Made with FlowPaper - Flipbook Maker
< PreviousVisit these service providers on the 2nd Floor of the Annual Conference venue or reach out after and tell them how you found them. They are committed to helping future-proof the work you do in claims and litigation management. #CLM2023 | theCLM.org/AC23 EMERALD PLATINUM Ready. Set. Thank You. HSU NEWMAN MOORE LLP LES H NM SELMAN LEICHENGER EDSONARCCA, Inc. Cozen O’Connor Envista Forensics Foundation AI Legal Language Services Litify Inc. Matson, Driscoll & Damico LLP SEA, Ltd. The MCS Group TorresVictor Wilson Elser GOLD Arcadia Settlements Group Beytin, McLaughlin, McLaughlin, O’Hara & Bocchino, P.A. Callahan & Fusco, LLC. Center City Legal Reproductions & Reporting Charles Taylor Adjusting & Technical Services Choice Legal Conroy Simberg Consilio DBI Construction Consultants, LLC Exponent First Legal Guardian Group, Inc. Halliwell Engineering Associates, Inc. McAngus Goudelock & Courie, LLC (MGC) Polaris Forensics Record Reproduction Solutions SecondLook, Inc. Traub Lieberman Straus & Shrewsberry LLP SILVER ABI Document Support Services DeSimone Consulting Engineers DXC Technology Services LLC J.S. Held Lowers Forensics International MC Consultants, Inc. Milliman, Inc. Segal McCambridge Singer & Mahoney, Ltd. Trustpoint.One SHOW DAILY SPONSORSHIP C. Jackson Investigations, Inc. Crawford & Company Custard Insurance Adjusters Inc. DeFacto Consulting Group, Inc. Engle Martin ESI (Engineering Systems Inc.) ExamWorks Five Sigma Forensic Weather Consultants, LLC Great Insurance Jobs Grindley Williams HaystackID Impaxx ITCube Solutions Inc. Judicate West LCS Record Retrieval Litchfield Cavo LLP Macro-Pro Nelson Forensics Pete Fowler Construction Services, Inc. QuestPro Consultants Risk Analytics, LLC Rocket Matter U.S. Forensic LLC Wisedocs Your House Counsel EXHIBITOR Carl Warren & Company CCC Information Services Inc. CED Technologies - Engineering Experts Charlee.ai First Environment, Inc. Imagine Reporting IN-Line Consulting Insure National Staffing Koeller, Nebeker, Carlson & Haluck, LLP Magna Legal Services, LLC Quintairos, Prieto, Wood & Boyer, P.A. Schlossberg & Umholtz Sikich The Medical Resource Network, Inc Unified Building Sciences & Engineering Verisk Vernis and Bowling VERTEX Winget, Spadafora & Schwartzberg, LLP Zehner Trial Consulting SUPPORTER HSU NEWMAN MOORE LLP LES H NM SELMAN LEICHENGER EDSON10 CLM MAGAZINE MARCH 2023 COMPLIANCE A Medicare Set-Aside (MSA) is a financial agreement that reserves a portion of a workers’ compensation settlement to cover future treatment and prescription costs of an injury, illness, or disease. MSAs were designed to protect Medicare from paying for post-settlement treatment related to the underlying injury for which the employer/workers’ compensation carrier would remain liable for if the claim was not settled. Utilized when an injured worker is or will soon be a Medicare beneficiary, MSAs project future injury-related medical costs over the person’s life expectancy. In January 2022, there was quite the commotion in the workers’ compensation industry when the Centers for Medicare & Medicaid Services (CMS) released an update to the WCMSA Reference Guide (Reference Guide) that included new information as it pertains to Workers’ Compensation To Submit or Not To Submit That Is the Question With Medicare Set-Asides By Michele Maffei and Heather Sanderson, Esq. Michele Maffei is director of workers’ compensation at Publix Super Markets, Inc. michele.maffei@publix.com Heather Sanderson, Esq., is president of Sanderson Firm PLLC. heather@sandersoncomp.com Rebar Kelly congratulates Managing Partner, Cathleen Kelly Rebar, for her selection as a 2023 CLM Professional of the Year Finalist. Cathleen is known in the industry as an aggressive advocate with creative solutions to difficult problems. She is a dynamic leader and always sets high standards for herself and the team. Her other accolades include Top 100 Lawyer, Super Lawyer, Rising Star, 2022 AV Preeminent Attorney, 2022 Managing Partner of the Year, 2022 Power Woman for Main Line Today and Western Suburbs, Lawyer on the Fast Track, and one of Exelon’s 15 Most Dynamic Entrepreneurs. On behalf of your team, clients, and friends, we are proud of you for this well-deserved recognition! You continue to inspire your team and others to be the best version of themselves possible. _congratulations_Rebar Kelly congratulates Managing Partner, Cathleen Kelly Rebar, for her selection as a 2023 CLM Professional of the Year Finalist. Cathleen is known in the industry as an aggressive advocate with creative solutions to difficult problems. She is a dynamic leader and always sets high standards for herself and the team. Her other accolades include Top 100 Lawyer, Super Lawyer, Rising Star, 2022 AV Preeminent Attorney, 2022 Managing Partner of the Year, 2022 Power Woman for Main Line Today and Western Suburbs, Lawyer on the Fast Track, and one of Exelon’s 15 Most Dynamic Entrepreneurs. On behalf of your team, clients, and friends, we are proud of you for this well-deserved recognition! You continue to inspire your team and others to be the best version of themselves possible. _congratulations_12 CLM MAGAZINE MARCH 2023 Medicare Set-Asides (WCMSAs). Of significance was the inclusion of Section 4.3, which, for the first time, addressed CMS’ position on non-submit/Evidence- Based Medicare Set-Asides (EBMSAs). The initial Reference Guide update on non-submit MSAs occurred on Jan. 13, 2021, wherein Section 4.3 was added to address non-submit/EBMSAs. This update provided that unless the CMS program has reviewed the MSA, it cannot be certain that its interests have been protected. Word of this update traveled fast, and the workers’ compensation/Medicare Secondary Payer (MSP) industry had numerous questions and noteworthy concerns about the language chosen for inclusion in the updated Reference Guide Section 4.3. It almost appeared as if CMS was trying to mandate the submission of MSAs to CMS, which is currently a voluntary process/procedure. Subsequently, about a month later, CMS hosted a WCMSA webinar. During the webinar, CMS acknowledged that in submitted MSAs, the Workers’ Compensation Review Contractor (WCRC) reviews proposed WCMSAs with a “worst case scenario” allocation philosophy. Additionally, CMS acknowledged that the CMS submission process is a wholly voluntary process. Additionally, regarding non-submitted/EBMSAs, CMS softened its stance on the webinar from its initial messaging in the January Reference Guide to comment that non-submitted MSAs would not automatically be assumed a burden shift to Medicare, and that nothing had changed from a legal, regulatory, or legislative standpoint with the Section 4.3 update. Thus, non-submit MSAs are still recognized, legitimate, and not automatically deemed a burden shift so long as the beneficiary and his/her representatives can prove appropriate allocation and exhaustion of the non- submit MSA/EBMSA funds. Next, in March 2022, CMS issued a revised Section 4.3 for the Reference Guide and softened the language. CMS now utilized permissive language (“may deny” rather than “will deny”) to describe its ability to deny payment. Thus, this language change clearly signaled that parties may prove that the non-submit MSA was appropriately allocated for and a protection of Medicare’s interests. A year later, there have been no known challenges or benefit denials in settlements with non-submit MSAs to date, and no additional guidance updates on this matter since March 2022. There have been some resulting changes and impacts to settlements in which parties desire to incorporate a non-submit MSA into workers’ compensation settlements with Medicare beneficiaries in some jurisdictions. Non-submit MSAs are permissible pursuant to 42 CFR 411.46(d)(2), and so long as the MSA provider/vendor can appropriately stand behind the methodology of calculation of the non-submit/EBMSA, the MSA will be recognized and the rest of the settlement dollars will be protected. The authors agree that across third- party administrators (TPAs), insurance carriers, and self-insured entities, there are various perceived theories on whether MSAs should be submitted or not to CMS, and each settlement is unique. Further, workers’ compensation payers continue to see the evolution of what may be included in MSAs change from one day to the next. Some examples of this would be the increase in mental health treatment, which is now more broadly covered by Medicare. It is not uncommon for workers’ compensation claims to also include future medical care for psychiatric treatment (i.e., anxiety, depression, PTSD, etc.). Additionally, ketamine infusions for chronic pain are now being included in MSAs. However, just a few years ago these infusions were not included in MSAs and have increased the cost of them where this treatment is warranted as ketamine infusion may cost $500 to $2,000 per infusion depending on ketamine dose, duration of infusion, and location. For now, Medicare still does not cover ketamine for mental health treatment. Ultimately, the choice between submitting or not submitting an MSA to CMS has become and should remain the settling parties’ ultimate choice, especially keeping in mind the value of the settlement and the complexity of the claim. K The choice between submitting or not submitting an MSA to CMS has become— and should remain— the settling parties’ ultimate choice. COMPLIANCE 14 CLM MAGAZINE MARCH 2023 L awyers and accountants can substantially reduce the risk of errors and omissions claims through the thoughtful use of engagement letters. Lawyers in most states must have an engagement letter to receive a contingent fee; accountants must have an engagement letter to conduct an audit. Engagement letters are invaluable, and claims professionals should examine their clients’ engagement letters closely to help evaluate claims. RULES, JURISDICTION, AND GOVERNING LAW Various state and federal laws and rules impact lawyers’ and accountants’ engagement letters. For example, the Securities and Exchange Commission, the Internal Revenue Service, and the Public Company Accounting Oversight Board may all impact a professional’s work. The state laws that govern engagement letters can be critical, as well. Accountants’ engagement letters are substantially impacted by standards issued by the American Institute of Certified Public Accountants (AICPA), which are often mirrored, at least in part, by state law. The American Bar Association’s Model Rules do not govern lawyers anywhere except that they are often replicated quite closely in states’ rules. An engagement letter should clearly set forth which state’s laws will govern the engagement. If a dispute arises, the parties will then know what rules will govern. Most professionals prefer to be governed by the law of the state in which their firm maintains its primary location. On the other hand, some Engagement Letters for Lawyers and Accountants What To Look For To Reduce Risk By Johannes S. Kingma and Daniel H. Hecht Johannes S. Kingma is an attorney at Stites & Harbison PLLC. jkingma@stites.com Daniel H. Hecht is assistant vice president, senior claims counsel, professional liability at Sompo International Insurance. dhecht@sompo-intl.com CYBER, MANAGEMENT, AND PROFESSIONAL LIABILITYTHECLM.ORG/MAGAZINE CLM MAGAZINE 15 states (like New York or Delaware) have particularly well-defined laws regarding malpractice issues that might speed the resolution of a dispute. Some states find it unethical for a law firm to require arbitration in their engagement letters, while other states do not. Some states may enforce arbitration requirements, while others may not. All of the Big Four accounting firms routinely use arbitration clauses in their engagement letters and their use by law firms seems increasingly common. On the other hand, many defendants do not prefer arbitration and would rather the dispute be decided by the court system in their jurisdiction. Arbitration provides confidentiality, the assumption of a quicker and less expensive process, and, oftentimes, a more sophisticated trier of fact. Those who oppose arbitration argue that it results in significant expense, places limitations on the discovery process, makes appeals unavailable; and tends to result in “split the baby” decisions that disregard defense motions. These considerations should be contemplated when deciding whether or not to utilize an arbitration clause. SHORTENING THE STATUTE OF LIMITATIONS In many jurisdictions, accountants have included language shortening the statute of limitations in their engagement letters. The theory is that parties should be allowed to contract as they please. We don’t see much evidence of attorneys utilizing such a provision. While unenforceable in some jurisdictions, it might still deter a client from filing a claim. However, some states might determine that a lawyer is in breach of an ethical rule for even attempting to shorten the statute of limitations. DESCRIPTION OF SERVICES Accountants and lawyers both frequently err by using an “off the rack” engagement letter that does not specifically describe the services provided. For example, an accountant who describes her services as “preparation of 2022 tax returns” could get in trouble by not specifying what state returns are to be prepared. Ensuing state tax problems for unpaid filings can be massive. Lawyers can fall into similar traps. For example, a lawyer whose engagement letter says that the representation will include “any and all claims arising from the accident,” may only intend to be covering auto insurance claims. If a product liability statute of limitations falls by the wayside, substantial malpractice litigation can result. It is important for both accountants and lawyers to be detailed in their descriptions of their services, which will result in fewer misunderstandings and claims. Specificity in the engagement letter also forces the professional to better plan the engagement while helping the client better understand the process. The letter should set forth the client’s obligations as well as the major steps anticipated in the process. FEES AND CONFLICTS Attorneys’ ethical rules typically require that the fees be reasonable and that some fee arrangements be specifically set forth in writing. The rules on accounting fees are less stringent, but many states and the AICPA have specific provisions that prohibit undisclosed commissions. A detailed description of fee provisions helps prevent disputes and litigation. Attorney conflict rules are usually more explicit than accountant conflict rules. Both lawyers and accountants often include conflict waivers in their initial engagement letters. The ethical rules for a particular engagement and the independence rules for auditors must be considered before utilizing and drafting a waiver. Inadequate conflict disclosure can result in loss of the statute of limitations defense and bring on punitive damages. INDEMNIFICATION, EXCULPATION, DAMAGE LIMITATION AICPA guidance should be carefully considered when indemnification, exculpation, or damage limitation language is included in an accounting engagement letter. State law often permits such language, and such disclosures can be quite useful in limiting or barring claims altogether. Some states have specific requirements as to the size of the font, the location of the provision, and the reasonableness of such provisions. Indemnification, exculpation, and damage limitation is less common in lawyers’ engagement letters and may be prohibited by state ethical rules. NEGOTIATED MODIFICATIONS A professional’s engagement letter is only as good as the modifications negotiated once it is presented to a client. Large clients often have their own engagement letters, which may treat a lawyer or an accountant as a simple vendor. This leaves a professional service firm to balance risk and reward, and firms need a process whereby those balances are examined. Engagement partners are highly motivated to bring in the work and may not have a clear view of the risk. Some firms create a matrix of provisions that can be modified without management’s prior approval. Lots of mistakes are made when two conflicting engagement letters are simply combined. Some insurance carriers provide advice as engagement terms are negotiated. In the end, understanding the important terms in an engagement letter, as well as the pitfalls that may accompany them, will help you evaluate a claim, take care of your insured, and protect your bottom line. K It is important for both accountants and lawyers to be detailed in their descriptions of their respective services, which will result in fewer misunderstandings and claims.16 CLM MAGAZINE MARCH 2023 D irectors and officers (D&O) liability insurance provides liability coverage to the directors or officers of a company, or to the company itself. D&O policies generally afford coverage for a claim that is first made during the policy period and reported to the insurer in accordance with policy terms. Such “claims-made” coverage differs from occurrence-based policies, which generally provide coverage for incidents that occur during a policy period. As the Seventh Circuit recently commented, “The purpose of a claims-made policy is to allow the insurance company to easily identify risks, allowing it to know in advance the extent of its claims exposure and compute its premiums with greater certainty.” D&O insurance policies also generally provide that two or more claims that are related will be deemed to have been first made on the date that the earliest claim was made. This can have a significant impact on the coverage available to the insured and has spurred substantial litigation between insurance companies and insureds. But what exactly does it mean for two or more claims to be related? RELATED CLAIMS UNDER D&O INSURANCE POLICIES D&O policies generally provide coverage for a claim that is first made during the policy period that alleges a wrongful act against an insured. D&O policies also require the claim be reported to the insurance carrier in accordance with the terms of the policy. D&O policies generally define the term “wrongful act” to mean “any actual or alleged act, error, misstatement, misleading statement, breach of duty, or omission” by an insured corporation or by an insured individual as a director or officer of the insured corporation. D&O policies often include a provision stating that two or more claims that allege related wrongful acts will be treated as a single claim under the policy, having been deemed first made on the date that the earliest claim was made. This decision—whether two or more claims are related for purposes of a related-claims provision—can have a significant impact on the coverage afforded for an underlying claim. For example, an insurer may argue that the provision bars coverage for a claim that was filed during the relevant policy Relationships Matter An Update on Related-Claims Issues Under D&O Policies By Aisling Jumper, Brian Bassett, and Tony Hatzilabrou Aisling Jumper is vice president and claims manager at FAIRCO. ajumper@fairco.com Brian Bassett is a partner in the Chicago office of Traub Lieberman. bbassett@tlsslaw.com Tony Hatzilabrou is an associate in the Chicago office of Traub Lieberman. thatzilabrou@tlsslaw.com INSURANCE COVERAGETHECLM.ORG/MAGAZINE CLM MAGAZINE 17 period but relates back to an earlier filed lawsuit. Conversely, an insured may argue that two or more claims are related to avoid paying multiple retentions or to avoid reporting a claim under the insured’s current policy to prevent an increase in insurance premiums. Therefore, this issue frequently arises in coverage disputes and has resulted in substantial case law. THE FIRST SOLAR DECISION In First Solar, Inc. v. Nat’l Union First Ins. Co, the Delaware Supreme Court examined whether two class-action lawsuits filed by shareholders of First Solar were related. The first lawsuit, filed in March 2012, alleged that First Solar violated federal securities laws by making false or misleading public disclosures. The lawsuit alleged, among other things, that First Solar misrepresented its ability to reduce manufacturing costs for solar panels and misrepresented the extent of manufacturing and design defects in its solar modules. First Solar reported the lawsuit to its insurer, National Union, which provided coverage for the lawsuit under a D&O insurance policy in effect for the 2011-2012 policy year. The insured ultimately exhausted the limits of the policy because of costs incurred in the first lawsuit. While the first lawsuit was pending, shareholders who had opted out of that first lawsuit filed a separate lawsuit against First Solar in June 2015, alleging violations of the same federal securities action as the first lawsuit. The lawsuit also asserted claims for violations of Arizona statutes and claims for fraud and negligent misrepresentation. At the time the second lawsuit was filed, First Solar had also had a “claims made” D&O policy also in effect with National Union for the 2014-2015 policy year. The 2014-2015 policy did not afford coverage for related claims that were first made prior to the policy period. The phrase “related claims” was defined as “any claim alleging, arising out of, based upon or attributable to any facts or wrongful acts that are the same as or related to those that were…alleged in a claim made against an insured.” The insured reported the second lawsuit to National Union, which filed a complaint seeking a declaratory judgment that the related- claims provision excluded coverage for the second lawsuit. The trial court, relying on prior Delaware case law, held that a complaint is related to a previous complaint if the claims are fundamentally identical, which, according to the court, required the same subject and common facts, circumstances, transactions, events, and decisions. The trial court held that the two lawsuits had “substantial similarities” and were “fundamentally identical,” such that the related-claims provision excluded coverage for the later filed lawsuit. Although the Delaware Supreme Court ultimately affirmed the trial court’s decision, it disagreed with the trial court’s analysis, noting that the use of the “fundamentally identical” standard disregarded the plain language of the insurance policy. First, the court noted that neither Delaware nor any other court had adopted “fundamental identity” as the standard governing relatedness inquiries, regardless of the contractual language. Following the principle that Delaware courts interpret contract terms according to their plain, ordinary meaning, the court held that “whether a claim relates back to an earlier claim is decided by the language of the policy, not a generic ‘fundamentally identical’ standard.” Applying the plain language of the insurance policy, the court found that the two lawsuits were related because the “[a]ctions involve[d] the same subject, as well as common facts, circumstances, transactions, events, [and] decisions,” and thus held that the related-claims provision precluded coverage for the second lawsuit. TREATMENT OF RELATED-CLAIMS ISSUES Given that the First Solar case was decided in March 2022, there has been limited case law applying the court’s holding. However, in Seritage Growth Props., L.P. v. Endurance Am. Ins. Co., the Delaware Superior Court applied the Supreme Court’s holding to find that a later- filed action by unsecured creditors of Sears in a bankruptcy proceeding was related to an earlier lawsuit filed by shareholders of the company for purposes of a related-claims provision in a D&O policy. While both actions involved different parties and asserted different causes of action, the two actions were both premised on the same transaction involving the insured’s purchase of numerous properties from Sears. Relying on First Solar, the Superior Court noted that the policy language controlled whether the two claims were related for purposes of the provision. The court also noted that the related- claims provision required the court “to primarily focus on the similarities between the underlying facts for the related claims—not on the parties involved or the type of claims involved.” The court ruled that the two lawsuits were based on the same wrongful conduct and, thus, were related for purposes of the related-claims provision. Conversely, in Amtrust Fin. Servs. v. Liberty Ins. Underwriters Inc. , the Delaware Superior Court applied the holding in First Solar to find that two lawsuits were not related as the record did not “suggest a meaningful linkage” between the two actions. WHAT TO DO IF RELATED- CLAIMS ISSUES ARISE Recent developments in Delaware case law clarify that whether two or more claims are related under a D&O policy for purposes of a related-claims provision depends on the language of the policy and the allegations of the underlying claim. Therefore, it is essential that insurers and claims handlers be cognizant of related-claims provisions in D&O policies and assess whether there are any prior claims submitted by the insured that may constitute a related claim. KNext >