The New Landscape of Risk That Every Business Should Prepare For

Businesses are facing larger and larger liability claims throughout the country, driven by a number of legal trends that are resulting in bigger lawsuit awards and new risks that many companies are unprepared for.

A recent study by Liberty Mutual Insurance found that the U.S. insurance industry’s liability-related payouts have been growing steadily due a number of factors, including:

  • Higher average claims costs
  • Increased number of claims
  • Higher legal costs and settlements
  • Higher medical costs for injured parties (in terms of hospital, rehab and pharmaceutical costs).

There are a number of trends that business managers and owners should be aware of so that they can take the necessary precautions to protect their organizations to the best extent possible. If you run a business, you should be aware of these trends, some of which could seriously financially damage your organization.

Legal trends

The report first looked at some trends that are not only increasing the amount of litigation businesses must contend with, but also higher awards.

Litigation funding – Outside investors are fronting legal fees to pursue lawsuits on behalf of aggrieved or damaged parties in exchange for a percentage of any ultimate settlements or judgments. In these scenarios, the claimants are more likely to want to take the case to trial and refuse settlement offers.

They may also push for unnecessary medical treatments. Attorneys may also present complex legal arguments that draw out the case and increase legal costs.

Traumatic brain injuries – More plaintiffs are claiming that they suffered traumatic brain injuries even for non-serious incidents. Claiming brain injuries requires additional medical treatment, more frequent doctor’s visits – and even settlements that would pay the person for a lifetime of care.

Higher jury awards – Juries seem more inclined to award higher and higher awards for breach of contract, intellectual property, product liability and wrongful death lawsuits. This is likely due to a growing sympathy from the public – and hence jurors – for injured parties (in their eyes, victims). In 2016 alone, four verdict awards amounted to $1 billion or more.

Medical costs increasing

In many liability lawsuits there is a claim of physical harm that necessitates medical treatment, and costs are on the rise for several reasons:

Medical inflation – Overall medical costs are on the rise. And general liability claims are costly because they can sometimes require years of treatment and rehabilitation for the injured party. Hospital services are increasing, as are drug costs.

Medical management challenges – Insurance carriers have little control over the medical treatment choices and costs of general liability claims. Because of this, it’s easier for the plaintiff’s lawyer to direct medical treatment to favored clinics or doctors. This has driven up medical costs for liability claims exponentially.

Other costly trends

More violence – As active-shooter incidents increase, you should know that more than 50% of them occur in places of business, government buildings or educational institutions.

Technology – Technology is advancing at a rapid clip and with an increasing number of data-driven companies, the use of the Internet of Things, 3D printing, social media and more, there is a whole new area of liability for companies.

Sharing economy – The sharing economy, while good in many ways, has created a lack of clarity about when coverages begin and end. This is forcing the insurance industry to devise customized insurance products.

The takeaway

Each industry has its own unique set of risks and you should work with us to tailor your insurance policies to meet your potential liabilities.

You should also discuss with us how to best put together a strong risk management policy for your organization, focusing on the largest risks that your company faces.

In terms of insurance, you may need specialized policies beyond your general liability policy.

And you may want to consider an umbrella or excess liability policy, so you have the additional protection you may need in case of one large claim.

New OSHA Deadline for Fall Protection

Slips, trips and falls are some of the leading causes of workplace injuries. They account for 20% of all workplace fatalities, disabling injuries and days away from work in general industry.

The injuries and risks are so common that four of the top 10 most cited standards by OSHA are related to fall prevention.

With that in mind, you should be aware of changes to OSHA regulations that take effect Nov. 19, 2018. The changes are part of a larger rewriting of the general industry walking-working surfaces standards that took effect in 2017.

Specifically, those rewritten standards:

  • Clarified definitions
  • Eliminated overly specific application conditions
  • Better organized the requirements
  • Simplified general requirements
  • Aligned more closely with the construction standard, and
  • Gave flexibility to use personal fall protection systems in lieu of guardrail systems.

The fixed ladders provision

That said, one area that was left for later implementation was standards for fixed ladders.

Under the revised standard, cages or wells for fall protection on fixed ladders higher than 24 feet are no longer acceptable. However, there are grandfather provisions and a phase-in period for the new provisions:

  • Fixed ladder systems installed before November 19, 2018 must have a cage, well, ladder safety system or personal fall arrest system
  • Fixed ladder systems installed on or after November 19, 2018 must be equipped with a personal fall arrest system or ladder safety system (cages or wells for fall protection are no longer acceptable).
  • When any portion of a fixed ladder is replaced, the replacement must be equipped with a ladder safety or personal fall arrest system.

What’s happening on the ground

OSHA continues to take the risks of slips, trips and falls seriously and continues to focus on some of the most overlooked areas that can contribute to these incidents. The most cited citations in OSHA’s 2017 fiscal year, which ended Sept. 30, 2017, were for general requirements violations, including housekeeping violations (291 citations), followed by 122 citations for clean and dry floors and 53 citations for walkways free from hazards.

The second-most common citation was for failure to protect against fall hazards along unprotected sides or edges that are at least four feet above a lower level, including:

  • 205 citations for unprotected sides and edges
  • 55 citations for fall protection stairways
  • 49 citations for falls – holes
  • 26 citations for falls around dangerous equipment

The takeaway

OSHA continues to police slip, trip and fall violations with gusto. Based on the statistics, you should make sure to keep work areas and floors clear of obstructions and slip and fall risks.

You should also make sure you have protections in place to avoid any unprotected sides and edges.

Why Your Firm May Need Professional Liability Coverage

A majority of companies are leaving themselves exposed in one crucial area as they take on high-end professional services work.

As more companies’ work is intangible, many firms are missing a critical element of protection for their professional services.

Professional liability insurance in the past was mainly purchased by architects, accountants and lawyers, but with more work like coding, programing and other ventures spawned by technology, the need for this type of protection has grown.

In fact, a recent report by Forbes Insights and The Hanover found that 40% of small business owners believe they face professional risks, yet they have not purchased professional liability coverage as part of their overall insurance package.

Many more firms are in the business of consulting or providing hi-tech services. In addition, the rampant growth of social media has also fueled the need for this type of coverage.

Professional liability insurance, also called errors and omissions insurance (E & O insurance), protects your business if you are sued for negligently performing your services, even if you haven’t made a mistake.

Businesses that need professional services coverage include:

  • Technology and software firms
  • Health, beauty and well-being services
  • Therapists
  • Architects and engineers
  • Real estate agencies
  • Consultants
  • Marketing and advertising firms
  • Medical professionals
  • Wedding and event planners.

Coverage gaps

If you are relying solely on a general liability policy, it may not cover you in the event of a lawsuit over an issue with the services that you have rendered.

Professional liability coverage can be especially important if you have customers who sue you for non-performance of your products or services, or withhold payment due to a contract dispute.

This is especially true if you are:

  • Performing consulting work, training or other services for customers.
  • Involved in work requiring special licenses.
  • Designing, recommending, installing or testing products.
  • Designing software or apps to a client’s specifications.

What it covers

Negligence – Professional liability insurance coverage can protect you and your business against actual or alleged errors and omissions that may occur while providing your professional services.
These claims can include anything from giving incorrect advice or omitting a piece of information, to failing to deliver your service within a desired timeframe.

Legal costs – The policy includes covering your legal costs in defending against a claim. Some insurers will even appoint an attorney to represent you.

Examples

  • A marketing consultant develops a drip e-mail campaign for a retailer that doesn’t generate the number of leads expected.
  • A management consultant develops an organizational strategy to improve communications in a company, but problems persist at the client and communications don’t improve.
  • A software developer fails to develop an app to the client’s specifications.

In all of these examples, a client may sue for damages. And in every instance, a professional liability insurance policy should help protect you and your firm.

Employers Failing to Report Serious Injuries to OSHA, DOL finds

Workplace Injury

A recent federal government report has urged the Occupational Safety and Health Administration to take steps to ensure that employers report fatalities and injured worker hospitalizations.

Many employers may not be aware, but in 2015 OSHA amended its severe-injury reporting rule to require that employers report the inpatient hospitalization of a single injured employee. Prior to the new rule, they only had to report to OSHA if three or more workers were hospitalized.

Other parts of the rule were left unchanged, including:

  • The requirement that employers report to OSHA workplace fatalities within eight hours.
  • The requirement that employers report any amputations or the loss of an eye within 24 hours.

 

Amputations are defined by OSHA as: “… the traumatic loss of all or part of a limb or other external body part. This would include fingertip amputations with or without bone loss; medical amputations resulting from irreparable damage; and amputations of body parts that have since been reattached.”

Inpatient hospitalization is defined as: “A formal admission to the in-patient service of a hospital or clinic for care or treatment. Treatment in an emergency room only is not reportable.”

Between January 2015 (when the new rule took effect) and April 2017, employers reported 23,282 severe injuries to OSHA in addition to 4,185 workplace fatalities, according to the report by the U.S. Department of Labor’s Office of Inspector General.

OSHA shortcomings

But the report found that OSHA had no assurances that employers reported hospitalizations, amputations and losses of an eye – and that only about half of those injuries were reported.

It also found that the agency was not consistent in citing employers that failed to make the reports in a timely manner.

Overall, the report found that OSHA had not been consistent in monitoring employers that it had authorized to conduct their own investigations into what had caused the incidents.

The report had sampled 100 severe injuries and found that OSHA had made inspections in only 37 of the cases and allowed employers to investigate in 63 of the cases.  But in 50 of the 63 cases that employers were supposed to investigate, the report found that OSHA failed to document its decision to allow employers to perform an investigation.

In about 87% of employer investigations, OSHA lacked justification for its decisions to allow employers to perform an investigation or closed investigations without sufficient evidence that the employers had abated the hazards that caused the accident, according to the report.

Employer takeaway

Safety specialists predict that the report could spur OSHA to take a tougher stance and improve its policing.

The report recommendeds that OSHA develop guidelines and train its staff on how to detect non-reporting of these incidents, and issue citations for late reporting or failure to report.

As an employer, you should be diligent about always following OSHA regulations, and now in particular, by following the rules on reporting serious injuries or fatalities.

If you do have a serious injury as defined above, here’s what you need to know:

 

To make a report:

  • Call the nearest OSHA office;
  • Call the OSHA 24-hour hotline at 800-321-6742; or
  • Report online, at www.osha.gov/pls/ser/serform.html.

Be prepared to supply:

  • The name of your business;
  • Names of employees affected;
  • Location and time of the incident;
  • Brief description of the incident;
  • Contact person and phone number.

NLRB Moves to Restore Joint-Employer Standard

The National Labor Relations Board has issued a proposed rule that would roll back an Obama-era board decision on joint-employer status for companies that hire subcontractors or use staffing or temp agency workers.

The decision by the NLRB in 2015 overturned a long-time precedent (a standard in place since 1984) that a company must have “immediate and direct” control over a worker to be considered a joint employer. The board ruled instead that a company need have only “indirect” control of a worker and not even exercise that control to be considered a joint employer.

Under the 2015 standard, a company could be deemed a joint employer even if its “control” over the essential working conditions of another business’s employees was indirect, limited and routine, or contractually reserved but never exercised.

The ruling was roundly criticized by businesses as it put both the hiring employer and its contractor or staffing agency on the hook for labor violations. The decision also applied to franchisors that were suddenly liable for labor issues at individual franchisees’ operations.

The ruling also spread plenty of confusion in the employer community, and it sent companies that used contract or temp labor to set strict written procedures of where their responsibility ended and the subcontractor’s began.

 

The proposed rule

The proposed rule affects businesses:

  • That are franchisees or franchisors,
  • Use temporary staffing agencies to supply manpower, or
  • Hire outside or subcontractors to work on their sites.

 

Under the proposal, an employer may be found to be a joint employer of another employer’s employees only if it possesses and exercises “substantial, direct and immediate control” over the essential terms and conditions of employment “and has done so in a manner that is not limited and routine,” according to a statement issued by the NLRB.

“Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship,” the statement said.

In announcing the proposed standard, the NLRB included a number of examples of how it would apply. Here are two:

Example 1: Red Line Staffing supplies line workers and first-line supervisors to Sporting Apparel at Sporting Apparel’s manufacturing plant. On-site managers employed by Sporting Apparel regularly complain to Red Line Staffing’s supervisors about defective products coming off the assembly line.
In response to those complaints and to remedy the deficiencies, Red Line Staffing’s supervisors decide to reassign employees and switch the order in which several tasks are performed.
Sporting Apparel has not exercised direct and immediate control over Red Line Staffing’s line workers’ essential terms and conditions of employment.

Example 2: Temp Worker Plus supplies line workers and first-line supervisors to Breadstone Enterprises at Breadstone’s baking plant. Breadstone also employs supervisors on site who regularly require the Temp Worker Plus supervisors to relay detailed supervisory instructions regarding how employees are to perform their work. As required, Temp Worker Plus supervisors relay those instructions to the line workers.
Breadstone possesses and exercises direct and immediate control over Temp Worker Plus’s line workers.
The fact that Breadstone conveys its supervisory commands through Temp Worker Plus’s supervisors rather than directly to Temp Worker Plus’s line workers fails to negate the direct and immediate supervisory control.

The proposed rule is currently up for a 60-day comment period, after which it may be amended following input from stakeholders. For now, you should stick with the contracts you have had since the Obama-era decision until this new rule is set in stone.

 

 

 

Preventing Substance Abuse in the Workplace

Drug and alcohol use by employees on or off the job is a troublesome societal plague that has put many employers on the defensive.

Research by the U.S. Department of Labor shows that between 10% and 20% of the nation’s workers who die on the job test positive for alcohol or other drugs.

The same research shows that industries with the highest rates of drug use are the most physically dangerous and involve the operation of machinery, such as construction, mining, manufacturing and wholesale.

With this in mind, you need to know all of the tools available to you as an employer to ensure that you keep a strong drug- and alcohol-free workplace policy in place, while trying to minimize the effects of employees who are heavy users off the job.

An effective policy can reduce the risk of workplace injuries to an impaired employee as well as co-workers and anybody your company may come in contact with, particularly customers or vendors. The actions of one impaired person, or someone that uses heavily off the job, can have far-reaching effects and turn out to be a significant liability for your company.

Various Occupational Health and Safety Administrations (OSHAs) at both the federal and state level offer employers help in sorting out the complexities of putting together an effective drug- and alcohol-free workplace policy.

Federal OSHA outlines five components it considers necessary for a drug-free workplace: a policy, supervisor training, employee education, employee assistance and drug testing.

Drug testing, it says, “must be reasonable and take into consideration employee rights to privacy.”

The federal agency has guidelines available to help resource-challenged small businesses formulate a policy aimed at a drug- and alcohol-free workplace. They include:

  • Drug-Free Workplace Advisor Program Builder. For employers needing to develop a policy from scratch, this guides them through the various components of a comprehensive written drug-free workplace policy. It then generates a policy based on an employer’s specific needs.
  • Substance Abuse Information Database (SAID). This includes sample drug-free workplace policies, surveys, research reports, training and educational materials and regulatory information.
  • Resource directories. These contain current lists of national, state and local resources, including summaries of state laws on workplace-related substance abuse, community organizations that help make businesses drug-free, and help lines for those who have a drug problem.
  • Training and educational materials. These include presentations, articles, fact sheets and posters to help employers provide workplace drug and alcohol education.
  • Workplace Frequently Asked Questions. These are available free of charge.

 

More detailed information for each of the above guidelines is online at: www.osha.gov/SLTC/substanceabuse/index.html

 

The New Zealand example
One good approach to drug and alcohol policies comes from New Zealand. Its OSHA – in simple, practical language – advises employers in that country to:

  • Formulate rules, agreed to by all parties, which apply the same for everyone: employees, contractors and employers.
  • Write the policy clearly and make it available to all in the workplace.
  • Describe steps needed to ensure a drug- and alcohol-free workplace.
  • Enforce the rules “consistently and fairly.”

 

The policy, says New Zealand OSHA, should aim to avoid worker drug or alcohol impairment without discriminating against or punishing employees.

Once formulated, the agency adds, the policy should be part of the company’s official health and management practices in recruitment and training, integrated into its human resources department and widely circulated throughout the business.

 

Fifteen Warning Signs of Workers’ Comp Fraud

Workers’ compensation fraud costs the insurance industry roughly $5 billion each year, according to estimates by the National Insurance Crime Bureau. And depending on whom you ask, fraud accounts for as much as 10% of the costs of all workers’ comp claims.

This type of fraud is typically associated with malingering employees who fake injuries in order to collect compensation and some paid vacation time.

In tougher economic times, particularly as lay-offs mount, some experts think there is an increased exposure for employees to claim a work-related injury for a variety of manufactured reasons, such as for an injury that occurred on personal time.

Anytime you feel you have a suspicious claim on your hands, look for these tell-tale signs of potentially fraudulent claims. Usually one of these items alone is not enough to point to fraud, but if you have two or more of them, it could suggest a problem.

  1. Late reporting. If you have an employee who suffers a legitimate on-the-job injury, they will generally report it right away. Late reporting may not always be indicative of a fraudulent claim, though, because sometimes the true effects of an injury may not be known until the following day.
  2. The Monday morning claim. If the injury allegedly occurred on Friday, usually late in the day, but did not get reported until Monday, there is reason to suspect there might be a little more going on than meets the eye. The logic is that the employee likely suffered an injury over the weekend and does not want to pay for it themselves if they lack health coverage, or if they don’t want to foot the bill even for their coverage deductible.
  3. Lack of witnesses. Often your employees won’t be working in a solitary environment and there ought to be somebody on your staff who witnessed the accident. Still, not every claim has a witness and this should not be used solely to determine fraud.
  4. Sketchy details or conflicting descriptions. Most claimants can recall the details of their injury. If the claimant seems to be fuzzy on the details and gives vague responses to questions, it could be a warning sign.
    Also, if the employee’s description of the accident conflicts with the medical history or First Report of Injury, there may be a problem. This could arise if, upon further investigation, the employee keeps changing the story and adding or removing pertinent information – a good reason to suspect it to be a fraudulent workers’ compensation claim.
  5. Disgruntled employee. A disgruntled employee is more likely to place fraudulent claims than an employee with high job satisfaction.
  6. Financial hardship at home. Workers’ compensation benefits are sometimes seen as a way out of a tight financial situation at home. Although temporary disability benefits are lower than normal working wages, the worker could use the time to “double dip,” that is, take on extra work when they are supposed to be at home recovering from the alleged injury.
  7. Hard to reach. This ties in with number 6. If this occurs every time the claimant is called, there is a possibility of fraud.
  8. Misses medical appointments. If an employee is truly injured, they want to get better and will make sure to go to all medical appointments. Missing appointments is another reason to suspect fraud.
  9. Engaged in activities not consistent with the injury. If your employee reported a back injury and other employees find that he is playing softball on the weekends or renovating his yard, there is good reason to suspect fraud.
  10. Employment change. The employee reports the injury right before or after being laid off, near the end of a contract job or near the end of seasonal work.
  11. Post-termination claims. If an employee files a claim after being laid off or fired, red flags should pop up.
  12. Frequent moves and changes. The claimant has a history of frequently changing physicians, addresses and places of employment.
  13. History of claims. If the claimant has filed suspicious or litigated claims in the past, they could be a person who feeds off the system.
  14. Employee refuses treatment. There should be no reason that a legitimately injured worker refuses a diagnostic procedure to confirm the nature or extent of an injury.
  15. Rigorous hobby. If the injured worker has a pastime that could cause an injury similar to the alleged work injury, the claim could warrant further investigation.

 

Remember, if you suspect fraud, you should talk to your broker or the insurance company claims representative to alert them. All insurance companies are required to have special investigation units that look into claims fraud. It benefits both you the employer and the insurer if the insurance company investigates and ferrets out a fraudulent claim.

If the insurer suspects fraud, they can reject the claim and report their suspicions to the local district attorney’s office and the Department of Insurance.

Prompt Filing of Commercial Auto Claims Can Stop Problems before They Start

While a driving employee may be flustered after an accident and may not be thinking of reporting the incident immediately, for you, the policyholder, the clock starts ticking the moment the accident has occurred.

To ensure that the claim is dealt with in a timely manner and to prevent a number of unforeseen consequences, the sooner after an accident that you report a claim, the better.

The reason it’s so important to file the auto claim in a timely manner is that there is often a third party involved. If there is a gap between when the accident occurs and your insurer getting involved in the claim, the chances the third party may take legal action increase.

This is especially true in commercial auto accidents, since some people may be more likely to take legal action in the belief that a business has deeper pockets than an individual. And with a third party that is out of the business’s control, there are more uncertainties.

Here are a few reasons why dawdling on filing your commercial auto claim can be detrimental to you:

Better chance the third party takes legal action – Insurance companies know that the longer it takes them to contact the third party and/or their insurer, the more likely they will secure the services of a lawyer and sue your organization. Prompt response puts the other party more at ease and makes them confident the claim will be handled in a timely manner that makes them whole again.

Claims costs can increase – As time ticks on filing the claim, related costs (potentially for your firm and the third party) are likely to rise, including:

  • Repair costs
  • Car rental costs
  • Down time for the vehicle
  • Storage costs, and more.

 

More time spent dealing with tasks following the accident – If you delay in filing the claim, you will have to take on some of the administrative work that the claims adjuster would normally handle. Claims adjusters have at their disposal resources you may not have access to, such as specialist repair and recovery services.

Reduced chances of a good result – Claims adjusters are trained in assessing your liability after an accident, and are also trained in detecting fraud by the other party. The more that time passes after the accident, the harder it will be for the claims adjuster to detect any fraudulent activity on the part of the third party.

Reputation and brand vulnerability – These days, many people take their grievances to social media. If a member of the public feels slighted by your firm or that your company mistreated them in some way, they may vent about you on Facebook or Twitter or other social media platforms.

If, however, you file that claim quickly and the claims adjuster reaches out to them, the chances that the other party feels victimized will greatly diminish. Also, claims adjusters are adept at working with third parties and know how to relieve their stress about the accident.

Getting claims reported on time

As you can see from the above, it’s imperative that your insurer knows about the accident as soon as possible so they can assign a claims adjuster to step in. Zurich insurance recommends the following to make sure that happens:

  • Assess your internal reporting procedures for auto incidents. A lengthy internal “chain of command” slows down reporting to your broker and insurer.
  • Regardless of who is at fault, report it to your broker or carrier immediately.
  • Discourage your employees from trying to resolve the claim directly with the third party or that person’s insurance company.
  • Include incident reporting as part of your fleet safety training program. Make sure employees know to report accidents regardless of fault.
  • Never assume a claim will “just go away.”

 

The bottom line is you can trust us, your insurer and their claims adjuster to handle the claim expediently and professionally. Leaving it in the claims adjuster’s hands will ensure the claim is investigated and that all claims are paid fairly.

 

What’s Driving Continued Fall in California Rates

There could be yet another workers’ comp rate reduction coming down the pike, after California’s rating agency filed a recommendation that benchmark rates for policies incepting on or after Jan. 1, 2019 be reduced by 14.5% from Jan. 1, 2018 levels.

The Workers’ Compensation Insurance Rating Bureau’s recommendation that the average benchmark rate be cut to $1.70 comes on the heels of an order by Insurance Commissioner David Jones to reduce these “pure premium rates” by 10.3% as of July 1, compared with Jan. 1 rates.

The advisory pure premium rates proposed to be effective Jan. 1, 2019 average $1.70 per $100 of payroll. This is $0.08, or 4.5%, less than the average approved July 1, 2018 advisory pure premium rate of $1.78. And the rate was $1.94 for policies incepting on or after Jan. 1, 2018.

While the published benchmark rates are an average for California’s 505 standard classifications, the pure premium rates approved by the insurance commissioner are only advisory and insurers may, and often do, file and use rates other than those approved.

Claims and claims-adjusting costs have continued sliding since 2015, the year after reforms addressed a number of cost drivers in the system. Still, the sustained claims cost decreases have surprised industry actuaries, who could never have imagined the full effect of those reforms.

 

The main drivers

The Rating Bureau cited the following continuing developments as the main drivers of the rate-decrease recommendation:

  1. Old claims from 2016 and earlier continue coming in short in terms of expected ultimate costs (some workers’ comp claims can continue for years, and even decades, for severely injured individuals who may still be collecting workers’ comp disability benefits and still be receiving care and medication for their industrial injuries or illnesses).  The Rating Bureau has been missing the mark on how much it expects claims to cost as they age and, as a result, in the last many rate filings it has had to adjust rates to account for these expected effects on future claims.
  2. Insurers and claimants continue settling the indemnity (disability payment) portion of claims with increasing frequency. In 2013, the year the legislature passed the most recent reforms, 48.3% of indemnity claims had settled at the 27-month mark (27 months into the claim). As of this year, 60% of 27-month-old claims had settled. The same holds true for other markers, at 39 months (62% in 2013 vs. 70.4% in 2018) and at 51 months (72% vs. 79.5%).
  3. The cost of claims (both indemnity and the medical portion) continues to grow at a moderate rate. One of the biggest successes has been the continued slide in medical costs per lost-time claims. In 2010, the average medical outlay for lost-time claims was $37,966, and that had fallen to $30,452 in 2016. The average medical cost ticked upwards for the first time in 2017 since 2010, to $31,440.
  4. Claims costs for 2017 were lower than expected. This is in part due to the downward indemnity and medical estimated ultimate claims costs for the 2017 accident year, which are significantly below the level the Rating Bureau projected in the Jan. 1, 2018 rate filing that it made last August.  The data show a steady decline in average length of temporary disability benefits. Members of the Rating Bureau’s governing committee said before a vote on the rate recommendation that the independent medical review process is resolving medical treatment disputes more quickly, which is allowing workers to get treatment and get back to work more rapidly.
  5. Wages are expected to continue growing in California. And since the benchmark rates are expressed in relation to payroll (x amount per $100 dollars of payroll), growth in average wage levels on paper acts as a buffer on claims and claims-adjusting costs. That in turn could reduce the pure premium rate level indication.
  6. Pharmaceutical costs are declining sharply.
  7. The number of liens filed continues to decrease thanks to reforms that dissuade the filing of liens when invoices are issued, a common practice in the past.

The Rating Bureau noted that it does have some concerns that could raise costs:

  • Increasing claims-adjusting costs (the administrative portion of adjusting claims).
  • A record-high number of independent medical reviews (which are ordered if there is a dispute about how treatment should proceed).
  • Continued high levels of cumulative trauma claims (these are mostly being filed in Southern California).
  • The data also showed a spike in medical-only claims late in 2017, but the Rating Bureau surmises (since it hasn’t studied it yet) that the increase is from better reporting of first aid claims. The Department of Insurance and the Rating Bureau have put an emphasis on getting first aid claims reported and, to encourage this practice, will be eliminating the first $250 of every claim from the experience-rating calculation, beginning in 2019.

 

The takeaway

Rates will vary from industry to industry, and some sectors may actually see higher rates despite the new filing. And depending on location, industry and their own claims history, employers may or may not see rate decreases come renewal.

Also, employers in Southern California face surcharges on their policies due to the rampant filing of post-termination cumulative trauma cases in the region. These cases are often filed without merit and are difficult to settle.

Even Small, Mid-sized Firms Need a Crisis Management Plan

With risks to companies and employees growing, sometimes the unthinkable happens and a business has a real crisis on its hands.

While large companies are usually well-prepared for a crisis should one occur, most small and mid-sized firms don’t have the resources or have not put much thought into how they would handle a crisis.

One of the most difficult parts of crisis planning is that you will often not know what you are planning for as a crisis could be a number of different events, like:

  • The sudden death of a key member of your team could lead to operational issues.
  • A defective product leads to an injury, illness – or worse.
  • An accident severely maims or kills a number of your workers.

 

To get started, assemble a team that includes key members from your organization who will be responsible for creating your crisis-response plan. Inc. Magazine recommends the following for your team:

 

Make a plan – You cannot start planning without first identifying your objectives. Once you identify them, you can make response plans for each type of event. Typically, that includes:

  • Safeguarding any person (employee, vendor, customer and/or the public) who may be affected by the crisis. Your plan would include how to respond to the crisis if people’s health and wellness at stake.
  • Making sure the organization survives. This would include steps you would take to ensure the company can continue as a going concern after a significant disruption.
  • Keeping stakeholders (employees, vendors, clients, the public and government) informed on developments.

 

The plan should take into account how a crisis would affect your main stakeholders:

  • Your employees
  • Your customers
  • Your vendors
  • The public
  • Your company’s value and reputation.

 

Create a succession plan – You should clearly outline the necessary steps to follow if you or one of your key managers suddenly became unable to perform their duties. This plan may include selling the company, or transferring ownership to family members or key employees.

Seek advice from the experts – This includes your leadership team, employees, customers, communications experts, investment bankers, exit planners, lawyers and financial managers. Each of these individuals has unique insights that can be invaluable for how to tackle a crisis.

Name a spokesperson – This is important if you have a crisis that spreads beyond your organization and affects the health and safety of a member of the general public, your staff or customers. This kind of crisis could attract media coverage and your organization needs to be ready to respond if that happens.
Funneling all media communications through a spokesperson can help you deliver a clear and consistent message to media, as well as to the public at large.

Honesty is the best policy – Lie or hide details at your own risk. A lack of honesty and transparency can lead to rumors, as well as a general distrust of your organization if the truth is exposed. The best approach is to be transparent and truthful about what happened and what you are doing to resolve the crisis.

Keep your staff up to speed – Besides transparency with outside people, it’s crucial that you don’t keep your employees in the dark after a crisis has hit. Again, to stop the rumor mill and also keep employees from becoming worried amidst the uncertainty, keep your workers abreast of developments – and what the crisis means for the organization, and what you are doing about it. Put together a plan for keeping staff up to date.

Keep customers and suppliers informed – If you have an event that’s causing some disruptions, you also owe it to your clients and vendors to let them know what’s happening. Don’t let them find out from the media. Like your employees, keep them regularly updated on events and the steps you are taking to address the crisis. Put together a plan for how you would keep them posted.

Act fast and update regularly – Keeping the communications alive is important and once you grasp the situation and its effects, you can issue summary statements of the crisis and what’s happened. Then you can follow up with regular updates on your action plans, on people affected, any hotline you may set up, and more.
These days news travels fast and like wildfire on social media. You need to move at the same pace.

Social media is vital – More and more people get their news from social media and the discussions that ensue on posts, so you need to make sure that your company stays on top of the flow. You may want to assign a person or two to monitor social media and post and react to posts on social media. That way, your team can tell the company’s side of the story and put to rest unfounded rumors.
Make a plan for what a social media contact’s responsibilities would be during a crisis.


Get an early start

Your plan won’t be effective if you create it during a crisis. Plan in advance, so everyone can approach the strategizing unrushed and with a clear head.