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Self-insured employers purchase excess insurance coverage to limit the risk of exposure to catastrophic injuries. This is often accomplished by having a workers compensation policy with a high deductible. Common deductibles for excess insurance are $250,000, $500,000 and $1,000,000. The self-insured employer needs to carefully analyze the amount of risk that is financially feasible before deciding on the deductible for the excess insurance.
The excess insurer has a strong interest in knowing about the workers compensation claims that have the potential to exceed the self-insured employer's deductible. The insurance contract will normally state the self-insured employer must report to the excess insurer any time the reserve amount on a self-insured employer's workers comp claim equals half of the deductible amount. .[WCx]
The excess insurance contract will call for the self-insured employer to report all “catastrophic” claims, regardless of the dollar amount of the claim. This could include
- Fatalities
- Amputation of a major extremity
- Spinal cord – quadriplegic, hemiplegic and paraplegic injuries
- Brain and brain stem injuries
- Comas
- Burns over more than 25% of the body
- Severe disfigurement and scarring, where applicable
- Loss of eyesight
- Loss of hearing
- Heart attacks
- Strokes
- Multiple surgical interventions
- Rape and sexual assault
- Post-Traumatic Stress Disorder
- Occupational disease claims
- Non-union of bone fractures
- Damage to organs – lungs, liver, heart, stomach, etc.
This list is not all inclusive. Any injury that has the potential to exceed the self-insured employer's deductible should be reported to the excess insurer. The report to the excess insurer should be completed by the third party claims administrator adjuster or the self-insured employer's internal claims adjuster as soon as the information becomes available that there is the potential for the claim to exceed the self-insured employer's deductible. The failure to report the claim timely (within the requirements of the excess insurance policy) could create a situation where the excess insurer denies coverage, or accepts the claim under a reservation of rights which allows them to deny coverage after thoroughly investigating the matter. .[WCx]
The report to the excess insurer should include the basic information about the workers compensation claim. This includes
- The facts surrounding the injury
- Compensability
- The nature and extent of the injury
- The medical management of the claim
- The amount already spent on the claim
- The reserves for the future cost of the claim
- Subrogation potential
- Any other offsets of cost
- Any Medicare or Medicaid issues
- The action plan to bring the claim to a conclusion
- The litigation management plan, if applicable
The self-insured employer at the start of the excess insurance policy should review with the excess insurer the specific reporting requirements of the excess insurer. A diligent effort by the self-insured employer to comply with the requirements of the excess insurer must be made.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
MODIFIED DUTY CALCULATOR: www.LowerWC.com/transitional-duty-cost-calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.
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