The frequency and severity of general liability claims will likely pick up in the near-term as the economy continues to expand, and over the longer-term as new technologies gain greater acceptance.

Recognizing this trend, smart buyers – partnering with their agents, brokers and insurers – are fine-tuning their risk management programs today, to better control the total cost of general liability claims tomorrow.

To guide this process, it is helpful to understand that general liability claims are becoming more polarized, with distinct trends in High Severity and High Frequency claims:

  • High Severity claims typically account for approximately three percent of a general liability policyholder's claims, but drive about 60 percent of total claim costs. These claims are becoming increasingly complex.
  • High Frequency claims represent the remaining 97 percent of claims and 40 percent of claim costs.  These claims have broad trends that are increasingly manageable with the right approach.

Understanding the cost drivers and best claims management practices for each of these claim types will help buyers better manage the total cost of general liability claims.

High Severity General Liability Claims

The cost of High Severity claims may increase as plaintiffs' lawyers expand their efforts to add diagnoses to catastrophic losses as well as increase the complexity of more moderate claims.    

Plaintiff attorneys look to build on the general and economic damages through several techniques, including:

  • Alleging additional injuries that add complexity and cost to otherwise moderate cases. We see a trend of using diagnoses that are trendy in terms of news coverage and difficult to prove. Two such trends include Traumatic Brain Injuries (TBI) and Post Traumatic Stress Disorder (PTSD).  TBIs have been covered heavily in the media in regard to football-related injuries. They are difficult to assess and measure, ranging from simple concussions to severe impairment and create wide variation in general damage awards.  In fact, there are more than 38 scales for measuring the severity of TBIs, according to the Center for Outcome Measurement in Brain Injury.  PTSD is also difficult to assess and has received significant coverage related to our returning veterans.   
  • Including Life Care Plans in less catastrophic general liability claims.  Such plans can be appropriate for some catastrophic claims, where they can help value and quantify the long-term costs of a significant injury.  However, we are seeing the call for such plans in claims where they are clearly not warranted.
  • Receiving training from, and using testimony of, national "experts" in specific claim types to capitalize on optimal loss value-creating techniques.  Such techniques can include aligning symptoms with diagnostics early in the life of the claim.
 

//

Understand what drives the cost of High Severity – also known as high exposure – general liability claims.

These trends don't have to impact total general liability costs.  The best practices for effectively combating them to better manage High Severity general liability claims include:

  • Triage capabilities – Quickly getting a claim to a professional with the right experience and case load is one key to effectively managing its outcome and cost.  This requires the right expertise and analytics.  
  • Strong expertise – An insurer must invest in the very best people with the very best training.  High Severity claims are dependent on strong subject matter expertise in coverage, liability, medical and legal issues. 
  • Hyper-segmentation – That expertise should reflect the specific industry and general liability issue involved in each claim.  A general liability claim from an energy company is far different than one from a hospitality policyholder.  Likewise, general liability claims involving premise, product or contractual liability are each unique and require a different set of skills to effectively manage its outcome.  Lastly, specific injury types require dedicated support.  Knowledge of experts and how they have testified in past cases is critical. 
  • Legal management – Legal spending drives general liability costs.  Buyers, agents and brokers should understand the ways an insurer manages legal spending and outcomes.  Can the insurer analyze potential legal providers to suggest the one most likely to deliver the best outcome cost-effectively given the specific nature of a claim and its jurisdiction?   
  • Expert resources – Bring the right resources to each claim to better control its total cost.  From medical directors who can assess alleged injuries, to nurse case managers who can review proposed Life Care Plans, to the best external experts to testify for the defense, buyers and brokers should understand the expert resources their insurer will use to manage general liability claims.
 

//

Learn how to best manage High Severity – or high exposure – general liability claims.

High Frequency General Liability Claims

We're seeing three interesting trends with High Frequency general liability claims that may impact total costs, unless carefully managed:

  • These claims typically involve high-frequency attorneys, who appear to value settlement volume over settlement amount.  As a result, there tends to be a low volume of actual trials with these claims, as these lawyers appear to target insurers who will settle rather than invest the time and resources to truly manage High Frequency claims. 
  • These claims often include soft – or in some cases, more overt – fraud.  Once again, it appears high-frequency lawyers are testing insurers to find those who lack the resources and resolve to manage High Frequency claims.
  • The medical tests and procedures associated with such claims often focus on finding a diagnosis, rather than treating an actual condition.

The keys to effectively managing High Frequency general liability claims include:

  • A disciplined risk tolerance that holds firm to a fair evaluation.  The threat of litigation or trial cannot change the fair evaluation. 
  • A repeatable process with tools that support consistent evaluations and negotiations, including general damage and medical evaluation.
  • The right measures and controls, including strong quality assurance and evaluation/negotiation coaches for claim managers.

Trends are underway that may increase the cost and frequency of general liability claims, unless buyers work with their intermediaries and insurers to fine-tune their risk management program.

About the Author

Glenn Shapiro is chief claims officer of Liberty Mutual's Commercial Insurance strategic business unit.  He manages an organization of more than 4,500 claims professionals. Teams are dedicated to managing a full range of property, general liability, workers compensation and commercial auto claims; developing the practices and tools needed to arrive at the best possible claim outcome; and continuously improving operations and service delivery. Glenn can be reached at glenn.shapiro@libertymutual.com.

Additional Information:

 

 

//

Understand the characteristics of a High Frequency general liability claim.

 

 

//

Learn how to best manage High Frequency general liability claims.

 

 

//

Hear about Liberty Mutual's general liability claims paying philosophy.

NOT FOR REPRINT

© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.