What is a Reservation of Rights Letter?

You file a claim with your insurance carrier. The carrier acknowledges the claim and starts their investigation.

 A week or so passes and you receive a Reservation of Rights letter.  What is it and what does it mean?

 A Reservation of Rights letter will typically mean one of three things:

1. The carrier is investigating the claim and may think you are not liable for the claim. In this instance, you would have had coverage if you were liable so they mostly likely will continue to defend you if a lawsuit arises.

2. The carrier needs more time to investigate. This ties in with #1; however, the claim might be moving quickly and the carrier wants to make sure their investigation is thoroughly completed.

3. The carrier has noted in the letter that policy language could cause this claim to be denied, but they are still moving forward until that can be fully determined.

Insurance policies are complex contracts. Reading your policy when you receive them is a best practice but is always recommended. At a minimum, read the headings on the exclusion pages. If something concerns you, call your agent for an explanation.

Sean Leigh

Commercial Risk Advisor

405-507-2757

sleigh@pi-ins.com

 

What You Don't Know About Work Comp

Oklahoma workers compensation insurance found at Professional Insurors Business Insurance in OKC.

Work Comp is a very complex policy.  Most people think they have no control over the costs of work comp costs.  However, work comp is very controllable if you are proactive and get involved.  Most importantly, hire an agent that specializes in work comp.  I want to cover just a few topics of work comp that most don't think about.

The Claims process.  When your employee got injured what did you do?  Did you send them to the Doctor who prescribed pain medication for a strained back and recommended they stay off work for a week?  Did you know that if your employee can be back at work, even light duty work, within 72 hours of his claim, you save 70% of the cost of that claim.  It's important to know the doctor you are using.  In case of a strained back, the employee could have probably been ok going home for the day, taking ibuprofen and coming back the next day for light duty. 

Did you know that when a claim occurs the insurance carrier sets a reserve amount for how much they think the claim will be?  That reserve amount counts the same as actual claim dollars spent.  It's important to always request your loss runs 5 months after the anniversary of your work comp.  After the 6th month the claims or reserve dollars shown will then effect your experience mod for the next year.  However if you get the loss runs and notice a claim should be closed, or you dispute the reserve amount, you could save money.

The longer your injured employee is out of work the worse your experience mod will be affected.  It's important that you or your agent are in constant contact with the:  Employee, Doctor, and Case Manager.  Believe it or not, sometimes work comp claims go unnoticed and you have an employee with a sprained ankle supposed to be out for a week, and he is still in the Work Comp system 4 weeks later. 

Transferring Risk.  If you use subcontractors you will always want to make sure they have their own work comp policies.  If they do not, you will be hit for their costs come audit time.   Not only do you want to collect certificates from them, you want to have them sign a contract which makes certain their insurance pays first.  In most policies, waiver of subrogation, primary non-contributory and indemnity clause are only enforced if there is a contract in place between you and your subcontractor. We have a method of protecting our clients in this area.

Hiring Practices.  You are probably thinking, how could my hiring practices affect my work comp?  First of all, are you hiring a criminal?  Are you hiring somebody that has figured out the work comp system?  You want to make sure you are at least doing background checks and drug tests.  These employees you hire are the face of your company, you want to make sure they are keeping the reputation you worked so hard for.

With regards to the recommendations I made above, we can help with all of these items.  We are setup to give access to our clients to run their own background checks for their employees.  We brought in an attorney to develop a contract for us to give to our clients who use subcontractors.  We would still advise our clients to have their attorney look over.  And relating to your claims process, we make sure we cover every angle when a claim occurs. 

If you have any Work Comp questions or would like us to take a look at your policy, please give us a call.  Sean Leigh