Telemedicine – The Newest Tool in Workers’ Compensation Claims Management

Meghan Dickerson, CET, Director of Risk Control
When one of your employees is injured on the job, the first and most important thing to do is to assess the injured worker’s condition and whether medical care is needed. Providing quality care swiftly is the number one action that companies can do to control claims costs, with the second being to report claims immediately. If you have someone on staff who is first aid certified, you may be able to assess the injured worker’s condition and provide first aid care without any outside assistance. However, often employees have more peace of mind when an independent third party does the evaluation. Similarly, having a third party assess your employee may pose less risk for you as the employer as well.

In the past, companies have had two other options: use an occupational medical clinic to assess injuries and provide care, or have a mobile triage company come out to the jobsite to provide care. In both cases first aid could be provided and billed directly to the employer when appropriate. However, both options have downsides.

  1. Wait Time: Having injured workers treated at an occupational medical clinic means driving to a clinic location and waiting, often for up to an hour, to be seen. If your policy is to have a supervisor accompany your employee to the clinic, now that person is losing several hours of productivity as well. Mobile triage companies solve some of this problem by coming to your location which means the employee can rest comfortably at the job site while waiting. However, it still takes time for these resources to be deployed. This can be both frustrating and costly.
  2. Cost: Clinics are in the business of providing medical care, and most of them do a great job. But statistically, it is more likely that employees who are seen in the clinic environment will need to be seen again. Mobile triage companies also provide great care, with an emphasis on treating with first aid whenever possible and only sending employees to the clinic if medical care if needed. However, these services can be even more costly than clinics because the resources come to you.

Virtual triage, a new option, has recently become available for employers that eliminates these downsides in certain situations. There are various types of virtual triage. Many companies provide telephonic nurse triage while others provide certified doctors available via video chat.  Some telemedicine vendors will coordinate with your workers’ compensation insurance provider. Often they will bill the claim directly for their services and may even be able to report claims for you. Others contract directly with employers.

In all cases, the care is immediate, without any wait time for employees or time off for supervisors, and the cost is typically about half of what a mobile triage company would cost. Best of all, guesswork is eliminated for the employer and employee because virtual triage companies use licensed medical professionals to direct self-care whenever possible, and direct your employee to a clinic right away when self-care is not appropriate. Typically, these providers are also recording the conversation (with the employee’s permission) and filling out an accident report that can be used to file a claim if needed.

There are still many situations in which a visit to a clinic or an in-person assessment done by a mobile triage company is the best option. But for many injuries, virtual triage is fast, affordable, thorough, and efficient, giving your injured employee the ability to address the condition quickly and get back to work safely.

How to Properly Insure Your Jewelry

Carolyn Konecki, CPRM, CISR
If you received the gift of jewelry this holiday season, you may be wondering if you should insure it, and if so, for what amount?  Since most homeowners’ policies have a special, lower limit for jewelry, it is important that you look at covering your jewelry separately.

Most new jewelry purchased from a retail store will include an appraisal and/or receipt along with a full description of the item. This documentation should be sent to your agent so the item will be added to your policy for the purchase price.

But what if you were given a family heirloom, inherited jewelry or don’t have a current appraisal? It is best to have fine jewelry appraised every three to five years. When going for an appraisal it critical to understand the three type of appraisals:

  1. Estate – Estate appraisals represent the lowest value for an item and are for the immediate liquidation value, like cash for gold. They are generally used for tax and inheritance purposes.
  2. Replacement Value – A replacement appraisal is a current market value appraisal.
  3. Retail – A retail appraisal is the full price that you would expect to pay at a high-end jewelry store.

Here’s an example: A ring is for sale at a jewelry store for $20,000 (retail). You own the identical ring and lose it. Because the insurance company works with wholesale jewelers, it costs them $12,000 to replace the ring (that’s replacement value). Later, you need to raise immediate cash and try to sell it and are only offered $8,000 (that’s estate value).

Since insurance companies pay out on replacement value, it is important that you tell your appraiser the purpose of the appraisal. You want your jewelry to be replaced exactly as it is in the event it is lost or stolen, but there is no point insuring items for full retail, when they can almost always be replaced or recreated for less.

 

Mixed-Use Residential Projects: Risk Management and Insurance Considerations

James Schabarum, CPCU, CRIS, AFSB
Contractors performing mixed-use residential projects should first evaluate the “Operational” and “Completed Operations” factors and exposures from a risk management and insurance perspective. A few of these key considerations are:

Operational

  1. Client Selection – owner’s sophistication of development staff, litigation history, background of the construction manager, plan details, and related relationships
  2. Site Entitlements – surrounding structures, milestones and timing
  3. Design Team – consideration of an Owner’s Protective Professional Indemnity (OPPI) policy to supplement the design professional’s practice policies for term of construction and 10-year statue. https://www.cavignac.com/wp-content/uploads/Q2-2016-Construction-Newsletter.pdf
  4. Environmental & Geotechnical Issues – consideration of a Project Specific Pollution Liability policy.
  5. Project Delivery Method – owner’s contracts with the design team
  6. Subcontractor Pre-Qualification and Guarantees – bonding back of significant trades (typically 50-60% of the project at a .75% rate)
  7. Owner Controlled Insurance Program (OCIP) / Builders Risk –a comprehensive approach, administered with local specialist to negotiate tailored terms and conditions  https://www.cavignac.com/wp-content/uploads/1Q-2015-Construction-Newsletter.pdf
  8. Project Financing – financing amount, debit structure, source, confirmation and payment terms­

Completed Operations

  1. Mix of Habitational Users – amount of “for-sale” (fee simple ownership) in the project will have a direct influence on probability of completed operations disputes and litigation
  2. Deed Restrictions – should be considered for all “for-rent” (not fee simple ownership) units
  3. Project Legal Team – owner’s local real estate development attorney specializing in mixed-use (residential) projects.
  4. Wrap Administrator and Quality Control – owner’s third-party advisors at the beginning of the project through the 10-year statue.

Contractors need to evaluate the costs and benefits associated with residential projects, the inherent long-term contingent liabilities and the likelihood of overall potential project profitability.

Why Did My Home Insurance Premium Increase So Much?

Carolyn Konecki, CPRM, CISR
The California home insurance market changed dramatically at the beginning of 2019 and continues to evolve into a very hard market. Thirty thousand homes burned to the ground during the wildfires of 2017 and 2018. The 2018 wildfire season was the deadliest and most destructive ever recorded in California, with a total of 8,527 fires burning almost 1,900,000 total acres. Seven of California’s top 20 most destructive fires have occurred just in the last two years.

Several of those fires – the Camp, Woolsey, Thomas, Tubbs and Atlas fires – were caused by utilities, yet the insurance companies cannot recover from them. Further compounding the issue, the California legislature passed several new consumer protection laws to assist wildfire victims, which shift more of the financial burden to the insurance companies.

Because of the large numbers of homes burned, the rebuilding costs have skyrocketed. Many home insurers offer additional limits of coverage as part of their policy, with some even doubling the dwelling amount. Construction timelines have also been extended. It is not unusual to take two to three years to totally rebuild. Keep in mind, the insurance companies pay for the family to live someplace comparable while their home is being rebuilt.

As a result of these combined factors, many home insurers are not renewing policies and/or adding large brush surcharges to homes that are located near open space, which includes canyons and hillsides. Embers can easily travel for miles in high winds, so even though a home is located near the coast, past fires have shown us that no home is truly safe.

The insurers have also tightened their underwriting, choosing not to add any new homes that are close to open space that have had a prior claim or that are older (and haven’t updated their internal systems). Insurers are also actively trying to spread their risk, meaning they don’t want to insure too many homes on the same street.

The impact I am seeing on our clients is limited options for both new property purchases as well as existing home renewals. Because of the higher rebuilding costs, all carriers are adding an inflation factor, automatically increasing the dwelling limit by as much as 10%. All insurance companies have increased their base rates and, as mentioned earlier, some are also adding brush surcharges.

The bottom line is higher prices with severely limited options.

What Can You Do to Manage Costs?

  1. Update your plumbing, electrical and heating systems.
  2. Replace a wood shake roof.
  3. Add protective devices like an automatic water shut off device, automatic earthquake shut off valve, and an alarm system. Not only do these devices increase your safety, but most insurance companies offer credits for them.
  4. Increase your deductible.
  5. Do not file small claims.
  6. Make your home as fire proof as possible.

Top 10 Construction Defects in 2018

Scott Bedingfield, Principal/Risk Advisor
Defective construction happens and when it does, the costs are huge. The more you know about the root causes of construction defects before they happen, the more you can prevent the cause. 

Quality Built is one of the nation’s leading third-party QA (Quality Assurance) inspection companies.  Based on data collected from thousands of projects, Quality Built has published the top 10 construction defects observed across the U.S. in 2018.

The list of defects are in order of construction sequence, not frequency. The post-construction repair costs are rough estimates and reflect nationwide averages, but do not include the consequential costs of dealing with construction defect issues, such as time and litigation.

The article (link below) was published by Jeff Hoch, Quality Built’s principal architect.

https://www.qualitybuilt.com/top-10-construction-defects-2018

The Top Three Reasons to Consider EPLI Coverage

Natalie Sherod, CIC, CPCU, Risk Advisor
Employment practices claims continue to be a concern for employers of all sizes.  With the number of claims increasing, Employment Practices Liability Insurance (EPLI) should be discussed at every renewal and should be included as part of your insurance program.  Here are the top three reasons to consider EPLI coverage:

  • The number and cost of claims continue to increase each year – Even if a claim never makes it to court, it can have a large financial impact on an employer. The average cost for an employment claim settled out of court is $75,000.  If the case does move to trial, the cost significantly increases. The average jury award for an employment-related case is $217,000.
  • The coverage can protect your company against a variety of allegations – There are a number of reasons an employer could see an EPLI claim. Claims can fall under the following categories:
    • Discrimination – An employee alleges they were not promoted due to his age.
    • Wrongful Termination – An employee alleges they were terminated because of their religious belief.
    • Sexual Harassment – An employee alleges they are the victim of unwanted sexual advances from their manager.
    • Retaliation – An employee files a workers’ compensation claim and soon after is moved to a less desirable shift. They allege this is in retaliation for filing the workers’ compensation claim.
    • Inappropriate employee conduct – Alleged defamation, invasion of privacy, breach of employee contract, bullying, wrongful failure to employ/promote are a few examples of claims that fall under this category.
  • Many EPLI policies have the option to cover third party liability claims – Employment practices exposures are not only limited to current or recent employees. Claims could arise from applicants who feel they were discriminated against during the interview process, clients who allege sexual harassment by your employees, and vendors who feel they were passed over for a contract due to their religious beliefs.

There are many coverages to consider for protecting your business – be sure to include Employment Practices on that list.

The Convenience of Telemedicine

Matt Noonan, CIC, RHU, CHRS, CCWS
What is Telemedicine?

As technology evolves, doctors are finding more ways to efficiently and conveniently care for their patients. One such method is through the use of telemedicine—a form of technology-based communication that allows a doctor and patient to communicate without being in the same physical space. Although telemedicine is not a complete replacement for direct patient care, it can be a useful tool for a variety of medical services, such as evaluation, diagnosis and prescribing treatment.

How Does Telemedicine Works?

Through the use of technology, communication is facilitated either in real-time or in a delayed setting. Usually a patient is able to communicate from his or her home with a doctor through live video or phone system. Doctors can see the patient and assess his or her symptoms, as well as obtain the patient’s records and medical history from electronic medical records.

Is Telemedicine a Substitute For In-Person Doctor Visits?

No. A virtual appointment is good for a number of mild conditions but is not suitable for severe symptoms like a high fever or a debilitating cough.  Additionally, you should not use a virtual appointment to seek treatment for chronic conditions, complex conditions, life-threatening conditions, anything requiring a test or hands-on exam or broken bones, sprains or other serious injuries.

Although telemedicine is not a full replacement of the care a patient can receive in a doctor’s office, it can help reduce barriers to receiving medical care. Many medical experts believe that patients who have difficulty traveling or who live in a rural area might have an easier time accessing medical care through telemedicine because it often eliminates the need for travel. In addition, patients who are recovering from illness or injury at home can be monitored by their doctors through telemedicine visits. It allows patients to remain in the comfort of their own home and potentially prevent further illness from exposure to germs in a hospital or clinic.

Use Telemedicine if:

  • You’re considering the ER or urgent care center for a non-emergency
  • You’re on vacation, a business trip or away from home
  • For short-term prescription refills

Telemedicine doctors can diagnose, treat, and often prescribe for over 70% of typical doctor office visits, including:

  • Allergies
  • Bronchitis
  • Cold
  • Flu
  • Respiratory infection
  • Sinus problems
  • Strep throat
  • Urinary tract infection
  • and more

Employers need to be aware that a stand-alone telemedicine benefit will most likely violate the ACA’s preventive care mandate and could subject an employer to potential excise taxes. To avoid this compliance problem, employers can structure their telemedicine benefits as a component of their group medical plans. Many of today’s group medical plans include one form or another of telemedicine services which are often offered at little to no additional cost.

Telemedicine is a service that can help reduce the barriers of time and distance to a hospital or doctor’s office and can connect a patient to a qualified physician through an app, phone or video, anytime, anywhere.

Why a Waiver of Consequential Damages is a Must

Kelly Potter, CIC, PWCA
Many contracts I review include an express obligation for a design firm to be responsible for consequential damages. Consequential damages are often defined as “indirect damages” and can include things completely out of proportion to an architect or engineer’s fee. This can be very problematic as these damages may include loss of use or loss of profits, and they can be excluded from your Professional Liability policy.

Even if a contract remains silent about consequential damages, a firm can still be liable for them. Best practices for design firm contract reviews should be to initially delete any client-drafted provisions that hold you responsible for consequential damages.  However, a firm should not stop there.  A provision should then be added to the contract that clearly states that neither the design firm nor client will be responsible for consequential damages due to any alleged failures by either party.

Please note, contract review services are provided from an insurance perspective only and do not constitute legal advice. 

Succession Planning: The Potential Impact on Your Surety Program

Jase Hamilton, CPCU, AFSB
All contractors start their business with a common vision:  To create a successful construction company.  However, once this goal is realized, many owners fail to properly and strategically create a succession plan that not only guarantees their own continued prosperity, but also the prosperity of their company. This is because most business owners lack the incentive to develop a plan until it becomes an immediate need. Unfortunately, this reactive approach, more often than not, results in a poor, costly and ineffective plan.

When developing a succession plan, there is one important question you must ask yourself: Who will my successor be? The answer to this question becomes even more critical for a public works contractor, as it not only has a lasting impact on the legacy of your company, but also an impact on the company’s ability to obtain surety credit once you transition out.

Finding a Successor

Finding a successor for your plan can be difficult. The three most common sources are family members or key employee(s), company employees through an employee stock ownership plan (ESOP), or an external party.  Regardless of your situation, identifying a successor and transitioning the company is a critical milestone that takes years to properly plan.

Family Member or Key Employee(s)

Most small- to mid-size construction companies are family-owned and operated. The transition of ownership to a family member or key employee(s) seems like a natural choice. It not only ensures the company is being transferred to a trusted individual but, in most cases, has the least impact on the company’s surety credit.

Although the most natural, transitioning to a family member or key employee(s) is also one of the most difficult succession plans to develop. Current ownership must invest a significant amount of time and energy in grooming the next generation to lead the company. The earlier ownership can identify a younger family member or key employee(s) as an apparent heir, the better. This allows current ownership time to appoint the heir as “second in command” in the early growth stages of the company. Not only giving the heir valuable hands-on experience but ensuring he/she will operate the company the way current ownership wants it operated and lead the company the way current ownership wants them to lead. This will also give ownership the opportunity to fully evaluate the capabilities of the heir and consider a different direction in the event the heir is not a fit.

It’s also important to involve your trusted advisors early in the process.  From a surety broker perspective, it is critical to evaluate a succession plan to help develop and prepare for milestones during the process. This also provides the opportunity to educate the heir apparent on not only the importance of surety credit for the operation, but also the personal guarantees and obligation that are inherent with ownership.

If properly planned, the transition to a family member or key employee(s) can be very rewarding and seamless. The goal is to preserve the financial strength of the company so that it may continue to obtain surety credit, and to fulfill the personal financial goals of the transitioning ownership.

Forming an ESOP

In the event transition to a family member/key employee(s) is not an option, another succession strategy that is increasing in popularity is the formation of an ESOP. Much like a 401K plan or profit-sharing plan, an ESOP is a vehicle that allows for employees to invest in a company’s stock through the purchase, a loan or gift.  Essentially it allows an employee to obtain shares and become a shareholder/owner of a company.

Outside of incentivizing or rewarding faithful employees, one of the more appealing benefits of forming an ESOP is that it gives current ownership the opportunity to quickly liquidate their shares in the company to the ESOP. However, this liquidation or structural shift can have significant impact on a company’s ability to obtain surety credit.

Typically, when an ESOP is formed, the company takes on a loan or other form of liability to initially purchase the stock from the existing shareholder(s). Over time, the debt is paid down; however, the immediate liability usually has a negative impact on the company’s financial condition and could reduce the company’s overall bonding capacity. Successful ESOPs prepare for this potential shift on the balance sheet by maintaining personal indemnity of previous owner(s) to ensure high levels of cash flow, and taking advantage of the various tax benefits to provide an immediate stimulant to bottom-line profits.

From a surety perspective, another potential risk with an ESOP is adequate transition of leadership. In contrast to transitioning ownership to a family member or key employee(s), formation of an ESOP usually requires less effort grooming a successor and leader for the company. This can lead to potential operational issues and concerns over perpetuation. To lessen these concerns, invite you surety partner to participate in the plan early and illustrate the continued involvement and long-term commitment of key employees under the plan.

Forming an ESOP may not be for every company but, if thoroughly planned with the advice of a CPA and surety partner, it can be an effective succession plan for any business owner.

Third Party

Venturing into the merger and acquisitions market may be intimidating or a less desired succession plan for some, especially when talking about legacy or employee assurance. However, much like the other succession strategies and if properly planned, selling your company can be very profitable and still ensure specific commitments are supported.

The first thing to do is partner with a business broker. Just like any advisor, it’s important to interview multiple candidates to ensure you find the right partner that understands your business and succession plan. The next step is to work with your advisors to determine what valuation approach makes the most sense.

There are various elements to consider when evaluating your company, from current market conditions to cost-base analysis and future income projects. Understanding these and other valuation methods are critical to maximizing the value of your company.

Finally, an agreement that defines your desires and demands needs to be formalized.  Some examples include:  Whether there’s a commitment from you to oversee operations for a period of time after the sale, guaranteeing specific key employees maintain their roles within the organization; how the purchase is realized over time; and if the purchase incorporates additional future profit sharing or other considerations.

When discussing the prospect of selling with you surety partners, it’s important to fully disclose your plan and utilize them as a resource to analyze the viability of the sale and the potential buyer. Many contractors undervalue the resources their surety partners can provide during this process, which ultimately can hurt the company’s ability to obtain surety credit after the sale.

The End of a Journey

Succession planning is a topic most owners like to avoid. For many, it signifies the culmination of your life’s work and it’s easier to ignore and put it off until it’s absolutely necessary. However, failing to effectively develop a detailed plan can have grave consequences, not only for your company but for yourself and your family.

Work with your advisors to develop a well thought-out and comprehensive succession plan. The process may take years, but if done right, it can ensure the continued success and legacy of your company for you and your family.

Does the New California Security Act Apply to Your Business?

Matt Slakoff, CIC, CRIS
Businesses face many risks.  Changes in laws and increases in liability need to be understood to ensure compliance.

There is a new strict law, effective January 1, 2020, that may apply to your company if it meets the following criteria:

  • Gross revenue above $25 million
  • Annually purchases (alone or in combination) personal information of at least 50,000 consumers
  • Derives 50% or more of its annual revenue from selling personal information

California SB 561 is a sweeping new law that leaves little room for interpretation.  The intent of the legislation is to bring clarity to the California Consumer Privacy Act (CCPA).

This Bill proposes three amendments to the CCPA.

  1. Any violation of any provision of this act would allow a consumer to seek damages directly with the offending company – This bypasses the step of the Attorney General being the primary party responsible for enforcement. This could lead to more lawsuits aimed at businesses.
  2. A “Right to Cure” provision will be removed which would have allowed a business the opportunity to remedy an alleged violation of the law with a 30-day notice.
  3. A provision is removed that allows

Links to Information on the CCPA:

https://www.irmi.com/articles/expert-commentary/a-summary-of-ccpa-of-2018

A comprehensive risk management assessment including the evaluation of cyber liability can help ensure your company’s continuity in the event of an incident that breaches these new laws.