Five Steps to Building Your Claim Management Toolbox

Five Steps to Building Your Claim Management Toolbox

Kevin M. Quinley

In the psychological thriller, “Black Swan,” a production of Tchaikovsky’s “Swan Lake” requires the ballerina to play both the innocent White Swan and the sinister Black Swan. In the film, Natalie Portman’s character channels her “dark side” to land the part.

Medical device firms face “the dark side.” Their black swans occur in the form of Icelandic volcanoes, Midwest tornadoes or Fukushima reactor meltdowns. They can beset medical device firms cloaked as product liability lawsuits, recalls, media exposés, and class action lawsuits. Perhaps as much as any business professionals, medical device managers and executives can relate to the bumper sticker observation that “Stuff Happens.”

Device companies navigate a perilous tort minefield. One wrong move or decision can expose firms to explosive liabilities. Highlighting this is the fact that in 2010, 10 of the 50 largest jury awards came in product liability cases. 2010 saw 15 product liability verdicts of $25 million or more; in 2009, there were only seven.There was a 77 percent jump in the total of the top five product liability awards in 2010 versus 2009. Many personal injury lawyers specialize in suing medical technology firms for defects real and imagined. They sponsor conferences and workshops targeting specific technologies, ranging from pacemakers to pain pumps. They scour the Internet and monitor U.S. Food and Drug Administration (FDA)actions as a “weathervane” pointing them to happy hunting grounds for litigation.

According to Ophelia Camina of Susman Godfrey LLP, “Jurors are more willing to believe that corporate wrongdoing was intentional.” Tough economic times and the recession might make jurors even more distrustful of big, corporate entities, says Carl Tobias, a law professor at the University of Richmond.

One safety net cushioning the impact of those liabilities is insurance. Insurance often spells the difference between survival and insolvency for medical device firms. It is an asset. Like any asset, it should be preserved and managed so as to not place it at risk. One way to manage insurance assets is to avoid missteps that could negate insurance coverage, cloud the prospect of insurance protection, and increase the company’s Maalox consumption.

Adroitly managing insurance as an asset through policy compliance and alertness at the placement phase can maximize the asset as a safety net, cushioning the impact of product liability costs.

The following five steps can help toward building a toolkit to develop collaborative partnerships with your insurance company through the claim process:

Tool #1. Embrace PromptLoss Reporting

Insurance policies generally require prompt notice of a claim as a condition for coverage. If a patient, doctor, attorney, hospital or anyone reports an adverse outcome, do NOT bury it on the desk. Make sure to send written notice in accordance with the claim reporting requirements in the policy.Consider sending it certified mail with a return receipt requested to document that you reported the loss and when, inaddition to email.

Many insurance policies require that you notify the company “as soon as possible” or “as soon as practicable” after a loss or claim.The consequences of not giving prompt notice differ, depending on the contract wording and jurisdiction. Since the consequences may be serious, time is of the essence. Communications should be a two-way street, though, in order to build a successful relationship with your insurance company. This leads to the second tool.

Tool #2. Ask the Insurer for Four Things

Don’t move forward without asking for the following important items:

• The insurer’s cknowledgement ofreceiving the claim;

• The name and contact number of the claims person (or defense attorney)handling the claim;

• The claim number; and

• Ask the insurer you informed of the claim’s progress and status.

Acknowledgement from the insurer gives you peace of mind that the loss notice has reached its destination. The adjuster’s (or attorney’s) name and contact information is key if you have questions about reserves, case status etc. The claim number is also handy. It helps the insurer and adjuster match your letter, email or phone call with the right case. Asking the insurer to keep you informed helps you build a relationship with the claims handler. This will facilitate tool number three.

Tool #3. Stay Engaged in the Claim Process

Get to know the insurance claim specialist(s) and any legal counsel who handle your losses. Check in with them regularly. Give them the time and information needed to mount an effective defense of your product. This might mean educating them on the intricacies and workings of your device. It might mean connecting them with key people within the company who can clarify a point of interest. It might mean digging out some hard-to-locate records or documents that are key or are required by the litigation process.It may be suggesting to them an outside expert who could be a resource for the defense team. The point is that successful claim defense is a team effort that merits ongoing engagement by the policyholder in the claim process.

Another dimension of engagement relates to communication FROM you to ALL key constituencies, which brings us to the next tool.

Tool #4. Adopt ThoroughLoss Reporting

There’s often confusion about loss reporting, especially reporting incidents. For medical device reporting and matters that haven’t (yet) triggered a claim, lawsuit or monetary demand, should you report these? Closely read the policy wording (because that will govern) and discuss the issue with your broker. Imagine explaining to your CEO, “Our insurance coverage is in question because I, um, well, didn’t notify the insurer of this when it was an incident.” Do you really want to have that conversation? That could be a bigger problem than any fallout from reporting incidents. Avoid this scenario through thorough loss reporting.

Tool #5. Discuss Claims Handling in the Insurance Placement and Renewal Process

Price, premium and getting the lowest quote often are the cornerstones of the insurance placement process. That is understandable. It is easy, however, to overlook claim aspects of the insurance relationship. Discussions with the insurer during the placement and renewal process as to how claims are handled will ensure that claims progress effectively and smoothly during a crisis. Here’s a tip:Include claim issues as part of an insurance renewal checklist.

The recent thriller movie “Limitless” features the character of Eddie Mora, played by Bradley Cooper. Eddie’s life is in shambles. He hasn’t started the novel that he’s contracted to write. His girlfriend has dumped him. He’s behind on his rent. However, Eddie’s fortunes turn when he takes a mysterious drug called “NZT” that imparts astonishing powers. He breaks through writer’s block to finish his novel. He becomes a fabulously successful day-trader. He learns Italian in his spare time.

Wouldn’t it be great if managing risk worked that way? If a pill could inoculate us against claims?
Sadly, no one has yet developed that drug. And, unfortunately, bad things happen to good medical devicefirms. Effective claim defense is a team effort, with vital roles played by the insurer, the policyholder and—in the case of litigation—the defense attorney. Collaboration wins. While medical devicefirms can face choppy water from torts and courts, by using sound management strategies, they can adroitly navigate the legal landscape and build an effective risk management toolbox.

Kevin Quinley is vice president of RiskManagement Resources for Berkley LifeSciences LLC. You can reach him at [email protected]. He is the author of “Managing Product Liability and Avoiding Litigation.” The views expressed here do not constitute legal advice, are his own and do not necessarily reflect those of Berkley Life Sciences or its customers.