A Proactive Approach to Claims

Obviously, no one ever wants to have a claim filed against them. That’s why it’s important to know what do before a claim is filed.

On May 15, 2018, Jeff Coleman, PE, FACI (The Coleman Law Firm) spoke on how to recognize an incident that could become a claim, and how to manage the incident before it progresses to litigation. He also gave tips on how to share lessons learned with your staff.

Note that this is not a comprehensive summary of the law, and legal counsel should be consulted for specific questions on how these topics apply to each situation.

Here are some takeaways from that presentation.

On managing claims and incidents

A claim is not the same as an incident:

  • Claim: “A demand for money or services alleging a wrongful act, error or omission”
  • Incident: “an situation that could likely lead to a claim”

The cheapest claim is the one that is resolved before it becomes a claim

So

  • You need system to identify incidents as early as possible

Which requires

  • A “safe” culture—one in which there are no negative consequences for reporting a potential problem

And you need to

  • Track potential claims/incidents, and manage them to resolution just like you would manage any other aspect of your business
  • Conduct an honest investigation: determine did we screw up or not?

But

  • Do not use e-mail or write memos documenting your findings, especially if it looks like there’s going to be a claim

Because

  • All written and recorded material is subject to legal discovery unless it’s addressed to your attorney and “prepared at their request”. This has to be real. You can’t just copy your attorney on every memo and expect it to be privileged information.

But don’t ignore the value of what you can learn. You can

  • Have a meeting and phrase your lessons learned as general Best Practices.

On working with insurance companies:

  • Change carriers only with caution. Carriers treat long term customers better: They know they’ll have a chance to make back a claim with future premiums.
  • Remember, loss history=defense costs + claims payments. People tend to forget that defense costs are part of the equation.
  • The insurance industry is cyclical. Work with established players.
  • The right broker is critical. The broker should have knowledge of: the markets, your business, as well as policy and coverage options.
  • Meet your underwriter and claims managers. The more they understand your business, the better off you are.
  • You have more power to select a defense attorney than you think
  • Find a carrier that has “pre-claim assistance” that pays for an attorney to help you with a claim before it becomes a claim, as well as “mediation credit” if available.
  • When choosing a plan, consider your options:
    • Limits
    • Deductible
    • Cancellation of policy (“short rate” or “pro rata”)
    • Project policy
  • The application: Take care in filling it out. Be completely honest. Then do not share it unless absolutely required.
  • How much insurance is enough? Remember that once the policy is exhausted you have to pay. $5 million is probably the minimum these days. But no one carries enough for the “mega screw up”
  • Report any personal injury. Always.
  • For other incidents, ask the carrier to specify the characteristics of incidents they want reported to them.

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