Chasing perfect claims results can seem like chasing the wind, especially when it comes to making denial decisions. As Isaac Newton presented in his third law of motion, every action has an equal and opposite reaction, and deciding when to deny a claim is no exception. Knowing when to deny a claim is critical, but it’s important to remember that there will be repercussions no matter the decision you make.
When initially evaluating claims, there are three general claims types encountered: the likely valid, the possibly valid, and the likely invalid. There is an art to analyzing and balancing these three types of claims and deciding which should be denied and fought. An initial analysis requires a grasp of the applicable legal standards and associated potential risks and exposure. Knowing up front how to navigate between types of claims, the applicable law, how much time to devote to a claim, when to hit a decision point, and when to deny and fight is essential to any claims-handling strategy.
The Likely Valid
Dwight Schrute works for The Schrute Family Construction Company (TSFCC). While driving the company truck to a construction site, Dwight is T-boned after an armored personnel carrier, driven by Mad Max, ran a red light. At the emergency room, Dwight is diagnosed with a fractured left wrist. As you analyze Dwight’s workers compensation claim, you note his negative drug/alcohol screen, the police report placing Mad Max at fault for running a red light without a driver’s license, and Mad Max’s .21 blood alcohol content.
Here, the law appears in Dwight’s favor for a workers compensation claim (and a personal injury claim against Mad Max). Dwight’s claim appears valid, legal exposure to TSFCC appears limited to workers compensation benefits, and the risks and exposure associated with denying Dwight’s claim appear high without solid legal grounds (where denial could conceivably expose the employer/carrier to tort liability). As such, denial here would be a poor choice.
The Possibly Valid
Many claims are not so clear and fall in a middle category of “possibly valid,” containing unanswered factual and legal questions that require investigation. During the investigation, it takes time to sort out evidence and applicable legal standards. Ultimately, these claims hit a decision point on denial, and knowing when that decision point is reached is crucial to limiting potential risks and exposure.
For example, on his way to the construction site, Dwight takes a detour to stop by a pig farm. He runs out of gas and walks to a gas station. On his way, Dwight spots some blackberries in a field 20-30 feet off the road. While walking through the field, he steps on a rattlesnake and is bitten on his right ankle. Dwight becomes dizzy and weak, but he manages to call 911. He is picked up by an ambulance, rushed to the emergency room, and receives antivenin. He later suffers from chronic pain (complex regional pain syndrome) and weakness, claims he cannot work, and seeks workers compensation benefits.
After investigating Dwight’s detour, you learn that Dwight’s brother Jeb owns the pig farm. Jeb tells you that he also owns the family worm farm, is part owner of TSFCC, and is also Dwight’s supervisor. Jeb confirms that he told Dwight to stop by and pick up tools for the construction job. Subsequently, you realize Dwight was properly driving to the farm, and running out of gas was simple negligence and not a good reason to deny workers compensation benefits.
However, as to Dwight’s decision to walk into a field and pick blackberries, you initially conclude that the snake bite had nothing to do with his job and was a personal detour. You discuss all of these facts with Dwight’s cousin, Mose Schrute, also part owner of TSFCC and another one of Dwight’s supervisors. Mose tells you that he likes blackberries and TSFCC often provides fresh fruit to its employees to strengthen morale. Mose confirms that he did not direct Dwight to pick the blackberries (as Mose does not have a phone), but he says he would have told him to pick the blackberries if Dwight had asked.
You are still not convinced the snake bite is a compensable claim, so you deny it. A week later, you are contacted by Dwight’s attorney, Jackie Chiles, who tells you that denying Dwight’s claim was “lewd, lascivious, salacious, and outrageous,” as blackberries are frequently offered for TSFCC employees. Jackie then demands that you immediately accept the claim, pay indemnity benefits for Dwight’s missed work, and pay his medical bills.
Obviously, the applicable workers compensation laws in the various states may differ on whether or not Dwight had a compensable work injury under this scenario. As such, before denying, it is advisable to obtain a legal opinion as to the law and the potential risks and exposure for denial, while assessing the best, most likely, and worst-case scenarios. If after analyzing the facts and the law you are convinced the claim is not compensable, then you would be on better ground to deny, also being prepared for a potential fight. You would also gain a general idea of the potential risks, exposure, likely costs, and possible defense/case strategy with the same.
The Likely Invalid
This last type of claim generally appears immediately dubious. With these, you see gaps in required legal standards or suspicious facts and evidence. This often leads to a fight, and knowing this up front can help set expectations and assist with initial strategic planning.
For instance, you discover Dwight, instead of driving directly to the construction site, decided to drive to Kata-Kan Goju-Ryu Dojo for some extra Goju-Ryu karate training (five miles in the opposite direction). While working on his Crane Boxing technique, Dwight fractures his right wrist and heads to the emergency room. However, while driving very slowly with his injured wrist (10 mph under the speed limit), Mad Max’s friend Snake Plissken, enraged by Dwight’s slow driving, intentionally rams the back of Dwight’s truck.
Practicing karate would not appear to be part of Dwight’s job, and Dwight’s brother Jeb confirms that it is not in his duty description. To be thorough, you also obtain a copy of the police report and interview Dwight, Snake, Jeb, and the Goju-Ryu karate master Chojun Miyagi. You learn that Jeb fired Dwight for his karate excursion and, while interviewing Miyagi, he says he is not surprised Dwight is a bad worker and would frequently ditch work. Miyagi says Dwight is his worst student, does not follow directions, and requires severe, remedial training to learn proper technique. As such, you conclude that Dwight cannot likely meet his legal standard for a workers compensation injury claim, where his injury did not arise out of or take place in the course of his work for TSFCC, so you deny the claim.
Almost two years later, just before Dwight’s statute of limitations runs out, Dwight’s attorney Jackie Chiles calls, telling you that Dwight was appallingly fired because of a genuine work injury, as Dwight needed karate skills to protect the construction site from looters. Jackie exclaims that the denial of benefits and termination were “outrageous, egregious, and preposterous,” and demands workers compensation benefits and damages for wrongful termination, or else he will file suit.
Certainly, there are numerous red flags with this claim. Denial appears appropriate. The facts do not appear to support the law behind a valid workers compensation claim, a wrongful termination claim, or otherwise. Consequently, you feel confident denying this claim after weighing the facts, the law, and possible defenses, while still recognizing the risk of wrongful termination or outrage claims (knowing Jackie’s courtroom skills).
Facing Uncertainty
Certainly, we often “don’t know what we don’t know.” Sometimes claims are not clearly in a certain category or, after additional investigation, some claims may shift between these three categories. The key to knowing when a claim may fall into a certain category or when you hit a workable decision point to accept or deny hinges on a thorough analysis of the facts to the law, recognizing that you will never have 100 percent fidelity. Recognize that with continued investigation comes increased time, opportunity costs, and associated risks, expenses, and exposure.
General George Patton has often been quoted saying, “A good plan violently executed now is better than a perfect plan executed at some indefinite time in the future.” Voltaire is purported to have similarly said, “Perfect is the enemy of the good.”
Perfect can certainly be the enemy of good claims handling. Knowing risks and potential exposure early is crucial to help drive the investigation, clarify facts, and assess claims for denial. Knowing the applicable statute of limitations, potential venue, judge, possible jury pool, and risks associated with denial are also important.
There is no “one size fits all” for evaluating claims for denial. However, it’s best to ensure that the facts are fully investigated up front, the correct legal standards are identified, and an analysis is made of how the facts match the legal standards. Further, an analysis of risks associated with denial and possible secondary effects should be done (e.g., an outrage lawsuit). Ultimately, if these steps are taken, then the suitability of denial should become clearer.