Moore: Why Does Loss Run Stay Open?
Monday, March 15, 2021 | 0
A new blog and newsletter reader asked a question last week after reviewing loss runs: We have a very old workers' comp subrogation claim open after seven years. Will that affect our experience mod? Why is it not closed?
Let’s look at why
Many workers’ comp carriers leave the claim open, as it generates a large number of notices that enable the adjuster to track the claim. When claims are closed, the notices sometimes do not generate and the claim may fall off a diary system very easily.
Each carrier’s claims department has its own way of handling a large or any workers' comp subrogation claim.
Some of the carriers and third-party administrators that I have worked for or consulted with all use different methods for tracking the claim. One TPA even has a subro-open status that closes out the claim but generates internal messages and diaries to follow it.
I wrote an article that recommends that employers keep their own diaries for subrogation claims. Checking in on a claim every six months will keep you up to date. If the claim was due to a motor vehicle accident, always keep a copy of the initial and finalized police report for your records.
Always email the adjuster, do not call. They will appreciate the email instead of a call. If you do not know the name of the adjuster, most carrier and TPA websites will provide it.
But then that points out a possible problem: To keep your reserves lower on any set of claims, you should have a working relationship with the workers’ comp claims staff. Check out this article on how to establish a working relationship.
Workers' comp subrogation claim units
On the $350,000 claim, the file has been referred to a specialized subrogation unit in Florida. You may be dealing with a department rather than with one adjuster. That is an OK situation. If you see different adjusters responding to your email, that is acceptable, as more than one may be working on your file at that point.
With this large claim amount, attorney representation by all parties may cause the claim to be open for years on end. The original adjuster you have been working with may not know the current status.
Experience mod effect (or not)
The experience mod will usually not have any effect from a claim with no reserves. The claim is the same as a closed claim: paid = total incurred.
The total incurred is the same. It's the figure that the carriers report to the rating bureaus that calculated your mod.
The $350,000 mod affected your experience mod for the 2017-2019 years. You likely had to pay higher premiums for those years.
But hold on! If the subrogation recovery unit recovers funds, the process is usually:
- Subro claim recovery.
- Funds credited back to file.
- Carrier data reporters report the recovery of funds to the rating bureau (NCCI, WCIRB, etc.).
- Rating bureau recalculates mod and sends back to the carrier.
- Carrier processes workers' comp premium refund.
The last bullet point is why I heavily recommend that you establish a diary system to follow the subrogation recovery. Workers' comp does not change that much.
Bottom line: Do not be concerned if a claim is still open that has no outstanding reserves if it is a comp subrogation claim. Build a diary and follow it. Use any calendar program.
This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.