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Unhinged

The co-morbidities of age and weight and a stubborn failure to adhere to his physical therapy regimen spell trouble for an injured, middle-aged construction foreman.
By: | April 19, 2016 • 11 min read
Topics: Risk Scenarios
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

The Injury

The scenario begins with the brief video below:

 

Heading South

It’s five weeks since the day Reggie first felt that twinge in his knee. The pain is still not so great that Reggie can’t live with it, but he’s getting a little tired of it.

After work one day, Reggie is having beers with Smitty Cheeks, one of the company’s mid to long-range truckers, who’s done driving for the week and will be spending the weekend in Memphis.

Smitty and Reggie are engaged in game of 8-Ball at their local blues and barbecue joint. Smitty slams the 8 ball into the corner pocket, winning the game.

“My game,” says Smitty.

Reggie eyes the waitress delivering food to their nearby booth.

“Good thing,” Reggie says. “ ’Cause our food is here.”

Partner

Partner

The two are tearing into some serious barbecue when Reggie notices Smitty pulling a pill from a vial in his pocket. Reggie’s already had a couple of beers, which makes him a little bolder.

“Watcha’ got there partner?” Reggie says.

“Vicodin,” Smitty says.

“My back’s a mess and I’ve been taking these Vicodins for a while. They help a good deal. Probably not best to drink and use these, but hey, whatever gets you through the night,” Smitty says with a beery wink.

Reggie pauses and then blurts out.

“Could you hook me up with a few of those? I’ve been having some aches and pains myself.”

Smitty pauses, then very efficiently strips the smoked meat off of a turkey wing.

“I can get you all you need buddy and the price is right,” he says, his lips smeared with barbecue sauce and this time not smiling.

The next day, Reggie, whose become more inactive and out of condition since his knee injury, is coming out of the bathroom at home with a towel around his waist.

He’s limping worse than he has been recently. The knee has begun to lock on occasion and feels like it might be giving out. His wife Arlene addresses him.

“When are you going to see a doctor?” she says to him with a worried expression on her face.

“I really don’t know,” says Reggie.

“I really think you should,” she says. “You don’t know what’s going on there and you should at least get it checked out.”

Reggie pauses, embarrassed. Arlene is looking at him compassionately and it softens his defenses.

“I tweaked my knee at work a while back. Tell you what, I’ll tell my boss on Monday and go see somebody.”

“Good,” Arlene says.  “You don’t want to go too long before figuring out what’s up.”

RSL_2015

Reggie tells his supervisor about his injury. Reggie’s injury is in turn reported to the company’s insurance carrier. But neither the claims adjuster or the employer discuss the idea of Reggie being offered modified duty.

Reggie is referred to an in-network physician, an occupational medicine specialist. The Occ-Med prescribes an anti-inflammatory for Reggie. He also orders an MRI for him and gives him a prescription for four sessions of Physical Therapy and orders him a hinge knee brace, due to the “giving out” feeling Reggie has reported in his knee.

The Occ-Med specialist gets the MRI results, which reveals a tear. Without calling Reggie into have another look at him or gauge how he’s done in therapy, the Occ-Med refers Reggie to an orthopedic surgeon.

Reggie is in the surgeon’s office looking at the MRI results with the surgeon when he gets the news.

“The MRI scan reveals a 4 mm acute medial meniscus tear, Reggie,” the surgeon says.

“We’re going to want to repair this,” he continues.

“You mean surgery?”

“Yes. I don’t want to let this sort of thing go in a man your age,” the surgeon says, patting Reggie on the shoulder compassionately.

Mollified by the surgeon’s kindly tone, Reggie doesn’t question the decision or seek a second opinion.

Reggie doesn’t think to ask about a less invasive approach, like more physical therapy, and the surgeon doesn’t bring it up. The surgeon puts in a request for surgery, which is approved by the adjustor with no follow up or questioning as to its necessity.

Reggie undergoes preauthorized, minor arthroscopic surgery and is initially given six weeks off of work under the direction of the surgeon.

The carrier’s claims adjustor makes a note of the surgery but doesn’t contact the employer or Reggie to check in on his condition.

“It’s a pretty minor procedure,” she tells herself while alternating between looking at her computer monitor, where the details of Reggie’s case are displayed, and checking her cell phone.

Then her phone rings.

“This is Janice,” she says, and clicks to another screen on her computer. Reggie’s case is out of sight, out of mind.

No one from Reggie’s company checks in with him to discuss the future possibility of modified duty or to check on his overall welfare.

The Wheels Come Off

It’s one week post-op and Reggie pays a visit to the surgeon for a wound check.

“Let’s have a look here,” the surgeon says, gently peeling off the adhesive bandage.

“Looking good,” he says.

“Good,” Reggie says.

The surgeon swabs Reggie’s knee with some antiseptic and distracts Reggie as he pulls out the sutures with a discussion about planning for the way forward.

“So, I’m going to give you a prescription for therapy. I want to see you do at least 12 visits to work on regaining full range of motion in the knee and getting your strength back.”

“Got it,” said Reggie.

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“How’s your pain?” the surgeon says.

“It hurts, no doubt,” Reggie said.

“Well let me know if you need more pain medication,” the surgeon says.

“I just might do that,” Reggie says before gingerly slipping down from the table.

***

It’s a week later and Reggie is sitting on the couch at home with the channel changer in his hand and his leg up.

Reggie checks his iPhone, scanning his e-mail inbox.

“Have you heard anything about your physical therapy appointment?” Arlene says from the kitchen where’s she’s pouring some tea for her and Reggie.

“Nothing,” Reggie says.

“I think I’m going to call them,” she says. “We need to get you into physical therapy.”

“Go ahead. I doubt they’ll call you back,” Reggie says. He’s not out of it but his manner is resigned and sluggish.

“It hasn’t been approved or processed yet by the insurance company.”

“Has anybody from your company ever contacted you?” Arlene says.

“Nope. But I’m still getting my workers’ comp checks, I guess I can be thankful for that,” Reggie says.

Reggie palms a pain pill from a vial and swallows it with a sip of water. Arlene can’t see him do this from her vantage point in the kitchen.

“I don’t like it, they should be in touch,” Arlene says.

“You’re probably right,” Reggie says, over his shoulder, taking a break from look at the television.

***

It’s another week before Reggie gets into therapy. The therapist greets Reggie as he’s ushered into the treatment area.

“Hi, I’m Maggie,” the therapist says. “Come on over to this table and lie down. I want to put some electrical stimulation on your knee and then we’ll get to work on it a little bit.”

Reggie walks over to the table, limping noticeably.

“You had surgery when?” Maggie the therapist says.

“Three weeks ago,” Reggie says.

“Hmmm, you’re late getting in here,” the therapist says.

“After we get through our work here today, I’m going to give you some home exercises to help you get caught up. We need to keep this knee moving and build your strength back up,” she says.

***

We cut forward to see the therapist working on Reggie’s knee. She flexes the knee slightly and Reggie almost jumps off of the table.

“This joint is stiff,” the therapist says.

“It sure is,” Reggie says.

Reggie’s reacting to the pain and eyes the therapist warily.

Reggie’s back at home and back in front of the television set. This time he’s got the pain medication bottle out in full view.

Arlene comes in carrying some groceries.

“Have you done your therapy exercises today?” she says.

“Not yet,” Reggie says.

She eyes the vial of pills on the table next to Reggie.

“I thought you were done with those,” she says.

“I’m not taking that many of them,” Reggie says. “And I did move. I went to the bathroom.”

Arlene just looks at him. She’s concerned but clearly doesn’t want to start an argument.

Without another word, Arlene heads to the kitchen with the groceries.

It’s five weeks since Reggie’s last visit to the orthopedic specialist and he uses a cane to get into the examination room. The use of the cane was approved by the adjustor.

The surgeon enters the room and sees the cane propped next to Reggie as Reggie sits on the examination table.

The surgeon is very alarmed.

“What’s the cane for?” he says. “I didn’t order you one.”

“I need it to walk,” Reggie says. “My knee’s still killing me and it’s hard to move it.”

“Where’d you get it, the cane?” the surgeon says, clearly disturbed.

“The therapist gave it to me,” Reggie says.

The surgeon quickly scans his electronic pad, looking for the report from the therapist.

“You had six visits. You were late getting in there but you had six visits. Although you should have had 12,” the doctor says, not quite panicking but clearly unnerved.

“You should have been going twice a week.”

Reggie ignores him.

“You said I could have more pain pills if I needed them, right?”

“What?” the doctor says, jarred that Reggie is ignoring him and taking up another subject.

“Yes I said that but I didn’t think you’d…” the doctor says before Reggie interrupts him.

“I’m gonna’ need more pain pills,” Reggie says with an edge.

The doctor says nothing. He’s at a loss.

“Doctor, I want more pain pills,” Reggie says.

The Session

This scenario was originally presented at the 2015 National Workers’ Compensation and Disability Conference in Las Vegas.

As part of the discussion, panelists discussed key aspects presented in the scenario.

Panelists included Dr. Robert Goldberg, chief medical officer, Healthesystems; and Dr. Jeffrey Sugar, Associate Medical Director, Sharp Rees-Stealy Medical Group. The session was moderated by Tracey Davanport, director, National Managed Care, Argo Group.

Insights from their discussion are highlighted below:

 

 

 




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

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“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

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Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]