There are many aspects of workers’ compensation insurance that employers must understand to ensure smooth functioning of this employee welfare program and avoid unnecessary litigation. The importance of medical records review as a means of establishing the legal validity of the workers’ comp claim cannot be undervalued. Employers must also be aware of options available to offer them financial protection. Excess workers’ compensation insurance is one such option – it is a useful policy to purchase when regular workers’ compensation is not sufficient to cover businesses. It provides the ideal shelter in the event of a serious workers’ compensation claim in which the claim settlement amount could pose financial hardship for the business. Excess workers’ comp insurance can either cover all workers’ comp losses up to a particular dollar amount, or cover an unlimited amount if the employer chooses the latter.
What are the major benefits of obtaining excess workers’ comp coverage? Self insurance provides the risk manager control over the cost of the organization’s insurance program. Excess workers’ compensation coverage gives them more control over the claims, lowers the cost of workers’ comp insurance, and improves cash flow.
The excess workers’ comp insurer would offer the employer other value-added services such as the following, and work as a partner.
- Guidance in meeting the necessary regulations
- Planning and preparing for emergencies
- Onsite safety checks and reviews
- Workers’ compensation claims management best practices
- Underwriting guidance
- Catastrophic claim management
- Support in managing and controlling jobsite hazards
The excess insurer would want to know about the employer’s workers’ compensation claims that could exceed the self-insured employer’s deductible. The insurance contract will typically state that the employer must report to the excess insurer any time the reserve amount on the former’s workers’ comp claim equals half of the deductible amount. All catastrophic claims will have to be reported, irrespective of the dollar amount of the claim. Any injury that could exceed the self-insured employer’s deductible should be reported. This report should be completed by the third party claims administrator adjuster or the employer’s internal claims adjuster. In case of failure to report the claim in a timely manner, a situation may arise wherein the excess insurer denies coverage or accepts the claim under a reservation of rights that allows them to deny coverage after a thorough investigation. The report provided to the excess insurer should contain information regarding the claim such as the following.
- All injury-related facts
- Whether compensable
- Nature and extent of the injury
- Medical services provided
- Amount already spent on the claim
- Reserves available for the future cost of the claim
- Other offsets of cost
- Subrogation potential
- Medicare/Medicaid issues involved, if any
- Action plan to handle the claim
- Litigation management plan, if required
What should you look for when choosing an excess workers’ compensation insurer? The insurer must be able to provide the above mentioned services. At the same time, they should include the allocated loss adjustment expenses (the cost of handling the claims) in the definition of loss per claim, not just what is paid to the employee in benefits.
Another thing to make sure is that the excess insurance covers all types of claims such as Longshore and harbor workers’ claims, Jones Act claims, railroad workers’ compensation, coal mine workers’ comp, and seasonal/migrant workers’ claims.
Look for an insurer that is flexible in their underwriting. In other words, such an insurer would allow your organization to set the self-insurance retention cap. In addition, they would be willing to endorse their policy to eliminate exclusions that could affect your coverage.
As a medical chart review company for workers’ comp lawyers, we understand that state laws vary and it is best for employers to consult with their attorney, insurance broker, or some other qualified professional before choosing an excess workers’ compensation insurance plan.