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Handling claims the Burger King way.

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In the first part of this two-part article, the techniques for designing and implementing an effective loss control program were explored using as an example the program implemented at Burger King. This article will look into controlling claims costs, an important part of every loss control program.

Even though a loss control program may now be in place in an organization, accidents resulting in claims against the business may still occur. Accordingly, because the likelihood that any sizable business will incur no accidents is close to zero, the risk management department must be prepared to deal with all claims, especially those involving personal injury or property loss. As in loss control, there are several essential elements that should be included in any meaningful claims management program. These are claims reporting procedures, employee training, professional claims handling, settlement strategies and legal services.

Establishing Reporting Procedures

The key to a comprehensive loss control program is the establishing of clear, concise reporting procedures which must be adhered to for all accidents occurring on the premises. If complete information is not readily available, the company may lose the opportunity to effectively deal with the claimant. In addition, information as to the types of accidents occurring at the work site may also be lost. This prevents management from understanding and reacting to potentially serious situations that may result in frequent and costly claims.

At Burger King reporting forms are generally filled out when the manager is under stress as a result of a disruptive incident occurring at a busy time in the restaurant. Therefore, the restaurant. Therefore, the incident report must be brief and straightforward. Burger King has designed a simple incident form with clear instructions for recording all relevant information.

In addition, most regional offices have a 24-hour hot line which restaurant managers must call to report all claims. A designated individual will help the manager complete the incident report or the notice of injury form for employee work-related injuries. If an accident occurs after hours or on weekends, the information recorded via the hot line should include a telephone number where the reporting manager can be reached. A return call is made on the next scheduled workday. Catastrophic events are reported directly to the insurance carrier via its own hot line and to corporate headquarters.

Prompt reporting is one of the most critical elements in the claims control process. If the report is not filed promptly, the ability to deal with the claimant on a friendly basis may be lost. Restaurant managers at Burger King are expected to report on-site incidents within 24 hours. When the report is received and the claims representatives contact the claimant within 24 to 72 hours, the response is amazing. "I can't believe you took the time to call me" or "You people really seem to care, and I appreciate that" are some of the responses representatives have heard. When accident victims are pleased with the responsiveness of an organization, they generally do not seek legal counsel. Delayed contact often angers people because they think that nobody cares about them. The most obvious outlet for this anger is through a lawyer and litigation, a situation to be avoided whenever possible.

Training Employees

Once reporting procedures have been established, it is essential that employees he trained to follow them when an incident occurs. Burger King recently completed a customer safety videotape that focuses on procedures for dealing with customer incidents at the time they occur. The tape was made in response to company experience indicating that managers and staff do not deal well with customer injuries. Either they do not believe the customer b as sustained an injury, they ignore the patron lying on the floor or they make excuses as to why the incident happened. In the worst case scenario, they not only accept responsibility for the incident, but tell the injured party how many other customers have been injured in the same manner.

Training employees to deal with the injured customer in a calm and caring manner is the best approach to reducing general liability litigation. It is not easy to deal with an injured customer, but with proper training the manager should be able to handle this situation as well as any other problem encountered in the restaurant. Making the victim comfortable, getting the claimant's version of how the incident occurred, calling for appropriate medical assistance and recording the names and addresses of witnesses are examples of what must be done during and immediately after a customer accident. If information is omitted, the company will most likely pay for it at the time of settlement.

Another important element in training is teaching restaurant employees when to talk and when to keep silent. Often, a plaintiff's attorney or an investigator representing the plaintiff will visit the restaurant to interview the manager and other employees. And because restaurant managers often aim to please, investigators and plaintiff attorneys are able to collect extremely damaging information, including signed statements. The restaurant staff must be instructed to talk to no one other than the loss control representative of his or her company or the insurance carrier's representative. All requests for interviews at the restaurant level should be denied until cleared by the next level of supervisors.

Claims Handling

Once the claim has been reported to the regional office, it must be transmitted to the claims handling staff. Typically, this is an insurance carrier's local claims office staff, but it could also be an in-house claims group employed by the company or a claims staff at company headquarters provided by the insurer. At Burger King, all three approaches to handling claims are employed.

A staff of claims professionals located at Burger King's corporate headquarters is used for afl general and automobile liability claims. This group, while employed by the insurance carrier, handles only Burger King claims. Calls are made directly to the claims-handling unit from the regional offices and contact is made by a member of this unit with the claimant usually within 24 hours. Early experience with the claims unit indicates that lag time for reporting liability claims has dropped from two to three weeks to 24 to 48 hours. As a result, Burger King has experienced a substantial reduction in litigated claims and a significant cost savings in liability losses.

Food product liability claims from company-operated restaurants throughout the country are handled at Burger King headquarters by an in-house claims person. If an investigation discloses that the claim is legitimate, a check is sent to the claimant. In comparing Burger King's settlement costs for these claims against those of the franchises which utilize the services of an insurance carrier, the company's cost averages 40 percent below the typical non-litigated claim. By acting promptly, the company usually avoids the higher cost of a litigated settlement.

Workers' compensation claims are reported directly to one of our insurance carrier's 73 claims offices. Loss control managers deal directly with the claims office serving their region. Because workers' compensation is regulated by state statute and most state laws vary, it would be difficult to centralize this function. Regional staff is expected to follow up with injured employees and get them back to work or into rehabilitation as soon as possible.

An important element of any claims program is to assure that the carrier's claims-handling standards either meet company needs or are upgraded with special instructions developed for handling its account. Special instructions must be distributed to all claims offices to assure that uniform procedures will be followed. Regardless of whether standard or customized claims handling procedures are adopted, it is necessary to conduct claim audits to determine whether the insurance carrier is meeting performance standards. Depending on turnover, competency, staffing levels and caseload, the carrier may not be able to comply with its own claim management standards much less those of another company. To remedy this situation, claims audits can be conducted by outside specialists or an in-house claims staff in conjunction with the insurance carrier's claims management staff. However this issue is approached, it must be done on a consistent basis to show the carrier that management is concerned about how its claims are handled.

Claims occurring in fast-food restaurants are not generally as serious as those experienced in manufacturing or heavy commercial activities. As a result, Burger King's claims may be put on hold or may slip through the cracks. Because the company is on a paid loss retro with a high self-insured retention, the money for settling claims is paid directly out of the bottom line. Delays or errors in claims processing can result in a higher claim settlement. Accordingly, Burger King schedules periodic audits at various claims offices throughout the year.

Settlement Strategies

Every company should develop a corporate philosophy regarding claims settlement. Will the company fight every claim filed against it, forcing the claimant into litigation? Does the company want to quickly settle all claims without regard to validity? Is negotiating all claims under a certain amount and litigating all claims over that amount a logical approach? There are many philosophies to settling claims, but it would be helpful to adopt specific claim settlement guidelines. Exceptions can be made, but at least there will be an understanding as to how to approach the bulk of claims.

The philosophy at Burger King is to verify the validity of the claim, then settle it as quickly as possible. The company prefers to avoid litigation whenever possible because litigation increases the cost of settlement. However, the company strongly resists cases for which it believes it has no liability. In recent years, the company has witnessed a turnaround in jury verdicts. It has won a number of personal injury cases in Dade County, FL, which historically has been a difficult jurisdiction for corporate defendants. This may be an indication that juries are becoming aware of who ultimately bears the burden of excessive awards.

When a claim exceeds a certain amount and an opportunity to reach a negotiated settlement exists, the risk management department oversees or directly participates in the process. Negotiations under these circumstances generally include straightforward dealings with the claimant or, in some cases, with an attorney representing the claimant. Participation in, or directing the course of, negotiations allows the company to eliminate the typical carrier bureaucratic delays and resolve the claim at an equitable cost.

Structured settlements are usually the preferred approach for major injury claims or cases involving minors. If done properly, they provide reduced settlement costs for the defendant and desirable cash flows for the plaintiff. Generally, annuity settlements are related to serious automobile and general liability claims, but can also be used in workers' compensation settlements in some states. This type of settlement allows for a payout that can be structured to meet the anticipated financial needs of the claimant and provides them with money management and tax benefits. An essential ingredient to an acceptable offer is to have enough up-front cash included in a structured settlement to satisfy all parties. If the annuity payouts are deferred far enough into the future, the value of the package is impressive when compared to the actual cost to the defendant.

Legal Services

Because companies must often deal with the legal profession in the claims settlement process, it is best done on an objective basis, understanding that plaintiffs' attorneys are generally competent professionals trying to get their clients the highest settlement. Accordingly, risk managers must make sure they select the best available defense council. When the insurance carrier is seen as primarily a service agency, the company it is insuring has the choice of counsel. In most cases, Burger King utilizes the insurance carrier's house counsel, because they are familiar with company procedures and charge a lower rate than outside counsel. However, in claim cases in the settlement range of more than $100,000, the best defense attorney should be retained. The corporate law department can be sought for advice in selecting outside counsel.

Generally, it is advisable to select an attorney with an excellent reputation in the jurisdiction where the case will be tried. A defense strategy should be developed by a team consisting of in-house counsel, a claims manager, the insurance carrier's claims representative and attorney, and outside counsel. Investigative work can be handled either by the insurance carrier or another agency, depending on the counsel's recommendation.

Because legal expenses accumulate rapidly, it is best to monitor them closely from the start. The cost of professional services and the defense strategy, including settlement options, should be discussed with outside counsel at the time of engagement. There should also be a detailed account of the cost of specific discovery items, depositions and miscellaneous clerical and operating expenses. In addition, the company must make it clear to its counsel that a reasonable claims settlement is preferred. During the claims process, there will be numerous opportunities to settle, all of which should be discussed with counsel. After the initial round of discovery, there should be a meeting to review the case and decide whether there is an opportunity to settle. If settlement cannot be reached at that time, another attempt should be made prior to going to trial. If this fails and a trial seems inevitable, a pretrial conference should be held because it may still be in the best interest of both parties to settle.

As seen in this two-part article, combining proper claims handling with effective loss control procedures is essential to protecting a company's bottom line. No matter how established a company, it is never too late to implement a comprehensive program.
COPYRIGHT 1990 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Herbstman, Donald
Publication:Risk Management
Date:Apr 1, 1990
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