Good Business Sense: Part 6

Saturday, June 4, 2005 | 0

This is the sixth and final installment in a series by Pamela W. Foust. Earlier installments can be read by clicking on the article title in the side-bar at right.

"A system that's easy to game destroys human character."
- Charles Munger

Its All Just Business

While the claims adjuster was beginning to appreciate the seriousness of her predicament, the claims manager was congratulating himself on his good business sense. He would have been surprised to find out that his staff generally viewed him as inflexible and unreasonable. From his own perspective, he treated everyone fairly and if he ran a tight ship, that's what the company wanted him to do. He had no desire to deprive a legitimate claimant of anything he had coming to him. But at the same time, they weren't supposed to be giving it away. After all, an insurance company was a business; not a charitable organization. In order to do his job and survive, a claims manager had to be first and foremost a businessman because the home office in Chicago was interested in profits, not good deeds. The day that Chicago decided that the company couldn't make a profit in California, they'd shut down their operations. He'd be out of a job and top managerial positions were hard to come by. That's why he was such a stickler about penalties. A few instances of sloppy claims handling on the wrong cases and the penalty assessments might be enough to convince Chicago to throw in the towel. To protect the company and his own position, the claims manager had made it a rule that any claims adjuster who was responsible for three penalties within a period of one year was subject to immediate termination. After initially firing two adjusters for excessive penalties, he never had to invoke the policy again. That meant they all must have gotten a lot more careful and that was precisely what he was trying to accomplish. People might grumble about some of his rules, but no one could say he didn't get results.

The claims adjuster was well aware of the fact that in the last ten months, she had been held responsible for penalty assessments on two cases. This meant she still had two more months to go before one of them would drop off the books. In neither of those cases did she understand exactly what she did or didn't do that was wrong much less unreasonable. Nor did she understand how the machine operator could do his job for six months, never missing a day from work and never seeing a doctor, and then become disabled as soon as he no longer had a job to go to. No matter what he might have told the foreman, it just didn't make sense. On the other hand, she wasn't a lawyer and she didn't know the judge. She'd seen stranger things happen and had heard all of the "case-from-hell" stories circulating throughout the industry.

She smiled at the thought of telling that sniveling attorney to go back in there and hang tough. It was tempting, but she knew she couldn't do it. In the final analysis, she had to look out for her own interests because if she didn't, certainly no one else would. Maybe none of what he said about the judge and the other attorney was true and he just didn't want to try the case, but she had no way of checking it out and she couldn't afford to take the risk. As a single mother with two children to support, she needed her job. She didn't create this problem and she had no intention of letting them make her the fall guy. She dialed the attorney's cell phone number and when he answered on the first ring, she told him that she was giving him the authority to settle the case for $75,000 as long as it included a full release of any and all penalty claims. Once they had the applicant out of the way, they could deal with the doctors later.

The Compromise and Release was drawn up, signed and approved by the judge after the defense attorney complied with the requirement to make good faith attempts to resolve the lien claims by calling up the various medical providers and offering them ten cents on the dollar which they all refused. It was now 11:15 a.m. and defense counsel hurried off as soon as he had his copy of the Order. The machine operator's attorney was in not in any rush. He had an afternoon appearance and the local applicants' attorneys always met for lunch in order to compare notes and trade strategies.

"You know," the judge remarked as he was leaving for the gym, "you really did a helluva job for that guy and I'll bet he doesn't even appreciate it."

"You're right," counsel agreed. "He doesn't. But if I were looking for thanks, I'd be in the wrong business. It's all a matter of having a job to do and doing the right thing. I mean, what would these people do without us? They don't have any power. They'd all be screwed over by their employers."

The judge thought about that for a minute. "That's what I like about workers' comp," he said. "It's not just about dollars and cents like most of the law. You get to feel like you're doing something beneficial for society."

After he received the settlement check, the machine operator paid back the $20,000 he owed and spent $28,000 on a new SUV. Another $5,000 went for things they had needed for a long time and a few luxuries for his wife and kids who had sacrificed so much. The remaining $10,000 went into the bank. It wasn't enough for a down payment on a trailer, much less a house. As for starting his own business, he didn't have the slightest idea what he could do. He started looking for work, but he was now 50 years old. It was difficult to explain what he had been doing for the past ten years. At first, he told prospective employers that he was out of the country and later that he had his own business. When they didn't hire him, he was certain they must have found out about his workers' compensation claim. He reluctantly accepted a job that paid minimum wage to start but they let him go after a few months because he couldn't keep up with production. Maybe he just couldn't do the work any more. He became severely depressed and stopped looking for work entirely. He went to a local mental health clinic to see if he could get a prescription for medication and one of the doctors suggested that he apply for Social Security Disability. After two years of appeals and with the help of an attorney, he was found to be totally disabled and his application for benefits was approved

The shop owner's workers' compensation premiums skyrocketed after his experience modification was increased to 300 percent. After all the costs were added up, the machine operator's case alone came to almost $150,000. Two of the other four workers who had lost their jobs in the layoff also filed workers' compensation claims although their cases had not been nearly as expensive. He had heard stories about businesses leaving the state because of the high cost of workers' compensation, but the shop wasn't that kind of operation nor did he have the knowledge or connections for a major move. Profits continued to decline. The shop owner finally sold the business to a competitor and accepted an offer to stay on as the Director of Operations. He was the only one to survive the transition with a job. The new owners laid off all of his former employees and replaced them with their own workers.

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