Made with FlowPaper - Flipbook Maker
< Previous8 CLM MAGAZINE NOVEMBER / DECEMBER 2024 I n an age of rapidly developing technology, attorneys and law firms have begun to utilize artificial intelligence in order to provide improved representation to clients. Last year, the American Bar Association released a study showing more than 20% of attorneys used or seriously considered using artificial intelligence tools. With artificial intelligence’s rise, those numbers will likely grow accordingly. However, as with any new and exciting tool, attorneys must also be cognizant of the pitfalls that accompany artificial intelligence. Famously, in June 2023, the Southern District of New York sanctioned an attorney for his reliance on ChatGPT. ChatGPT itself was not the problem. What was problematic, however, was the attorney’s request to ChatGPT to provide case law to support his arguments responding to the defendant’s motion to dismiss. Instead of providing actual case law, ChatGPT fabricated eight citations to opinions that simply did not exist. The attorney did not use LEXIS, WestLaw, or any other service to fact check the opinions to determine their accuracy, currency, or validity. As a result, the court entered sanctions for the attorney’s willful use of artificial intelligence. This is not to say that the usage of artificial intelligence is bad for attorneys. To the contrary, it offers significant benefits, including saving clients time and resources through document productions, summarizing testimony, and drafting correspondence. But, in doing so, attorneys and legal professionals must keep in mind multiple considerations. As in all other ethical matters, the ABA’s Model Rules of Professional Conduct (MRPC) govern an attorney’s ethical conduct. Indeed, the usage of artificial intelligence affects multiple facets of the MRPC. Ethical AI Considerations for Legal Professionals in the Age of Artificial Intelligence By Lee J. Hurwitz TECHNOLOGY >>> Lee Hurwitz is a shareholder at Segal McCambridge. lhurwitz@smsm.com2025 CONFERENCES & EVENTS LOCAL CHAPTER EVENTS HAPPEN YEAR-ROUND. LEARN MORE: theclm.org/events DATE CONFERENCE/EVENT LOCATION Sponsorship: sponsorship@theclm.org Speaking: programming@theclm.org DATES, LOCATIONS, TOPICS, AND EVENT NAMES SUBJECT TO CHANGE. FEBRUARY 11-12 Focus Conference ORLANDO • Work Comp • Casualty & Risk Management APRIL 8 CCO and CLM Advisory Board DALLAS Networking (invite only) APRIL 9 - 11 Annual Conference DALLAS JUNE 12-13 Focus Conference NASHVILLE • Cyber • Diversity, Equity & Inclusion • Property • Transportation • Claims & Litigation Management SEPTEMBER 3 CCO Summit (invite only) BALTIMORE SEPTEMBER 3-5 Claims College BALTIMORE SEPTEMBER 17-19 Construction Conference SAN DIEGO OCTOBER 14-15 Litigation Management Symposium CHICAGO OCTOBER 15-18 Litigation Management Institute CHICAGO DECEMBER 4 Women’s Summit CHICAGO DECEMBER 4-5 Focus Conference & Holiday Party CHICAGO • Alternative Dispute Resolution • Extra-Contractual • Insurance Coverage • Insurance Fraud • Claims & Litigation Management REV.11272024 LITIGATION MANAGEMENT WEEK10 CLM MAGAZINE NOVEMBER / DECEMBER 2024 RULE 1.1 – COMPETENCE MRPC Rule 1.1 states, “[A] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.” Above all, attorneys must be competent in what they do—an obvious talking point, to be sure, but one that is integral and worth reminding. In using artificial intelligence, an attorney must know what the tool is and how to use it. Attorneys cannot use ChatGPT, for example, simply because it is new and exciting. Like any new tool or area of practice, attorneys need to become familiar with artificial intelligence before using it in order to provide adequate representation to the client. Failure to do so risks situations like that attorney who used ChatGPT to generate fictitious case law and citations. RULE 1.4 – COMMUNICATIONS MRPC Rule 1.4(a)(1) states, “[P] romptly inform the client of any decision or circumstance with respect to which the client’s informed consent...is required by these Rules.” and MRPC Rule 1.4(b) states, “[A] lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” While not all clients have strong feelings one way or the other regarding the usage of artificial intelligence, attorneys should err on the side of caution and communicate to keep their clients apprised of the decision to use it. Indeed, there are multiple reasons why communicating artificial intelligence usage is beneficial to a healthy attorney-client relationship. Some clients may have moral hesitations regarding its use. If there is a particular cost involved with a new tool, then that must be conveyed, as well. Furthermore, MRPC 1.4(a)(1) ties into MRPC 1.6(c) because attorneys have a duty to ensure that sensitive documents are kept confidential. Obtaining permission to use artificial intelligence for storing or reviewing certain sensitive documents will be necessary to develop and maintain a strengthened relationship. Like any new tool or area of practice, attorneys need to become familiar with artificial intelligence before using it in order to provide adequate representation to the client. TECHNOLOGY >>>THECLM.ORG/MAGAZINE CLM MAGAZINE 11 Congratulations to all the 2024 CLM Phenoms Under 40, especially my GB colleague — Christa Johnson! YOU ALL REPRESENT THE BRIGHT FUTURE OF OUR INDUSTRY. 2024 CLM Lifetime Achievement Award 2020 RISE Mentor of the Year RULE 1.6 – CONFIDENTIALITY OF INFORMATION MRPC Rule 1.6(c) states, “[A] lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.” As mentioned above, maintaining confidentiality of a client’s documents is paramount. Multiple document- review tools exist that allow attorneys to cut down on time and costs with prompts—requesting that the artificial intelligence tools filter out certain documents and flag responsive documents to be turned over in discovery. Doing so clearly has great benefits for clients as it significantly lowers the amount of time (and cost) needed to conduct a document review. The service, however, must maintain high standards of safekeeping so that a client’s sensitive and confidential documents are not accidentally disclosed or stolen. The attorneys clearly have a duty to vet the artificial intelligence tool to ensure a client’s documents or work product are kept safe and secure. RULE 5.1 – RESPONSIBILITIES OF PARTNERS, MANAGERS, AND SUPERVISORY LAWYERS MRPC Rule 5.1(a) states, “[A] partner in a law firm, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct.” There are never any guaranteed outcomes in any profession, legal included. But law firms need to strive to follow tenets of the MRPC when utilizing artificial intelligence. Regardless of the size of the law firm, policies need to be in place in order to advise and train attorneys on artificial intelligence should that firm choose to incorporate it as part of its practice. The firms, and leadership within firms, have a duty to make sure attorneys and legal professionals are using best practices that comport with the MRPC when incorporating artificial intelligence. Artificial intelligence is, without doubt, exciting, promising, and useful to the legal profession. But the MRPC requires that attorney engage in the highest standards of ethical conduct while using it. The stakes and potential damage to clients, and an attorney’s reputation, are too great to not fully consider the MRPC. In following the MRPC when using artificial intelligence, attorneys will continue to provide clients effective and improved representation while strengthening the attorney-client relationship. K12 CLM MAGAZINE NOVEMBER / DECEMBER 2024 S tructured settlements have existed since the late 1970s when Congress officially recognized their value in helping claimants secure long-term financial stability for an injured claimant. Initially introduced as a way to assist those who had suffered severe physical injuries, structured settlements quickly gained popularity because of the financial security they provide. Over the years, they have become a versatile tool in the claims process, offering benefits not only to claimants, but also to defendants and insurers. Despite their clear advantages, structured settlements remain underutilized by many claims professionals today. In this article, the authors offer quotes and information to help you understand and optimize structured settlement. “As we approach the holiday season, and the utilization of ‘settlement parties’ and year-end mediation days, this is an important refresher on structured settlements.” — Caryn Siebert Structured settlements are a way ‘Tis the Season for Structured Settlements Understanding This Valuable Tool for Claim Negotiations By Caryn Siebert, Gerardo Monroy, and Jarrod Zea CLAIMS MANAGEMENT >>> Caryn Siebert is vice president and director, carrier engagement, at Gallagher Bassett. caryn_siebert@gbtpa.com Gerardo Monroy is CEO of Ringler Associates. gmonroy@ ringlerassociates.com Jarrod Zea, CSSC, CLPF, NCG is structured settlement office administrator at Z Settlement Advisors. jzea@ringlerassociates.com THECLM.ORG/MAGAZINE CLM MAGAZINE 13 to utilize self-insured or carrier dollars more efficiently by focusing on needs, thereby making structured settlements an efficient way to resolve claims and provide financial security for the injured claimant and potential cost savings to the defendant. WHAT EXACTLY IS A STRUCTURED SETTLEMENT? “Simply put, it’s a series of tax-free, periodic payments designed to meet the long-term needs of a claimant. These payments are funded through an annuity provided by a highly rated life insurance company, offering claimants a secure, predictable source of income. Structured settlements are formally recognized under IRS Code Section 104(a), which ensures that these payments remain tax-free when tied to physical injuries or sickness.” — Jarrod Zea The real magic of structured settlements lies in their flexibility. Unlike lump-sum settlements, which can be spent quickly or poorly managed, structured settlements offer a steady stream of guaranteed, tax-free income over time. They can be tailored to cover ongoing medical costs, lost wages, or any other financial need that might arise post-settlement. This makes them particularly effective in cases involving long-term care, such as workers’ compensation, auto accidents, medical malpractice, or catastrophic injuries. “One of the biggest advantages for claims professionals is that structured settlements can help facilitate negotiations, and inviting a structured settlement broker to prepare scenarios doesn’t cost a thing to either party. Whether in my former roles as chief claims officer, president, or general counsel; or in my current role in discussing ways in which to avoid surprise verdicts, I consistently encourage the utilization of structured settlements. They offer a way to bridge the gap between what the claimant/ claimant attorney demands and what the defendant deems as a reasonable settlement offer. By structuring payments over time, a solution can be found that satisfies both sides. It’s a powerful tool when negotiations hit a wall, allowing both parties to compromise without sacrificing the core needs of the claimant.” — Siebert Beyond being a great negotiation tool, structured settlements also provide significant cost savings through the use of “rated ages.” “A rated age is determined by medical actuaries that assess the life expectancy of a claimant based on their medical history and injury, that can result in a claimant having a ‘rating’ that is older than their actual age because of those health conditions. This can reduce the overall cost of the annuity, benefiting the defense by lowering the overall settlement cost while still providing the claimant with necessary lifetime benefits at a reduced cost to address their needs. The current interest yields make the current environment even more favorable for those interested in structures.” — Gerardo Monroy For claimants who rely on public benefits like Medicaid or SSI, structured settlements can also be designed to protect those benefits. By carefully planning the payout amounts, claimants can continue receiving essential government support while benefitting from the settlement. This is especially important for the “unique investor,” (the recipient of a one-time settlement), who might not be able to manage a lump- sum payment on their own. “In workers’ compensation cases, Medicare Set-Asides (MSAs) can be efficiently addressed by use of the structured settlement product. Structured settlements provide a reliable way to comply with complex Medicare regulations, while ensuring that the claimant’s future Medicare covered medical needs are protected. By structuring payments for the MSA, the settlement can cover the claimant’s ongoing care without triggering penalties or jeopardizing their future Medicare benefits, and at the same time protecting the Medicare general fund.” — Zea Bringing a structured settlement consultant into mediation early in the process is key. “Claims professionals can bring in these experts at no cost to the parties, allowing for live options to be created on the spot during negotiations. Consultants add value by crafting customized solutions that address the unique needs of each case, helping claims professionals close claims faster and more efficiently.” — Monroy In today’s claims environment, structured settlements offer a pathway to resolve claims in a way that benefits everyone involved, hence everyone wins. They provide claimants with long-term financial security, offer defendants and insurers potential cost savings, and help facilitate smoother, more efficient negotiations. For claims professionals looking to close claims with minimal friction and maximum benefit, structured settlements are a tool worth embracing. By understanding the history and flexibility of structured settlements under current interest rates, professionals can unlock a solution that helps all parties find common ground, protects claimants’ futures, and stretches the dollars from self-insured or carrier partners further than ever. K Unlike lump-sum settlements, which can be spent quickly or poorly managed, structured settlements offer a steady stream of guaranteed, tax-free income over time.14 CLM MAGAZINE NOVEMBER / DECEMBER 2024 I n a recent conversation with a seasoned workers’ compensation insurance adjuster, I was struck by the deep-seated reluctance to embrace modern technology, particularly artificial intelligence (AI), in generating impairment reports. This adjuster, with over 20 years of experience, firmly believed that all impairment reports should be manually calculated and entirely authored by doctors without any technological assistance. During our discussion, I posed several questions that challenged this adjuster’s traditional viewpoint. Is it fair for a doctor to use pen and paper or a desktop calculator? What about using tools like the AMA Guides CD-ROM Calculator (circa 2005)? Or, ultimately, should they employ AI systems that are trained on highly- structured and accurate databases? This line of questioning seemed to highlight the central emotional struggle many face, including insurance adjusters: Are we willing to transition to higher technology for more accurate reports, fairer settlements, and faster benefit delivery? Upon further probing, it became clear that this adjuster’s reluctance was rooted in a deeper uncertainty about technology’s role in our daily lives. Should we revert to longhand division, manually balancing our checkbooks, or even relearn cursive writing? While these questions were posed humorously, they underscored a significant point: How much are we willing to let go of, and how can we put our faith in a higher technology system that many of us may not fully understand? AI CAN SCALE LIKE NO ADJUSTER CAN Artificial intelligence is neither a magic wand nor a silver bullet. Instead, it represents an opportunity to scale labor and concepts far beyond what one person or even hundreds of people could achieve manually. AI can deliver results and insights into workers’ compensation injuries that are currently beyond our reach due to the limitations of manual work. Do we really want our doctors spending time on longhand division, trying to determine where the decimal point goes when translating a thumb digit impairment to a whole-person impairment across multiple body parts? The answer is a resounding no. This adjuster’s resistance highlights a broader issue: the changing of the guard. Technology will continue to advance, regardless of our willingness or reluctance to accept it. The key to Making Peace With AI The Struggle Within for Workers’ Comp Adjusters By John Alchemy WORKERS’ COMPENSATION >>> John Alchemy is founder and CEO of Rate-Fast. john@johnalchemymd.comTHECLM.ORG/MAGAZINE CLM MAGAZINE 15 harnessing AI’s potential in impairment rating and other aspects of workers’ compensation lies in our ability to understand the algorithms, and then we can structure the instructions effectively. AI’s possibilities are vast in terms of its potential to pare down the time and complexity in resolving workers’ compensation claims. It is unrealistic to expect qualified medical evaluators (QMEs) to search the country for past cases with nearly identical injuries, symptoms, and external variables to get a sense of how much they have generally settled for. QMEs also are not always in a position to identify anomalies in subjective pain-scale scores reported by patients. Similarly, workers’ comp adjusters will not necessarily identify key trends across thousands of claims—for example, parts of the current AMA guidelines that appear to overrate the presence of a surgery in a patient’s medical history (i.e., the surgery does not significantly impact the treatment or ability to get back to work). But AI can do this by synthesizing hundreds of thousands of past claims and medical reports. Think about how much more quickly claims would settle with significantly more objective, comprehensive impairment evaluations. Litigation and infighting between employees and employers over subjective medical evaluations would diminish by a wide margin. Instead of trying to reconcile conflicting AMA Guides charts and tables, we would be able to determine the truly pertinent variables that can help steer us to fairer settlements. EMPOWERING HUMANS, NOT REPLACING THEM The struggle within ourselves, especially for those like this adjuster who has dedicated decades to the profession, is understandable. Change is difficult, and the fear of the unknown can be paralyzing. We have seen technology make many jobs obsolete in other industries, from bank tellers to elevator operators to travel agents, to name a few. However, historically technology has enhanced individuals’ ability to do their jobs in as many or more instances. Social media did not put marketers out of work, it helped them target their buyers and audiences better. Workflow automation has not left DMV employees at the unemployment line, it has reduced the amount of “busywork” and red tape (e.g., data entry, collating, filing, etc.), enabling them to concentrate on exceptions and complex cases. AI will have a similar effect in workers’ comp. Embracing AI will not mean abandoning the expertise and judgment that seasoned professionals bring to the table. Instead, it will augment their capabilities with tools that enhance accuracy and efficiency. If utilized properly, AI will make it easier for claims adjusters and medical evaluators to carry out their duties and do their jobs even better. As we navigate this transition, it is crucial to provide education and support to those hesitant to adopt new technologies. By demonstrating AI’s tangible benefits and addressing concerns transparently, we can bridge the gap between traditional methods and innovative solutions. The ultimate goal is to improve outcomes for injured workers, streamline processes, and ensure that benefits are delivered promptly and accurately. The acceptance of AI in workers’ compensation is not about replacing human expertise, but empowering it. By embracing higher technology, we can achieve more accurate reports, fairer settlements, and faster delivery of benefits. The future of workers’ compensation lies in our ability to adapt and evolve, leveraging AI to create a more efficient and effective system for all. K Artificial intelligence is neither a magic wand nor a silver bullet. Instead, it represents an opportunity.16 CLM MAGAZINE NOVEMBER / DECEMBER 2024 CLM Perspectives In the Southeast, a high-rise student housing building featured all the amenities one would expect in a luxury hotel. But during a recent holiday season, while students were away on winter break, tempera- tures dropped and a cold spell set in. On Christmas Eve, with the building essentially vacant, pipes froze and a leak occurred on the building’s upper levels. “The building management team was off on holiday, and so this water was able to run for a considerable amount of time before the leak detection systems picked it up,” says Chris Wilkie, Crawford Global Technical Services. Time passed, water traveled, and while teams were mobilized to diagnose the problem and turn the building’s water off within a reasonable amount of time under the circumstances, the building sustained signifi- cant damage and 150 student residents were about to have their post-holiday living situations disrupted. There was no avoiding the fact that this would be a sizable loss. While it could have easily spiraled out of control given the type of damage, number of people in- volved, and the timing with the holiday complicating the response; the combination of prompt action, competent expertise, a knowledgeable building owner, and superb communication led to a speedy, favorable resolution. This unfortunate event, and especially the effective re- sponse to it, offers tips and lessons for dealing with freeze claims, especially in areas where such losses are increasing in frequency but have not been historically common. In this case the positive steps began with a prepared insured, highlighting the importance of pri- oritizing risk management before a loss occurs. “They had a preferred vendor already,” notes Wilkie, “so they were able to leverage that preexisting service agree- ment they had to get the vendor out there relatively quickly.” The insured also had a solid facilities team on-site that knew the building well and was able to get the mitigation vendor set up and mobilized quickly. After getting the appropriate teams on-site, the biggest challenge was coordinating the many moving parts involved in a claim like this. There were numer- ous parties to communicate with, including multiple vendors, insurers on the risk, the insured, and the 150 students who no longer had housing to return to after the winter break. Dealing with this challenge highlights the need for experienced, proactive claims professionals who know how to handle complex claims. Vendors must stay on task, insurers must be kept in the loop, and the claimant’s considerations must be taken into account to prevent a large claim from becoming a catastrophic one. Don’t Let Freeze Claims Leave You Out in the Cold Chris Wilkie Casey WilliamsTHECLM.ORG/MAGAZINE CLM MAGAZINE 17 In this case, the task fell to Wilkie and Casey Williams, also with Crawford Global Technical Services. While Wilkie handled communications with the vendors and con- sultants, and oversaw outreach to the students; Williams handled conversations with the car- riers and with the insured’s portfolio manager. On finding alternative accommoda- tions for 150 students, Wilkie says, “We only had a limited window of time to figure out a solution: We could either break leases, find hotels, or find out if there was any other capacity to temporarily house people. And then, of course, it’s ultimately up to the students what they want to do.” In the end, prompt action led to nearly all of the students having a plan in place before they returned from break. For Williams, meanwhile, dealing with the insurers involved a different kind of communication. “For the most part, it’s really just level-setting their expectations,” Williams says. “Insurance carriers expect regular, responsible reporting to keep them apprised of the process.” Ultimately, mitigation and dry out wrapped up by the end of January, and two months later, by April 1, the building was back online. It took multiple crews, a lot of work, and, most importantly, effective coordination and oversight of everyone involved to ensure the work got done promptly and costs did not spin out of control. Because of the prompt com- munication with the students, there was very little fallout as far as negative social media posts and publicity. Because dam- age was assessed early, the right vendors were brought in, and adequate oversight was in place to make sure the work was done properly and according to plan, the building was able to carry on with minimal disruption to leasing. Lessons Learned and Top Tips for Handling Freeze Claims As mentioned, this particular claim teaches valuable lessons when it comes to freeze claims. Location. First and foremost is where this loss occurred. Freeze losses are migrat- ing deep into the Sun Belt—from Arizona, to New Mexico, to parts of Florida as well. Risk managers in these regions need to be made aware of this new reality so they can adequately prepare. Older buildings in the Sun Belt in particular may not be designed for colder temperatures. Claims profession- als and risk managers should be in com- munication with each other long before cold weather sets in to evaluate properties. Preparation. Another key preventative step is knowing beforehand which vendors will be brought on-site and establishing good relationships with them. Commercial insurers should build those relationships to get the right teams to the multiple risks they insure. Risk managers should also reach out and con- tract ahead of time with mitigation vendors. After a freeze event, there may be widespread damage across an entire region, stretching resources thin. Which properties get priori- tized may well come down to the relationships established long before the event. In the claim analyzed above, the building owner’s relation- ships and contracts with a preferred vendor played a crucial role in getting the right people on-site during a major holiday. Prompt notice. In this claim, prompt notice was complicated by the fact that residents had departed for winter break and the building staff was home for the holiday. Still, notice was given as soon as the damage was discovered, which helped limit the size of the claim. With prompt notice, the right experts and vendors can be brought onto the scene and perhaps ad- dress an initial problem before it spreads. “It really does reduce the amount of the claim because you might not have an entire building you need to replace pipes in,” notes Williams. “You might just have a garage, for instance.” Expertise. Experienced claims profes- sionals can make all the difference during a freeze claim and can prevent a water loss from becoming a complex claim. If the insurer or adjuster simply hands the process over to vendors, costs could rise quickly. Adjusters must understand the damage and causes, and also how to man- age the complicated process of mitigation and recovery. Knowledgeable adjusters can anticipate and quickly resolve most con- cerns that will be raised by the numerous stakeholders involved in a freeze claim. Independent investigation. Experi- enced adjusters must assess freeze claims independently so they can form their own opinions of the damage and how to reme- diate and repair it. “Sometimes when you get on-site, you’re met in the parking lot by the insured and their team and their bro- ker.” says Wilkie. “It’s good for the adjuster to take the time, step back, and evaluate it on their own independently.” Setting expectations. Claims adjust- ers need to set expectations up front with mitigation vendors and the insured. These expectations should include milestones, deliverables, equipment sufficiency, resourc- ing, and processes. The adjuster must have a project management mentality to make sure timelines are met and costs are controlled. Communication and coordination. Hand-in-hand with setting expectations, adjusters must communicate clearly and stay involved throughout the claims process to coordinate remediation and recovery and ensure the expectations set early on are being met. An adjuster who touches a claim at the outset and then never looks at it again will likely be surprised to find out that an expected cost of $50,000 has spiraled to $300,000. By contrast, an adjuster who has followed all of the steps above—who has established relationships with the vendors, set expectations, and stayed involved throughout the claims process—will likely experience a much more predictable and favorable resolution. K Chris Wilkie is international executive general adjuster and cyber incident manager at Crawford Global Technical Services. chris_wilkie@us.crawco.com Casey Williams is executive general adjuster at Crawford Global Technical Services. casey_williams@us.crawco.com CLM Perspectives “[Prompt notice] really does reduce the amount of the claim because you might not have an entire building you need to replace pipes in; you might just have a garage.” – Casey WilliamsNext >