In part one of our series on Worker-to-Worker claims, we outlined their impact on insurers and contractors. In our second part, we discuss practical steps to manage these as well as making provisions within your project costs for the increased cost.
Workcover authorities use a preferred panel of lawyers to recover the costs paid to the injured worker, and this often results in those same firms attending multiple claims mediations. This familiarity means they soon come to appreciate those construction companies who are likely to be more active in defending their liability during proceedings or negotiations. A construction business that consistently presents positive evidence to defend the claim will make those parties, as well as the injured worker, carefully evaluate the risk before bringing a recovery action.
Insurers also appreciate clients who meaningfully contribute to the defence of these claims – and are more likely to provide cover over the longer term. Establishing a relationship with the right legal providers for your business makes for a team approach and this should be considered an investment in obtaining the best possible outcome.
In establishing a defence or strategic response that assists in containing exposure or controlling a claim, several factors are important. We recommend every construction business considers the following as a starting point:
The impact of these claims has driven up policy deductibles, typically $250,000 per claim for mid-tier contractors. Despite this, most claims will end up settling well over the deductible. The usual arrangement is to agree on a panel firm appointment and the contractor pays defence costs as deductible erosion.
Although the contractor may prefer to have their own solicitors given the greater deductible, it would be unwise to use non-panel firms who most likely won’t be as familiar with the WorkCover panel and the recovery formula, nor will they have lower charge out rates.
Absorbing the additional cost into projects will depend on the frequency of Worker-to-Worker claims on projects. While the ideal goal is that none occur, a prudent and practical approach would be an allowance for such additional costs amortised over all projects. This can be done by:
It should be remembered that claims are not lodged for some time following cessation of payments to the worker, so these greater deductible costs will impact future projects, allowing time between now and then for provisions to accumulate.
Willis Towers Watson can help you manage Worker-to-Worker claims in conjunction with your insurer by:
Such measures will help alleviate the impact of these higher excesses now being imposed on the construction industry.
