DATA SECURITY & CYBER RISK
Protecting Your Clients Against Cyber Incidents & Breaches (Ace Group, August 2013): Cyber breach insurance is becoming an increasingly important part of an insurer’s offerings. The average cost of a cyber breach was $3.7 million in 2012, compared to $2.4 million the prior year, according to a study by Net Diligence. Standalone cyber insurance is a rapidly growing market, with some carriers reporting a 20-30% growth over the past year, and the $1 billion dollar market in 2012 closing in on the $1.4 million market for employment practices liability coverage. The maximum limits range from $10 to $20 million, with premiums ranging from $15,000 to $35,000 per $1 million of coverage. PropertyCasualty360 research shows businesses purchasing coverage limits between $5 million and $20 million. Although these statistics are not focused on cities, they demonstrate how seriously insurers and insureds are taking potential cyber breach events. Pools can serve their members not only by providing cyber breach coverage, but also by helping members become aware of how to protect against breaches and document evidence. Taking certain preventative measures will enable forensic investigators to determine whether there has been an actual breach and, if so, the scope of the information compromised. Pools can also help their members develop and execute notification plans that comply with legal and regulatory requirements and establish good public relations.
You've Suffered a Cyber-Security Breach—How Will You Respond? (Property Casualty 360, 6/25/2013): Key issues to explore when preparing for a potential cyber breach are:
1. What are the potential impacts of possible data breach events on relationships with key stakeholders, public and media relations, and the organization’s financial resources?
2. What does your state law require?
3. What steps should be included in the organization’s crisis communication plan and how will they be funded?
4. How will crisis management responsibilities be allocated among staff and which staff members have the qualifications and preparation to be media spokespersons?
5. Which crisis communications vendors will you use, if any?
HEALTH CARE BENEFITS
"Skinny" Plans Under PPACA: Are They a Solution? (Mondaq, 7/20/2013): ln the midst of discussion about who has to offer coverage and who will get it, the question has arisen about what will that coverage need to look like for the employer to avoid penalties starting in 2015? The concept of "skinny" plans has emerged - a replacement of sorts to the mini-med plans being phased out. The key will be for employers to ensure that any plan they offer is a qualifying plan under PPACA, which will take careful evaluation of all options.
MEDICARE SECONDARY PAYER
Law Addressing MSP Act Flaws Still Needs Some Work: Report (Property Casualty 360, 8/9/2013): Although it took the SMART Act 5 years to get though Congress, another bill that would amend the processes and procedures under the Medicare Secondary Payer process is pending before Congress. This new bill would (1) create an exception to Medicare secondary payer requirements for certain workers' compensation settlement agreements, and (2) provide for the satisfaction of such requirements through use of qualified Medicare set-asides under workers' compensation settlement agreements. The bill has been referred to the subcommittee on Health, and the full text of the bill, H.R. 1982, is available here.
PROPERTY & CASUALTY
10 Tips for Navigating the Bad Faith Maze (Property Casualty 360, 8/12/2013): Good adjuster training is a critical tool in avoiding bad faith claims. Professional file documentation that does not appear adversarial to the insured, does not comment unfavorably on adjuster performance, and does not speculate about the possibility of bad faith is critical. So is proper advance preparation of adjusters for depositions, to ensure that they understand what will happen at the deposition and are prepared to control their emotional response to what may be an aggressive posture by the opposing attorney. A trend to watch for is the development of case law in a few states that bad faith can exist even where there is no coverage, if the insurer’s claims handling is unreasonable and goes beyond good faith mistakes.
Can Third-Party Capital Change The Property Catastrophe Market? (S&P Capital IQ, 4/23/2013): The “convergence market”, where the capital markets offer catastrophe bonds, industry loss warranties and other types of reinsurance contracts, is providing an increasing percentage of the total outstanding property catastrophe limits and putting downward pressure on prices. However, the market is relatively untested, and its behavior in the event of a major catastrophe is uncertain. Some of the identified advantages of traditional reinsurance include:
• A more permanent capital structure that will not change as readily in response to changes in the broader capital markets and increases in interest rates or credit spreads
• A higher level of risk services
• The ability to offer reinstatement limits
UC Davis pepper spray cop files workers' compensation claim (Sacramento Bee, 7/27/2013): In an illustration of how new communication technologies can affect liability, a police officer who pepper-sprayed students at the University of California at Davis has filed for workers’ compensation benefits. He claims nervous system/psychiatric injuries after a video of the incident went viral on the Internet and he received 10,000 text messages and 17,000 email messages, as well as the delivery of various items to his home.
AMA obesity classification could spike workers comp costs (Business Insurance, 8/8/2013): The California Workers’ Compensation Institute has released a report finding that the American Medical Association’s reclassification of obesity as a disease may increase workers’ compensation costs if it leads to more identification and treatment of obesity among injured workers. In particular, injured workers may begin to claim that obesity is a compensable consequence of a work-related injury or even a primary diagnosis arising from sedentary work conditions, not just a co-morbidity that complicates and increases the cost of treating a work-related injury. The study looked at 1.2 million workers’ compensation claims, and found that an obesity co-morbidity is a significant driver of treatment expense, lost time, opioid and psychotropic drug use, and attorney involvement. Although the CWCI study was focused on California, the AMA reclassification of obesity has potential nationwide ramifications that will affect other states. Look for more analysis in the next RISC Report.
A full copy of the report is available here.
Claims Adjuster, TPA Could Face Criminal Charges for Worker Fatality (Property Casualty 360, 8/1/2013): An unusually bad set of facts in a California case reinforce the individual peril that an insurer, TPA, employer or adjuster might face for failure to make a prompt, objective and reasonable conclusion about compensability of a workers’ compensation claim that leads to denial of medical expenses. The injured worker had surgery for a shoulder and cervical spine injury and subsequently developed a MRSA infection. The TPA refused to authorize medical treatment for the infection over a three-year period, despite a workers’ compensation judge’s order that the infection was a compensable consequence of the original injury. Although the patient received treatment paid for by Medi-Cal, he ultimately died in 2008. The Workers’ Compensation Appeals Board upheld penalties that had been imposed for unreasonably delaying medical care and forwarded the TPA to the Division of Workers’ Compensation Audit Unit. A claimants’ attorneys group is arguing for criminal prosecution of the TPA and the adjuster. In some states, although not California at this time, a private cause of action for bad faith would also be available, occasionally even if the claim is eventually found to be non-compensable. The position of this TPA and adjuster illustrate why professional and thorough claims investigation and a good decision-making process are critical to any claims operation.
Workers Compensation Market: Challenges Remain Despite Recent Improvements (Carrier Management, 8/1/2013): Premium rate increases and some degree of economic recovery have led to premium revenue improvement in workers’ compensation. This improvement is not universal among all carriers. Some carriers have weaker underwriting performance, which has reduced their premium volume. Although there may be additional improvement going forward, workers’ compensation historically has seldom produced an underwriting profit, so consistent positive results in the future are unlikely. Competitive market conditions, including abundant underwriting capacity, may limit the market’s current hardening phase, leading to flat or declining rates in the future.
Phoenix firefighters sue over denials, delays of insurance payments (azcentral.com, 8/1/2013): Phoenix firefighters have filed a lawsuit in federal district court against the city’s workers’ compensation service provider. The lawsuit alleges violation of federal racketeering laws. The plaintiffs’ lawyers say that using RICO helps the firefighters avoid immunity laws that could block the claims. Among the activities alleged as a violation of RICO were mailing denial letters and using “hand-picked” physicians to support the denials. One of the claims involved was a cancer presumption claim. A very disturbing aspect of this lawsuit is the negative perspective on the use of panel physicians to evaluate claims.
OTHER TOPICS OF INTEREST
Are Police and Fire Department Mergers Catching On? (Governing, 8/8/2013): Interest in merging police and fire into a single public safety department may be experiencing an uptick. Michigan State University research found that at present only 128 jurisdictions have merged police and fire administration, but U.S. jurisdictions are looking for more cost effective ways to deliver services and are beginning to look at alternative models. Michigan State has developed a Program on Police Consolidation and Shared Services that is conducting research and providing information and resources to help guide departments considering consolidation, shared services or other efforts to revamp public safety services. Although this program is not directly targeted at risk management, it is worth following for pools with an interest in emerging models for public safety service delivery.
Obama administration backs prayer at local government meetings (Los Angeles times, 8/8/2013): A 1980’s Supreme Court standard used to determine when government actions violate the First Amendment to the U.S. Constitution is under review by the Supreme Court. The “endorsement” standard says that government actions violate the First Amendment if they appear to “endorse” religion. The standard has been used in cases that prohibit governments from taking actions such as displaying the Ten Commandments or hosting Nativity scenes at Christmas. In the case under review, the Obama administration along with conservative forces have filed briefs taking the position that the court should relax the constitutional limits on religious invocations at local government meetings and allow those bodies to open their meetings with a Christian prayer if they so choose. Changes by the Supreme Court in the boundaries on government activity in this area may warrant pool guidance to members on the new standards.
U.S. warns against eminent-domain mortgage seizures (Los Angeles Times, 8/8/2013): The Federal Finance Housing Agency says that it will instruct Fannie Mae and Freddie Mac to “limit, restrict or cease business activities” in any jurisdiction using eminent domain to seize mortgages. Fannie and Freddie, as well as bondholders, have filed a lawsuit seeking an injunction against Richmond, California and Mortgage Resolution Partners, a private entity that would fund the Richmond eminent domain plan. The lawsuit alleges violation of the takings clause of the U.S. and California Constitutions, the California eminent domain law, due process, the interstate commerce clause of the U.S. Constitution, and the contract clause of the U.S. Constitution. For pools, the question is what responsibility they may have if a member adopts this strategy.
2013 NLC-RISC Staff Conference - Registration and Preliminary Agenda Now Available! (October 21-23, 2013 at The Nines in Portland, Oregon): The NLC-RISC Staff Conference Provides staff of state municipal league-sponsored risk pools with the opportunity to learn about trends, programs, services and best practices in a variety of coverage lines and functional areas, and offers a great opportunity to network with pool staff from across the country ~ all in a non-competitive, collaborative environment! A preliminary agenda and online conference registration, as well as hotel reservations can all be found on the 2013 NLC-RISC Staff Conference Event Page. Contact Erin Rian with questions or concerns.
Southern Municipal Conference IT Conference (October 16-18, 2013 in Columbia, South Carolina): The Southern Municipal Conference has sponsored the SMC IT meeting for 11 years. The group meets twice each year to share the IT experiences of each league and/or Risk pool. Presentations by IT experts on the latest hardware and software help keep the participants up to date on the cutting edge of technology. Registration for the SMC IT Group meeting is open to all State Municipal Leagues and League Risk Pools.
Property Inspector - Rhode Island Interlocal Risk Management Trust: Property Inspector for non-profit self-insurance pool for RI local governments. Provide detailed loss prevention inspections, identify potential hazards and design preventive programs. Extensive field work. Knowledge of governmental risks and OSHA Construction Standards. Undergraduate degree in insurance or risk management preferred. Professional certifications/designations (ARM, NFPA, OSHA) desired. 3-5 years field experience. Proficiency in Microsoft Office. Salary commensurate with education and experience; excellent fringe benefits. Resume ASAP to Brian T. Ahern, Director of Risk Management Services, RI Interlocal Risk Management Trust, 501 Wampanoag Trail, Suite 301, East Providence, RI 02915; by fax to 401-438-6990; by email to email@example.com.