June 2009 Issue
18 June 2009
Welcome to the June 2009 edition of the Proclaimer!
This is a very special edition.
On 24 May 2009, Proclaim turned 10 and in celebration of our 10 year Birthday we have launched our new website. Check it out when you are free!
We are also celebrating in style and having several discussion groups and several 10 year celebration events throughout the year involving client's and staff as well as a party in Melbourne bringing all our staff together from around Australia. We will also be celebrating in Sydney Brisbane and London later this year so be sure to watch this space.
State of the market
As claim managers we are kept very busy during economic downturns as in difficult times claims tend to increase. The main areas impacted are professional liability, directors and officers liability and public liability claims. We also tend to see an increase in smaller claims as people chase money they may not have pursued a year ago, so classes of insurance like accident and property have the potential to be impacted as well. Not to mention the expected increase in fraudulent claims and theft related claims that comes with more desperate times.
The collapse of several large companies will have a major impact on the D and O and PI markets, as inevitably litigation follows corporate collapses and within the litigation maelstrom you can add Directors and corporate advisers. On the liability side we had previously advised that costs were rising and the plaintiff lawyers have strongly reemerged in the personal injuries space. The economic conditions will only tend to exacerbate this trend.
Against this background you would expect rates to be on the move. While rates are certainly not heading south any more the lingering capacity in the market has meant that only pockets of risk are being impacted by increases in rates. We expect we will see more rate increases after June passes and the reinsurance renewal season kicks in with what is expected to be higher reinsurance rates. At a recent breakfast seminar the CEO of QBE Australia confirmed that rates had increased 5% for QBE in the March quarter, in the first real signs that rates are moving. However, competition remains strong.
With the increase in claims activity, we expect some local and offshore underwriters will find maintaining claims service standards to be a challenge over the coming year. We know many insurers have to cope with cost containment strategies like staff freezes at the same time that claims are increasing. At Proclaim we are well positioned to assist underwriters with overflow and scheme business across all lines of business. To assist our clients we have expanded our expertise in several areas:
- We have recruited Sarah O'Leary to work with Susan Rawling in medmal and liability claims
- We have recruited Barbora Pradeuax to assist Russell Walker with Accident and Allied Health Claims
- We have expanded our property and motor capabilities with more announcements due shortly
- We continue to recruit and train legally qualified professionals to manage claims in our expanding Liabilty and PI teams.
It is our objective to be the preferred supplier of claims services to the Insurance Industry so we look forward to helping insurance companies and self-insured companies through the challenging times ahead. We hope you get an opportunity to look through our revamped website, full of information and case studies, as well as profiles of all our people, including our new staff. You can even see some of them as they were when they were 10 - now that Proclaim is celebrating reaching a similar age!
By Sarah O'Leary
A patient who initiates a claim perceives that something has gone wrong with their medical care and feel they have been left with an undesired outcome. The practitioner's experience, usual practice and reputation is then called into question.
In order to effectively manage a medical malpractice claim it is imperative that all parties keep in mind the emotive and privacy issues involved. Whilst investigations may reveal that a claim can be justifiably defended, communication with the patient or their representative should be cognizant of their often sensitive medical position. Equally where a claim should be compromised, settlement considerations should include protection of the practitioners' professional reputation through the use of tightly worded confidentiality provisions, given that any judgment would be in the public domain.
Given the difficulties faced by those involved it goes without saying that early intervention and swift resolution of medical malpractice claims is beneficial to all.
From the insurers' perspective prompt notification of a claim is paramount as any delay may be prejudicial and can often create an uphill battle for the defending party at the outset. An earlier example of delayed notification involved two GPs who failed to advise their insurer for almost 12 months of a claim brought by the deceased's family for a delay in diagnosis of cervical cancer. Whilst insurance cover was ultimately maintained in that case, in view of the lack of response the plaintiff commenced proceedings.
The court subsequently ordered that the claim would be struck out if the defence was not filed within four months. The strict time frame created difficulties in assessing breach of duty and causation, notwithstanding that investigations revealed that one named defendant did not treat the patient and two other locum GPs should have been named. So the lack of discipline in the claim process that caused late notice created 2 major issues:
- The failure to address the issue at the time caused the claim to escalate to litigation.
- The passage of time created problems with investigation of the facts surrounding the claim.
Had there been a timely notification, prompt investigations would have revealed the correct parties and settlement could have been achieved before litigation commenced.
An early analysis of the medical records and consideration of expert evidence, can quickly determine whether the claim should be resisted or compromised. Depending on the circumstances, providing a detailed response to a letter of demand is often sufficient to encourage the patient to abandon the claim. This may be achieved particularly where the injury is relatively minor, for example in reply to allegations of substandard nursing care regarding administering injections, family planning issues and ear syringing techniques or in dental cases relating to alleged incorrect tooth extractions, unnecessary fillings or root perforations.
Alternatively early mediation can be an effective means to narrow the issues and ascertain quantum expectations within a confidential setting. The opportunity for open communication at the outset can be invaluable to the patient in gaining a better understanding of the treatment they received. An example of where mediation could have avoided costly litigation was where the court, by assisting an unrepresented plaintiff who had brought a claim against several optometrists, abandoned the usual directions timescales which resulted in protracted litigation. Invitations to mediate early in the proceedings were resisted. However, shortly before trial the plaintiff finally agreed to mediate and a reasonable compromise for all parties was achieved without the need for trial. Had mediation taken place earlier in the proceedings (or even before proceedings had been commenced) not only would the plaintiff have had a chance to resolve questions and concerns about her care but significant legal costs could have been avoided.
Proclaim can offer assistance to insurers of healthcare professionals and to healthcare companies with significant self insured retentions by reviewing current systems of notification to implement a comprehensive system of early notifications of circumstances which could give rise to a claim. Outsourcing claims to Proclaim provides access to an experienced, objective and professional organisation without compromising your reputation or the privacy of claimants.
We strive to minimise litigation and tightly control costs. For further information please contact Sarah O'Leary on (03) 96605269 or email@example.com and Susan Rawling on (03) 96605253 or firstname.lastname@example.org
By Jon Broome
Aon provide an excellent annual risk survey which provides some valuable information on trends in the insurance market.
There were a few things that struck me from this year's survey. First, that brand image remains the key concern facing businesses today, yet that is not something that insurance alone can go any way towards protecting. Secondly, outsourcing key services continues to strengthen as a significant trend in the market.
Finally, the falling cost of risk. The total cost of insurance risk has shrunk dramatically over the last few years of the softer insurance cycle.
1. The rise and rise of Brand Image as key business risk
While companies are becoming more concerned about current issues like liquidity and credit, the key corporate issue remains brand and image. Many companies have collapsed or gone to the brink in the last year and the results for them have been catastrophic damage to reputation and image. The irony is that in an insurance and risk survey this is the one risk that can't be adequately covered by an insurance product. The loss of goodwill that goes with damage to the brand is very difficult to quantify and no insurance product would want to cover the fall in market cap post calamity - the likes of which we have seen repeated over and over in the last year.
So much of what is at stake in your brand can be determined by how you respond to a crisis or a difficult situation. There are countless examples over recent history of poor responses to a crisis which has led to permanent damage to reputation - think of molestation cases against the Church, The Pan pharmaceuticals debacle, through to what we see now happening in the Bushfire Royal Commission.
What we have seen in these cases is often a command and control situation from within, when external objective advice and expertise may have been a better option. Those caught up in the crisis often lose their objectivity in the face of pressure and bad press. As an outsourced claim manager dealing with disputes on a daily basis, we see first hand the advantage of having an independent and objective third party intervening early in a dispute situation.
2. The rise of outsourcing
Against that background it is probably no surprise that companies are more and more looking to outsource key insurance advice and support areas. There is a greater recognition in today's corporate age that companies are best sticking to their knitting, focusing their energies on what they do best, and outsourcing key specialised support areas.
For instance, outsourcing claims management by companies has increased from 38% 3 years ago to 63% now. Outsourcing loss control engineering has increased from 23% to 64% in the same period.
This goes hand in hand with the key corporate concern of reputation being paramount.
If Brand and Image is your key concern, you need to ensure you have the best possible resources available and in place to avoid a crisis, or to manage a crisis if it hits. It is becoming increasingly clear to companies and their Risk Executives that an objective response to a difficult situation, utilizing the skills of external experts, is a better form of risk response than attempting to manage it oneself.
However it should be noted that while damage to reputation looms largest when there is a crisis, the reality remains that every touch with a customer, and every decision made by a company, has the ability to impact its brand and image.
You want to protect your brand and image - you need to have the best possible resources supporting your efforts. It is clearly no longer sufficient to rely on internal resources alone when you face a challenge that may impact your reputation.
3. Falling cost of risk
The Total Cost of Insurable Risk (TCOIR) was 11.97 per $1000 of revenue in 2003/04 at the height of the previous hard market.
The TCOIR was $4.52 per $1000 of revenue in 2008/09, which is less than 40% of what it was 5 years ago.
So the costs of insurable risk have dropped 60% in 5 years. While some of this should be seen in the context of increasing revenues for companies in Australia, the number itself is still mind boggling. If we said the TCOIR was 25% over what it should have been relative to its real value in 2003, it would still be double what it is today.
The only bright spot for Insurers in this survey result is that retention costs increased substantially in 2008/09 to be double their highest point in the last 7 years. Around one third of TCOIR costs were in risk retentions. Some of this may be explained by large losses that have occurred within retentions, but it also may be a pointer that companies are becoming more sophisticated in predicting the market and are increasing their retentions in the belief (no doubt true) that the cost of insurance has bottomed.
Some other observations
It was interesting to see QBE once again ranked as the number one most respected insurer in the small and mid market. The rise of Lloyds was also interesting - shooting up from Number 6 to 2 in the less than 100m market, from 10 to 3 in the mid market and number one in the upper end of the market. We have seen quite a bit of business graduate to Lloyds markets in the last year or two, and in some cases we are proud to support that business with a strong local claims service, which we hope assists in Lloyd's efforts to provide a strong service in Australia.
From a claims perspective, there were some interesting results to ponder.
- Brand and image is the key concern for companies in this market.
- Your brand and image is put to the test whenever you have a claim or a dispute with a customer.
- More and more companies are outsourcing specialist skills like claims and risk management to specialist companies.
- Insurable costs have reached their bottom and we expect premiums and self-insured retentions to increase in future.
- This will effectively mean more risks are controlled by the company and not by their insurers. In which case, to protect a company's reputation, they need to ensure they have the right resources in place to manage their risk and any claims that arise.
*thanks to AON for providing us with a copy of their Risk Survey 2008/09
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By Richard Thomas
Sandra Scott v CAL No 14 T/as Tandara Motor Inn, Michael Andrew Kirkpatrick
Motor Accidents Insurance Board v CAL no 13 T/as Tandara Motor Inn, Michael Kirkpatrick
Full Bench, Supreme Court of Tasmania (on appeal from Supreme Court per Blow J).
The appeal overturned the decision at trial that the Tandara Motor Inn ("the hotel") and licensee could not be held liable for the death of Shayne Scott (the plaintiff's husband) after he crashed his motorcycle shortly after leaving the hotel.
The plaintiff had a blood alcohol reading of 0.253 (approximately five times the legal limit to operate a motor vehicle).
The appeal decision will have some effect on insurers of licensed establishments and industry groups representing hotels, bars, restaurants and licensed clubs.
On appeal, the matter would be heard in the High Court which is the final tribunal for appeals in Australia. The last time the High Court heard an issue similar to this was in South Tweed Heads Rugby Club v Cole. It is relevant then to discuss what the current law is, as set out in Cole.
South Tweed Heads Rugby Club v Rosalie Cole
The plaintiff (later appellant) Rosalie Cole attended a champagne breakfast at the club. A certain amount of champagne was included in the cost of the event. When the free champagne ran out at about 12 noon the plaintiff was served a further bottle but was refused further service at around 3:00 pm by reason of suspected intoxication.
The plaintiff was then supplied with further drinks by her companions though she was eventually noted to be so intoxicated that she was asked to leave the premises. She was first offered a ride home on the club's courtesy bus which was refused, and then later she was offered a taxi ride home which was also flatly refused. The plaintiff was then seen to leave with two men who promised to see her home safely.
Unfortunately, some time later, Mrs Cole was struck by a car and injured while walking on the highway near the club.
At trial, Mrs Cole succeeded in an action against the club and the driver of the vehicle (although there was some reduction for contributory negligence). The club successfully appealed the decision to the NSW Court of Appeal and which was later upheld by the High Court in a majority decision (4 to 2).
Of the six Judges sitting in the High Court, two found that the club owed no duty to the appellant due to her intoxication; two found that they did not have to decide if a duty was owed because in any event there was no breach; and the dissenting two justices found that a duty did exist and that this was breached in the circumstances.
On the question on whether a duty was, in fact, owed to the appellant, Gleeson and Callinan JJ emphasised that the drinking of alcohol is a voluntary act although they thought that a duty could arise in exceptional circumstances (without expanding on what these might be). Justices McHugh & Kirby found that there was a duty on the basis that the consumption of excess alcohol rendered people especially vulnerable.
Justices Gleeson and Callinan also found that even if a duty did exist, there had been no breach by the club. They noted the difficulties of monitoring consumption in a large room of over 100 patrons and acknowledged that plaintiff had been refused service and asked to leave with efforts made to see her home safely.
The dissenting minority however, considered that the club's duty was breached by allowing her to become so intoxicated that her judgement was significantly impaired.
Both Gummow and Hayne JJ did not decide on the existence of a duty or whether any such duty had been breached. They found that even if there was a breach at some point in the evening, that breach was remedied by efforts to see her home safely and that there was therefore a break in the chain of causation. Gleeson and Callinan JJ concurred with this reasoning.
The decision in Cole appeared to indicate a judicial preference for individual as against community responsibility.
Sandra Scott v Tandara Motor Inn
Turning now to the decision under discussion, it is important to set out the very individual facts at issue. The hotel was situated in a small community in Tasmania and the deceased was, unsurprisingly, well known to the licensee of the hotel (Michael Kirkpatrick). In fact, the deceased had on occasion, been allowed to purchase drinks from the bottle shop on 'credit'.
On the night in question, after drinking a stubbie of beer (330 ml) at work with his workmates, the deceased drank from around 5:30pm to 8:00pm at the hotel, making his way through 6 to 8 cans of premixed whisky and cola.
Apart from a short period when he was served by Kirkpatrick's wife, the deceased was served exclusively by Kirkpatrick who was alone in the public bar.
As there was talk of a 'booze bus' on the highway near the deceased's home, he decided to store his motorbike in the hotel's storeroom. His keys were given to Kirkpatrick and placed in the tips jar. Kirkpatrick thought the deceased would be able to get a ride home.
Shortly before the deceased left the bar he was observed by other patrons to be resting his head on his arms on the bar. He was also heard making aggressive comments including swearing about his workmates at the local Council.
Notwithstanding his earlier decision to store his motorbike in the storeroom, the deceased changed his mind and demanded that the storeroom be opened and his keys be returned. He vehemently rejected the publican's offer to call his wife before leaving on his motorbike.
At trial, Blow J referred specifically to Cole and comments made by the justices in coming to their decision on the possibility that a duty may arise under exceptional circumstances. In his view, the publican's agreement to store the motor bike did not constitute such special circumstances. He found that the hotel and Kirkpatrick did not owe a duty of care to the deceased in the circumstances.
Justice Blow further commented that the very fact the deceased made the conscious decision to ride home was an indication he was not incapable of looking after himself. Interestingly though, the Justice also commented that had there been a duty owed he would have found that this was breached by the failure to take the simple step of calling the deceased's wife.
The Appeal (Full Bench of the Supreme Court of Tasmania)
In a majority decision (2-1, Crawford CJ dissenting) the Court found that a duty was owed to the deceased and that this duty was, in fact, breached leading directly to his death. In doing so, the Court focussed heavily on the individual facts of this particular case. In particular, the Court found:
- The deceased was well-known to the publican;
- There were no difficulties monitoring intoxication (c.f. Cole);
- Mr Scott was evidently intoxicated and this was known to Kirkpatrick (among other signs by the demands to take back his bike);
- The hotel involved itself in the means of the deceased getting home (by storing the motorbike).; and that
- Kirkpatrick must have known he would be at significantly increased risk of injury or death by driving home (and more so by riding a motorbike). Accordingly, this was a foreseeable risk which was not 'far-fetched or fanciful'.
The Court decided that it would have been relatively easy to establish Mrs Scott's phone number and call her to collect him and that it would not have been too difficult to delay or prevent the deceased from leaving on his motorbike.
In evidence Kirkpatrick conceded that he had taken similar steps with other patrons in the past. Interestingly, Evans J stated that even had it been unlawful not to return the bike (this argument was raised by the respondents) it could still have been 'reasonable'. In any event, no unlawful act was required.
It is well-established law that intoxication can inform the duty of care owed and this is most often seen in cases involving patron on patron assaults (where hotels in Australia are frequently found liable). This is because it is recognised that once a person is intoxicated they are more vulnerable and prone to aggression.
I would argue that the result in this case may have been very different had the deceased been a patron in a bar or hotel in a larger town or city. It would certainly have been a different decision if the hotel staff were unaware of how the patron had travelled to the hotel. You will recall that much was made of the specific facts of the case. Arguably, the decision acts as a disincentive for publicans to take an interest in the safety of their patrons at all as Kirkpatrick's efforts to store the motorbike in the storeroom were given considerable attention by the full bench.
My concerns with the decision would be that Kirkpatrick and others did make various efforts to assist the deceased in getting home safely. This included the initial agreement to store the motorbike, Kirkpatrick's offer to call the deceased's wife and an offer by other patrons known to the deceased to give him a lift home. It is my understanding that no evidence was led that established the publican could, in fact, have ascertained the wife's phone number. The full bench's decision also assumes the deceased would not have left if his wife had been called and gave scant regard to the aggression shown by the deceased to the publican in demanding his keys back. It is difficult to see how there could be a finding that reasonable steps extended to placing oneself in harm's way.
Next steps - appeal?
Unsurprisingly, there has been much speculation on whether the matter will be appealed. Relevant industry groups and insurers will no doubt watch with interest. It is almost certainly the case that had the full bench decision affirmed the decision at trial, that the Motor Accidents Insurance Board would have funded an appeal to the High Court. The decision opens up a potentially valuable avenue of recovery actions for the MAIB (which administers and pays claims relating to motor accident claims in Tasmania - there are similar bodies mirroring these functions in other states and territories).
Assuming an appeal is forthcoming it is interesting to see what remains of the justices who heard Cole at the High Court.
- French, CJ - not on the HCA for Cole - known as a moderate.
- Heydon, J - heard Cole in the NSW Court of Appeal which allowed the appeal
- Gummow, J - sat in Cole and found no breach of duty causative of the injuries
- Hayne, J - also sat in Cole and agreed with Gummow.
- Crennan, J - new to the bench but known as a black letter lawyer who has agreed with Gleeson & Gummow on prevision decisions.
- Keifel, J - also new to the bench, known as a black letter lawyer and conservative.
- Bell, J - a recent addition who is thought to be a liberal.
The High Court's most famous liberal jurist, Michael Kirby is soon to retire and will be replaced by Bell. Justice McHugh, who was in the dissenting minority with Kirby J has also retired. To balance the ledger in a sense, Gleeson and Callinan who both found no duty existed in Cole have also since retired.
The make-up of the bench seems to be favourable towards a potential appeal although again, the very individual facts of the Scott case do give pause for thought.
Risk management recommendations
Management of licensed premises should emphasise to their staff compliance with Responsible Service of Alcohol guidelines, the Liquor Acts and similar legislation (as relevant in each state). Essentially, this boils down to ensuring no service to evidently intoxicated patrons. Further steps might be the provision of food on premises and providing free soft-drinks to designated drivers. Providing either a courtesy bus or, at least, easy access to telephones and numbers for taxi services, would arguably satisfy the duty of care to intoxicated patrons.
As we have mentioned, as part of our 10 year celebrations we have unveiled a new website. It has a number of case studies and features, as well as profiles of our staff and information about how we go about our business. Please take a look and if you get a chance send us some feedback on what you think.
Welcoming new Proclaimers
As Proclaim continues to expand, we would like to welcome the following new Proclaimers to our team: -
- Jayne Haydon
- Sarah O'Leary
- Monique McKinery
- Jessica May
- Eugenia Anang
- James Hahm
Follow the link to our website http://www.proclaim.com.au/people/index.html where we are displaying profiles of all our staff.
Gertrude Contemporary Art Spaces
Since 2004 Proclaim has sponsored Gertrude Contemporary Art Spaces, a residency and exhibition program for young and emerging artists. Like Proclaim, Gertrude artists are trying to make their mark in a large industry and our sponsorship helps those artists to break the boundaries so their talents are recognised. Those of you who have been to our office will know we have a fairly distinctive contemporary feel to our offices - the major reason being the artwork we hang on our walls, most of which comes from Gertrude artists - residents and alumni. More information is available at our website at http://www.proclaim.com.au/we_sponsor/index.html
Congratulations to Chris Wood for being the winner of our Super 14 tipping competition. Chris, from McCabe Terrill in Sydney, survived a challenge from Peter Murdoch of Barry and Nilsson. It seems the lawyers are cornering the market on Super 14 tipping!
In the AFL tipping after 8 rounds Sebastian Broome has a 2 point advantage over Brett Field and Richard Mole. After Jon Broome's daughter saluted last year, will someone be able to catch Seb before year end and prevent a Broome back to back?