Also, case managers who don’t help achieve these goals, don’t climb up in the company.
Workcover insurance companies: incentive programmes and bad faith
These incentive programmes result in what is called (and is recognised in civilised countries) bad faith claims handling. It isn’t necessarily the horrible, instantly recognisable , and so common conduct that we all look for . It is, instead, the day to day swindling of a couple dollars here, and a few more dollars there, over and over again, on claim after claim.
Denial of a small claim, or a small benefit no matter how unfair, rarely results in a serious challenge to the insurance company. Fact is few injured workers can find a lawyer to litigate over a few hundred or even a few thousand dollars.
Also, when you think about it, workcover insurance companies handle many more small workcover claims than large ones. As such, the best opportunity to save millions of dollars is in the area of small claims and benefits, and that is where you will find the most examples of bad faith, as well as some of the most blatant examples.
For example, a workcover insurer denied an injured worker -who broke her leg- a few thousand dollars in medical expenses and benefits. She couldn’t find a lawyer to help her, because her workcover claim was too small to provide much of a fee. (She would not end up with a permanent impairment and as such be eligible for a meager lumpsum, and she also had no negligence case). The injured worker could not bother to go through conciliation. The insurance company made money by denying this injured worker legitimate benefits.
However, take the same injured worker but place her in America or Canada. Undoubtedly she would have found a very civic minded lawyer willing to take the case. After a year of litigation, she would win. In the bad faith litigation that ensued in a very similar case, her lawyer found the insurance company’s incentive plans. They paid bonuses to case managers based directly on reductions in claim/benefit payments. The jury awarded a couple millions in punitive damages.
In yet another case, a workcover insurer denied payment of $5,000 in medical bills to an injured worker, without any legitimate grounds at all. Again, most claim denials of this kind go unchallenged and the workcover insurer wins automatically. What Australian lawyer would want to litigate a $5,000 case for contingency fees allowed in workcover claim proceedings?
But again, if the injured worker lived in America or Canada, he would have found a lawyer, won the case, and his lawyers would bring a lawsuit against both the workcover insurer and the employer for bad faith. The insurer may have settled. The employer may go to court. The jury again would return a verdict in the millions against the employer for aiding and abetting bad faith.
Most of us wouldn’t look too hard at a dispute involving only a few thousand dollars. That is where we need to change our thinking. And change our insurance contracts! Why? Because we (injured workers and lawyers) are used to handling transactions one at a time. Workcover insurance companies handle thousands of these same transactions everyday. They teach their case managers to handle each similar case in the same way.
If they are denying a particular claim without any reasonable basis, then they are probably handling many other similar workcover claims in the same way. That means a case involving denial of a few hundred dollars might actually be a case involving denial of tens of millions of dollars.
In addition, when you look under the surface, you’ll find that these small(ish) cases often have big agendas behind them, hidden from view. When you reveal the hidden agenda, the little case takes on massive proportions.
Example of an incentive scheme
To show you how workcover insurance incentive programmes work, we have been given selected excerpts from discovery of personnel files obtained in litigation in America against a very prominent insurance company. Whilst the following incentive scheme is from the USA, we do know for sure that our own Australian workcover insurers also have similar incentive programmes.
The facts are simple in this case. The injured worker was in a machinery accident, suffered soft tissue injuries, and submitted her medical bills to her insurer. The insurer hired a “medical review organisation”, who issued a report saying that the actual treatment exceeded what was necessary/reasonable. After that, the workcover insurer denied payment of $1,800 in physiotherapy bills.
Internal incentive programmes for claim payments
Documents produced in discovery confirmed that the workcover insurer has engaged in the practice, for at least the past decade, of setting financial goals for case managers to meet in making claims payments. The performance evaluations of each case manager track their success in meeting their goals. Their pay is linked directly to their performance.
Some of the internal goals set by the insurer include:
- Goals of denying a certain percentage of claims (in this case: 30%);
- Goals of holding the average payment per workcover claim at a specified dollar level;
- (many also have monetary incentives linked to return to work)
This workcover insurer has a written internal policy called “Pay for Performance”. This policy equates accomplishing company goals with pay increases and promotions for the case manager. The written instructions provided to claims handlers tells them that:
YOUR PERFORMANCE WILL LINK TO YOUR PAY
You should be compensated according to how well you perform in critical performance areas. By rewarding achievers, we put ourselves in a position to develop future leadership and to accomplish our critical company business goals. On the other hand, if performance fails to match expectations, your compensation will reflect that.
This performance management program is designed to link our pay system. You can expect that your individual performance ratings will play a key role in determining your pay level each year.
THE COMPANY CONCEALS THESE ACTIVITIES
In resisting discovery, the company offered the testimony of a regional claims manager at a motion hearing, claiming that no such programs existed.
First, the case manager testified that the insurance company creates no financial goals for case managers/claims personnel, and admitted that such conduct is wrong:
Q Did I understand you correctly that there are no financial goals or …expected results put out in front of case managers by the [insurance] company?
A That’s true.
Q Would you agree with me it would be wrong to do that?
A Yes, I would.
Q Would you agree with me that it would be unethical for an insurance company to put out expected results in front of claims personnel and have them strive for those results, financial results, with respect to paying claims?
A It would be wrong because they wouldn’t have control over the results.
The case manager even went so far as to say that such conduct is strictly forbidden, and that any supervisor caught engaging in such conduct is subject to disciplinary action:
Q Okay. But at any rate, you’re clear on the idea that [the company] does not keep track and evaluate individual case managers on their averages of what they pay out each year in claims?
A To my knowledge, that’s strictly it’s forbidden that they do that. If a supervisor is doing that, he or she is subject to disciplinary action.
The trial court ordered discovery to go forward anyway. All this testimony turned out to be false.
CASE MANAGERS ADMIT THIS CONDUCT IS IMPROPER
In deposition testimony, the supervisor in charge of the injured worker’s claim in this case eventually conceded that, in her opinion, it is wrong to include financial goals in the performance appraisals of case managers/claims personnel, and concedes to telling her own supervisors it was wrong. She continued to use the practice, however, because she was told to do so, and was just doing what she was told.
This same supervisor conceded that no matter how well intentioned you are, you can’t help but be influenced when your job and your pay is affected by the things that the company is telling you to do.
Bad faith is as much about WHY the case managers behave the way they do, than it is about the events that happen to any particular injured worker in any particular case. This type of evidence gives the jury a flavour for the fact that while the insurance company refused to pay only $1,800 in this case, the actual amount of money involved is much more than that, and it will take very significant action by the jury to correct this behavior. Otherwise, it is simply more profitable for the insurance company to keep doing it.
- Some Signs Of Bad Faith Insurance Claims Settlement Practices
- Workcover insurance bad faith negotiation tactics
- Bad faith claim against workcover insurance company
- Unfair Claims Handling Practices in Workcover Insurance – No tortious Duty of Good Faith
[Post dictated by Workcovervictim and manually transcribed on behalf of WCV]
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