and expensive to handle, and can present an insurer with the threat of mass tort actions or serial litigation.
With both the frequency and severity of mold claims on the rise, insurers need to take steps toward true process management to obtain the best outcomes now, and to enable improved claims handling in the future.
In the effort to produce the best possible outcomes on mold cases, insurers should consider bringing new methods to the processes they use to manage the claims. In addition, an ongoing and concerted effort should be made to collect critical information that can be used for long-range planning and continuous process improvement.
Efforts should focus on creating and supporting a centralized claims unit; aligning claims handling goals with outside counsel; and collecting and analyzing data on results to continually reevaluate the effectiveness of legal representation and claims management procedures.
To begin to get a handle on the effective management of mold claims, the insurer may consider establishing a centralized and specialized claims work unit.
Since the litigation landscape and medical opinions about the effects of mold seem to evolve daily, claims staff must stay current with the latest trends while still performing their primary taskimproving claims outcomes.
Rapid changes in the field make it more difficult for an insurer to maintain consistent positions on these claims as compared to other causes of action facing the company. Therefore, communication flow among claims handlers and executives, and between the insurer and counsel, may be even more important than that required by less complex claims in a more stable environment.
Knowledge sharing, both within the company and between the company and outside counsel, is critical to support consistent and effective claims management. Employing technology-based tools that enable real-time communication within a claim file supports the best utilization of in-house expertise, and can actually decrease administrative burdens.
For example, Web-based systems that build online file documentation not only permit members of an insurers claims staff to collaborate better with outside counsel, but also make in-house total file review procedures easier.
In a highly collaborative, communication-rich environment, an insurer can begin to manage the volatile mold claim book more efficiently and effectively.
It is well known that taking a proactive role in claim management and adhering to clearly stated litigation guidelines can help prevent inappropriate indemnity payments, or leakage, and unnecessary claims expenses, in turn improving loss ratios.
Ideally, collaboration between counsel and the company should address legal strategy, the specific tasks critical to the strategy, and a timeframe to complete them as well as a financial plan for legal services and expenses.
There are solutions that can be employed to monitor progress and control costs as soon as a mold claim file is opened.
Many insurers have implemented technology solutions to assist with strategy definition, budget preparation and monitoring, and adherence to claims handling guidelines. The automation of these functions helps to conserve valuable staff resources by freeing them to focus on affecting strategic variables.
When a commitment to up-front strategic partnering is supported by technology tools, effective claims management and improved outcomes become attainable goals. Claims department personnel and attorneys can then function as members of a "virtual legal team" with a common focus on quality outcomes and an eye on the insurers bottom line.
Engaging outside counsel with expertise and a track record of success in mold claims is no longer just an option, it's a necessity. Higher fees are typically justified by the overall savings and quality of outcomes that expert firms can offer the insurer. But how does a company know which law firms are the best when it comes to mold cases?
Technology and processes that capture both loss and expense data and performance ratings by law firm can provide the support for deciding which outside counsel to engage for the most effective mold litigation.
Quantitative data on legal fees, expenses, indemnity payments and totals can be accumulated and extracted for law firms, and claims staff can provide subjective ratings on expertise, adherence to guidelines and the complexity of the case, by firm as well as individual attorney.
With both the subjective data and the hard numbers on loss payments and legal costs, claims adjusters can make–and support–informed choices of counsel.
In addition to using technology tools to support collaboration and to assess the cost effectiveness of legal representation, the insurer can, at the same time, improve its strategic focus. The same tools used to support operations can build a base of historical data, including claims characteristics and the disposition of closed matters, drawn from a large number of mold claims.
This information allows the company to reevaluate and refine claims management strategy and procedures based on experience, so that they are best attuned to overall corporate goals. With such information at hand, strategic goals for claims handling are aligned on an enterprise level.
Automated systems that collect the claims data must be flexible, so the insurer can tailor them to meet its unique claims handling needs and generate on-demand reports that accommodate a company's customized data requirements.
That is, the insurer should be able to ask a question based on any number of data fields, and to extract quantitative information on all categories of costs–legal fees, claims expenses and loss payments–and their totals.
When such an automated system is in place, the claims executive is empowered to make informed, supportable strategic decisions.
Industry-wide mold claims counts could well climb into the hundreds of thousands, and damage awards on single cases have already run into the tens of millions. With such losses on the horizon, insurers need to take a long view towards process management and technology solutions to control the course of mold claims. Historical patterns may indicate actions that differ from their corporate bodily injury/property damage claims management processes, or even from those used for other classes of environmental claims.
It is impossible to predict losses, legal fees and expenses, control avoidable costs, and set reserves in a vacuum. By using available data collection and reporting tools, however, insurance companies are in an empowered position to analyze trends and formulate strategic responses.
The industry must embrace a range of claims management procedures and technology-based solutions in order to engage in true process management and eliminate avoidable costs. In these early stages of mold litigation, aggressive changes in claims management and the utilization of technology tools can pay bottom-line dividends for years to come.
Derek Koch is Vice President of Products and Services of Visibillity, a Chicago-based application service provider that delivers litigation management solutions to the insurance industry. He can be reached at Derek.Koch@Visibillity.com
Reproduced from National Underwriter Edition, February 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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