Gallagher McIntyre

Client Services

Case Studies

Acquisition – Effective Claims Management

The acquisition by a publicly traded company of a global supplier of road building materials.

Business Situation/Challenge

The McIntyre Group was hired by the acquiring company to evaluate the exposures and insurance in place for the purchase of a multi-billion dollar street and road construction contracting division of a large publicly traded company. With the acquisition came more than 1,000 open Workers Compensation Claims in over 40 states. The buyer was concerned that these costs would spiral out of control and needed assistance in managing these claims.

Gallagher McIntyre was assigned to review historical insurances in place, review exposures and provide an estimate of potential future liabilities arising out of this stock purchase agreement.

Current insurance of the target division was placed in a Captive Insurance Program where retained losses and aggregate retentions were significant and maintained for more than 10 years. Detailed loss analysis and projections of ultimate losses were required within the captive structure. The seller’s claims were managed by in-house legal staff that would not be working on the future claims, and no insurer oversight or unbiased assessment of potential claims values (reserves) was available. The buyer wanted assistance at the local and corporate level in managing these claims.

Gallagher McIntyre reported to management an assessment of the actual insurance in force and identified more than 50 pending claims that were without reserves. Further analysis proved that the retentions in the Captive Program applied per employee for occupational disease. While the case law favored the employer in the specific jurisdiction, the reserves attached to these claims were nominal and not reflected in the overall claims history.

Further analysis justified the cost of potential outstanding liabilities to be far in excess of the projections and revised estimates were created that reflected historical development. Working with actuaries, Gallagher McIntyre perfected the original estimates of outstanding liabilities that factored into the negotiations of this acquisition.

Solution

Gallagher McIntyre resolved the issues by:

  • Being assigned by the purchaser to manage this claims array of assumed liabilities to maturity, so that escalation and further development could be slowed or arrested
  • Implementing an aggressive claims management system that required our consultants to work with local and executive level contacts to reduce claims costs
  • Claims were triaged and placed on a case specific diary. The Gallagher McIntyre team worked with the client to contain costs and stimulated action-oriented communication with nurses, adjusters, attorneys and claimants
  • Over an 18-month period, Gallagher McIntyre worked with the client to close over 300 outstanding claims resulting in tens of millions of dollars in savings under projected costs

Benefits

The benefits to the claimants and the client are multifaceted. Bringing open workers compensation claims to resolution can improve the quality of life for injured workers, while at the same time quantifying outstanding liabilities for the employer. Effective communications can help improve the quality of care and encourages resolution, which reduces costs.

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