Hot Topics of the PLUS Symposium

Nikole Maus, Assistant VP BMS Specialty Casualty Team, discusses the themes that dominated the PLUS Medical Professional Liability Symposium 2012:

The resounding theme at the 2012 PLUS Medical Professional Liability Symposium was that change is coming and how do we prepare for it? The conference kicked off with rather a ‘doomsday’ forecast by Cyber Security Expert, Juval Aviv (former Israeli Secret Service and a leading authority on terrorist networks, and their inner workings). He surely incited many attendees to create their disaster plans on their flights home! However, more seriously, whether it is through ACO’s, Technology, Changing Regulation/Litigation, Claim Trends or ERM, there are changes set in motion that even a strike down of the PPACA will not prevent.

It is critical for all of us in the Healthcare space to closely watch the changing demographics of Healthcare Providers and the impact (and exposure) the new technologies of the age will have on this business. The panelists gave many examples of how these changes will drive the frequency, severity and types of MPL claims brought forth in the coming years. Furthermore, the insertion of ACO’s and the coming together of Hospitals and Physician Groups may gray the lines of the insurance and reinsurance coverages currently in place.  The reinsurance industry needs to ensure we are responsive to the integrated healthcare system – at all spectrums.

Fundamentally, as an industry, we must be ahead of the curve to ensure our clients have the coverages in place to help navigate them through the changes to come.

A.M. Best 2012 Review & Preview Conference – P&C Highlights

Brett Bordelon, VP BMS Analytical Services, discusses the recent A.M. Best Review & Preview Conference and below is his summary report from the event.

A.M. Best 2012 Review & Preview Conference – P&C Highlights. This year, A.M. Best held its Review & Preview Conference on March 12-14 in Naples, FL. At the conference, A.M. Best and other insurance industry leaders provided their insights on the industry’s performance in 2011 and viewpoints on where the industry is heading in 2012. Senior A.M. Best analysts also gave presentations rich with insights on the rating process and rating methodologies.

Click on the link to read BMS’ P&C-focused recounting of many of the conference’s highlights.

Click here for our Analytical Services information page.

The Med Mal Reform Bill

Urban Friesz, BMS’ Vice President of Claims discusses his research on the recent med mal reform bill that passed in the US House of Representatives last week:

The US House of Representative passed legislation on March 22, 2012, that the Congressional Budget Office projects will reduce direct and discretionary spending by $46.6 billion over the 2013-2022 period (H.R. 5, Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2011).

The bill, labeled H.R. 5, contains significant implications for medical malpractice insurance carriers and, in a prior form, could have meant big changes in how insurance is regulated in the United States. The McCarran Ferguson repeal amendment, which is part of the broader bill, has since been narrowed to exempt property and casualty and life products. The McCarran-Ferguson ACT of 1945 (15 U.S.C.A. § 1011 et seq.) recognized authority among the states to regulate the business of insurance unless federal law specifies otherwise. Broad repeal of this act would have likely meant larger regulatory oversight by the federal government under the Commerce Clause of the US Constitution.

The Bill Summary & Status published on the Library of Congress website lists the following elements of the bill:

• Sets conditions for lawsuits arising from health care liability claims regarding health care goods or services or any medical product affecting interstate commerce.

• Sets a statute of limitations of three years after the date of manifestation of injury or one year after the claimant discovers the injury, with certain exceptions.

• Limits noneconomic damages to $250,000. Makes each party liable only for the amount of damages directly proportional to such party’s percentage of responsibility.

• Allows the court to restrict the payment of attorney contingency fees. Limits the fees to a decreasing percentage based on the increasing value of the amount awarded.

• Allows the introduction of collateral source benefits and the amount paid to secure such benefits as evidence. Prohibits a provider of such benefits from recovering any amount from an award in a health care lawsuit involving injury or wrongful death.

• Authorizes the award of punitive damages only where: (1) it is proven by clear and convincing evidence that a person acted with malicious intent to injure the claimant or deliberately failed to avoid unnecessary injury the claimant was substantially certain to suffer; and (2) compensatory damages are awarded. Limits punitive damages to the greater of two times the amount of economic damages or $250,000.

• Denies punitive damages in the case of products approved, cleared, or licensed by the Food and Drug Administration (FDA), or otherwise considered in compliance with FDA standards.

• Provides for periodic payments of future damages.

As with any political issue, there are arguments for and against tort reform. In theory, constricting the universe of exposure reduces uncertainty and allows medical liability insurers to more accurately price insurance for practicing physicians and medical providers. Many argue that this reduction in risk also discourages practitioners from ordering unnecessary tests and procedures that serve to protect them from liability in the event of a lawsuit for medical malpractice (defensive medicine). Opponents of the bill argue that establishing caps on liability awards denies victims of medical negligence fair compensation for their injuries. They also refute that these reforms significantly reduce the cost of providing medicine.

As of March 28, 2012, govtrack.us predicts HR 5 has a 13% chance of passing congress. The related bill in the Senate S 1099 is showing an 8% chance of passing.

If you have any comments/questions about my blog or would like to contact me, please email: urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.

BMS launches global construction initiative

BMS announced the launch of its global construction initiative, responding to the needs of its clients around the world.

Gavin Madell, previously Director of Price Forbes’ Power and Construction business, joins the BMS Wholesale, Risk Solutions Team to lead the new initiative.

Click here to view the BMS Wholesale, Risk Solution Team Home Page

Media Links to this story:

Business Insurance Feature, click here to access the Business Insurance website

Inside Fac Feature, click here to access the Inside Fac website

Insurance Day Feature, click here to access the Insurance Day website

Global Reinsurance Feature, click here to access the Global Reinsurance website

Insurance Journal Feature, click here to access the Insurance Journal website

Brand value: The future is Apple

The big news this week is that Apple has joined the highest echelons of corporate life with a market capitalisation in excess of $500 billion. It is now worth (based on this measurement at least) more than Microsoft and Google combined, or about the same as Poland (GDP $530 billion).

Perhaps, slightly surprisingly is that Apple’s market capital is not based solely on brand. It holds $30 billion in cold cash and $67 billion in long-term investments. It also has hard assets of $138 billion. However, that still leaves $265 billion in intangibles and perfectly illustrates the challenge facing risk managers today and in the future.

Historically, insurance has been purchased to cover buildings, contents, stock, equipment and even traditional liabilities such as Employers Liability of Public/Products Liabilities. This reflected the value of those tangible assets. But as we have commented on elsewhere on our site, these days there is so much more value in intangible assets (such as intellectual property rights and goodwill) than in tangible assets. And insurance just hasn’t kept pace with the change in where the majority of the value lies.

Most risk managers can lay their hands on their “All Risks” material damager and business interruption insurance, but how many have an “All Risks” Intangible Asset Protection? The challenge for risk managers and brokers alike is to design insurance programmes to provide this protection. It may require new tools (like Data Breach coverages, Intellectual Property protection and Cyber Insurance) and new understanding, but if risk managers really do want to live up to their name it needs to be tackled right now.

BMS launches new global construction initiative

BMS Group, the independent global broker, announces today that it has launched a new global construction initiative. Gavin Madell, with over twenty years’ experience, will lead the new team. The construction team will provide an enhanced service for BMS’s clients, and demonstrates the company’s on-going commitment to building new product lines across the business.

Gavin joins from Price Forbes, where he was previously Director of its Power and Construction business. He will be supported by David Lazell on the General Liability side, and Paul Hutchinson on the Professional Indemnity side. Steve Ferns, who joined BMS five months ago from Lockton, will head up Construction Claims. All members of the team have extensive experience, with particular focus on the US, Canada, Asia Pacific and Africa.

Nick Cook, CEO BMS Wholesale, today commented:

BMS is committed to continuing our expansion of the global wholesale division with a range of products to best fit our clients’ needs. Gavin Madell is the latest of a number of experienced producers to join BMS Wholesale. He brings with him vast expertise in this sector, and I look forward to working with him to build our Construction practice.”

China’s Cyberwar Skills

Rupert Alabaster, Director BMS Professional & Financial Servicesresponds with his thoughts following  the  US report on China’s cyberwar skills, a risk to military  – profiled by BBC News, 8 March 2012. Rupert will be establishing a regular blog on the themes of Cyber Risk, Intangible assets and the insurance market.

There is more and more talk of the next confrontation being fought in cyberspace rather than with soldiers. Certainly, there is a concern that key infrastructure from utilities and government through to emergency-responder networks and banking systems maybe targeted.

And it will not obviously be one nation state versus another, at least on the surface. Rather all sorts of cyber groups may be at work infiltrating systems, manipulating, stealing and changing data.

As more and more companies become aware that it is not just a lone hacker sitting in their bedroom that could be interested in what is on their servers, there is a much heightened focus on cyber security. In turn, risk managers are being asked to buy cyber insurance as protection against security breaches. But – and it is a big but – cyber insurance policies are not all the same and few, if any, are specifically designed to protect against a coordinated attack on behalf of a State.

The problem is that most cyber policies carry a version of the traditional War/Terrorism exclusion. They vary in their language but generally the intent is not to cover coordinated State or politically motivated attacks. And with the US declaring that State coordinated cyber attacks could constitute an act of war (BBC News, 1 June 2011) you can bet that underwriters will look closely at this exclusion in the event of a big claim.

Cyber is not only the new front for war and criminal activity, it is also at the vanguard of new risks being identified and insurances designed. It is early days and the present crop of coverages have a long way to go before risk managers can sleep easy at night.

Click to view the BMS Wholesale, Professional and Financial Services homepage

Bad Faith Claims Handling for Natural Disasters

BMS’ Vice President of Claims, Urban Friesz discusses bad faith claims handling for natural disasters. He will be establishing a regular client services and claims themed blog.

In light of the immense storm activity we experienced in the South and Midwest last week, I thought it might be timely to revisit an article titled 3 Steps Insurers Can Take To Avoid Class Action Litigation Stemming From Natural Disasters, which was published in October 2011 on Property Casualty 360°, a National Underwriter Website.

As a reinsurance claims specialist, the part of the article that drew my attention dealt with claims for bad-faith. Most treaty reinsurance agreements include coverage for the insurer’s liability for loss or damage arising because of certain failures of a company in handling a claim. Two of the three recommendations included in the article involve claims handling. As a general rule, claims handling methodology should satisfy fair claims handling practices as required by each state as well as meet the prescribed duty of care required of the relationship between policyholder and insurer. A handy 50 State guide for claims handling practices assembled by Lynch & Associates can be found at Claim-Handling Guidelines.

Insurance companies typically have claims handling manuals which set forth acceptable claims handling practices and procedures in the acknowledgement, investigation and settlement of claims. In addition to these standard elements of the claims process, these manuals often prescribe additional steps to be taken in the event of a full or partial denial of coverage or other claim dispute. So, as long as you have a sound claims handling manual and your claims staff adhere to these practices, you should be good right?

Well….what about the scores of independent adjusters and appraisers that get involved when disaster strikes? Because of the difficulty in planning and deploying claims resources for sudden catastrophic events, most insurance companies rely heavily on local or national independent adjusting firms to help adjust catastrophe claims. What happens when these adjusters don’t adhere to a company’s claims procedures or fail to operate within the scope of the service agreement between the insurance company and the adjusting firm? What happens if the “failure” in claims handling mentioned above is attributed to actions of an independent adjuster?

The Vermont Supreme Court stated in Hamill v. Pawtucket Mutual. Ins. Co., No. 2005-025, 2005 WL 3556694 (Vt. Dec. 30, 2005) that, because the conduct of an adjuster acting within the scope of his or her authority as agent for the insurer is imputed to the insurer, the insurer is subject to liability for the adjuster’s mishandling of claims in actions alleging breach of contract or bad faith. An action for breach of contract or bad faith stems from the terms of the insurance policy itself or the implied covenant of good faith and fair dealing which commonly exists in the contract between an insured and his insurer. Absent privity of contract with the insured, the independent adjuster does not owe an independent duty to the insured unless the insured is suing for an intentional tort such as fraud or deceit (Dumas v. ACCC Insur. Co., Eleventh Circuit Court of Appeals, Case No. 09-13027). As a result, the insurer is often on the hook for activities of an independent adjuster when they lead to bad faith allegations.

It’s hard to think about bad faith claims handling in light of the devastation and tragedy experienced across parts of the country last week. Insurance companies are diligently deploying resources and capital to help individuals and communities in need as a result of these storms. Nonetheless, taking a few moments to review your service agreements with independent adjuster firms and formalizing expectations may save you time and money later.

If you have any comments/questions about my blog or would like to contact me, please email: urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.