Tag Archives: Christine Fleming

Bolstering insurers’ cyber defences

This latest edition of Milliman Impact entitled “Bolstering insurers’ cyber defences” explores the efforts of U.S. insurance regulators to address cyber security risks.

Here’s an excerpt:

Unsurprisingly, insurer cyber security has become an important issue for US regulators in recent years.

In the spring of 2015, the New York insurance supervisor wrote to more than 160 insurers encouraging them to view cyber security as an integral aspect of their overall risk management strategy. It also announced enhancements to the IT examination framework to include more detailed questions on an insurer’s cyber security policies, protections, and procedures.

More significantly, the NAIC has engaged in a burst of activity, having taken the significant step of establishing a Cyber Task Force in November 2014.

Creating the task force demonstrates US insurance supervisors’ commitment to addressing cyber security in the insurance sector, according to Christine Fleming, claims management consultant at Milliman in Boston….

The task force’s comprehensive work plan and timetable speaks volumes to the significance and urgency that US insurance supervisors and commissioners now place on cyber security, explains Fleming.

The task force is concerned with both the protection of consumer data held by insurers and improved monitoring of insurers cyber underwriting activities and exposures. During 2015, the NAIC embarked on four major work streams:

• Establishing guiding principles on cyber regulation
• Creating a Consumer Bill of Rights
• Modernising examination protocols to include cyber security
• Including a cyber security statement in insurers annual statement

Cyber risk regulation: First line of defense

Cyber risk is destined to become a much bigger part of insurers’ business yet it also comes with challenges. Insurers are grappling with a lack of historical data and the threat of aggregation and systemic risks. At the same time, regulators and ratings agencies are becoming more aware of the potential risks that cyber presents to insurers’ balance sheets and the industry’s reputation. This Milliman Impact article provides more perspective.

Claims complicated by obesity weigh down workers’ compensation sector

Research shows that obesity is more than a major health problem in the United States. Obesity is also having adverse financial effects on industries like workers’ compensation insurance. A high percentage of claims related to obese and overweight claimants has resulted in more expensive workers’ comp payments. Milliman consultant Christine Fleming recently wrote a Best’s Review article explaining how the following processes can help insurers manage claims involving obesity and effectively assist injured claimants with obesity-related issues.

• Document information about claimants
• Carve out an obesity claims unit
• Communicate with claimants
• Consider early intervention of medical management
• Implement training on settling claims
• Consider incentives for employers
• Keep employees active

To read Christine’s article, “A weighty issue: Obesity and the implications for workers’ compensation,” click here.

Policy language affects pollution liability claims

The terms and conditions of pollution liability policies have often created disputes between insureds and insurers, resulting in litigation. In a recent Best’s Review article, Milliman’s Christine Fleming explores three oft-disputed areas of these policies: “the definition of a ‘claim’; the timely notice requirement; and the ‘known loss’ condition.”

The following excerpt offers perspective concerning the meaning of a claim:

Most pollution liability policies are claims-made, meaning that the claim has to be made against the insured during the policy period. Although this requirement seems clear, the question of what constitutes a claim has been the basis of coverage disputes.

For example, in Hatco Corp. v. W.R. Grace & Co., the insured was a prior owner of a contaminated site. The insured received a letter from the current owner of the site that included an administrative order directed to the current owner, and a warning that the current owner would hold the prior owner liable for any costs it incurred in connection with the administrative order.

The insured had a pollution liability policy in which “claim” was defined as a “demand for money.” The court held that the letter was not a demand for money, but rather a threat. Thus, the court reasoned that it was notification of a potential future claim and not a claim as defined under the policy.

In another case, Alan Corporation v. International Surplus Lines Insurance Co., the insured purchased a pollution liability policy. The government contacted a third party, not the insured, during the policy period regarding contamination at the insured’s site. That third party spoke to the insured about the contamination, also during the policy period. After expiration of the policy period, the government initiated action against the insured related to the site.

The insurer’s position was that no claim had been made against the insured during the policy period. The insured argued that the communication with the other party discussing the contamination constituted a claim because it set off a chain of events that eventually led to the government action. The court held for the insurer, and rejected the insured’s position that a claim had been made during the policy period.

The Takeaway: Don’t assume that a “claims made” policy resolves the issues raised by occurrence policies, or that the report date will now be clear. Questions will continue to be raised and litigation will continue to revolve around when a claim was brought against the insured and, indeed, even what it means to have a claim.

United Nations decision could have big implications for sexual misconduct claims

The United Nations (UN) has recently taken the position that childhood sexual abuse should be considered torture. Classifying childhood sexual abuse as torture may eliminate statutes of limitations that dictate when victims can file civil suits. Any institution acting in an official capacity found to have caused pain or suffering through sexual abuse could be exposed to additional litigation.

In her article “Seeking justice: Insurance and sexual misconduct,” Milliman’s Christine Fleming provides perspective on insurance coverage issues that could be triggered if the UN’s initiative comes to fruition. Here is an excerpt:

Are old CGL (commercial general liability) policies still exposed today?
In cases of childhood sexual misconduct, the abuse often occurred many years before the lawsuit was brought or the claim was reported. This long report lag exists because states set the statute of limitations within which a plaintiff can bring a suit as the time when that person reaches the age of majority. In addition, some states have extended the statute of limitations specifically for childhood sexual abuse claims. The legislatures in these states reason that there are unusual psychological barriers impeding the victim’s ability to report these incidents, and lengthening the statute of limitations achieves a higher social purpose and promotes a just outcome. Several states allow five to 10 years after reaching the age of majority in which to file a suit, or longer. Two states have no time limitation for filing childhood sexual abuse lawsuits. Many states also have an alternate trigger allowing the plaintiff to file within a certain number of years after discovering their injuries were related to the sexual abuse. This is frequently not a clearly identifiable date.

Because of this long reporting lag, older CGL policies can and do get triggered for claims related to childhood sexual misconduct.

For abuse or injuries that occurred over a long period of time, how do we determine which policy responds?
If the abuse occurred over a long period of time, and/or there is a long lag before the claim is reported, then the insured may have several CGL policies in place, any or all of which could provide coverage for the occurrence. The relevant date for determining which policies are triggered is the date the damage occurred, not the date of the conduct that led to the damage. In the case of sexual misconduct, it is the date the injury occurred, not the date of the negligent hiring or supervision, that determines the policies triggered.

However, because of the repeated and continuous nature of many sexual abuse cases, it is difficult to determine the date on which the injury actually occurred. Therefore, most courts have held that all policies in effect during the period of actual abuse are triggered. This theory is known as the “exposure” trigger of coverage. Some courts, however, have held that the injury progresses even after the abuse ends—specifically, until the date the plaintiff discovers his or her abuse-related injury (i.e., when the injury becomes “manifest”). In these jurisdictions, all policies in effect during the period of actual abuse and thereafter until the date the injuries are discovered are triggered. This theory is known as the “continuous” trigger of coverage.

The fact that many policies may be triggered does not mean that all triggered policies will pay the same amount of indemnity or defense. Generally, there are two methods courts use to allocate damages among the triggered policies: pro rata and all sums.

Under the pro rata approach, losses are divided among all triggered policies. The courts applying pro rata allocation reason that this approach is consistent with the CGL policy; namely, that a policy pays only for damages occurring during that policy period. Of course, in cases of injuries sustained as a result of continuous or repeated sexual molestation, it is impossible to determine what quantity of the damage occurred during each policy period. Therefore, courts usually allocate pro rata based upon an insurer’s share of the time on the risk or some variant thereof (e.g., some states allocate pro rata based upon a combination of time and limits on the risk). In most cases, the insured’s own self-insured retentions in triggered years are also allocated a share of the exposure.

The all sums method also finds support in the CGL policy language; namely, that the insurer is required to pay “all sums” the insured is legally obligated to pay as damages resulting from an occurrence. Under the all sums approach, all losses are allocated to one policy period and losses are paid off of those policies up to the coverage limits. In short, insurers are jointly and severally liable for the entire amount of the claim. The insurers within that policy period may then pursue other carriers for contribution. In many cases, the insured’s self-insured retentions in years other than the allocated policy period do not contribute to the losses. In some cases, the insured can select the policy period within which losses will be allocated.

Tort overhaul: Patient compensation system legislation raises more questions than answers

In recent legislative proposals in Florida and Georgia, lawmakers have sought to establish a patient compensation system (PCS) as an alternative to litigation for compensating patients with injuries that could have been avoided under alternative healthcare (referred to as “medical injuries” within the legislation).

Proponents say offering a PCS as an alternative to litigation could lead to faster outcomes with claims. Advocates claim that faster claim resolutions and less attorney involvement would ultimately reduce overall costs, while providing access to compensation for more patients. They also argue that this system would benefit claimants with minor injuries, who are frequently excluded under the current system, because their claims generally do not result in the kind of large monetary awards that make taking a medical professional liability (MPL) case cost-effective for plaintiff attorneys.

Can PCSs really provide the many benefits, in cost savings, fairness, greater access, and efficiencies, that their proponents claim? This article by Christine Fleming, Eric Wunder, and Susan Forray offers some perspective.

This article was originally published in Inside Medical Liability, First Quarter 2014.