The Law

Court Rules Mail Room Clerk’s Clerical Error No Excuse for Late Reporting

A rogue letter left Johnson & Bryan Inc. $80,000 short after a J&B mail room clerk misplaced an important claims letter.
By: | September 28, 2018 • 2 min read

Johnson & Bryan Inc. (J&B), brokered a property insurance policy for clients Ellen and Joseph Brooks with Hanover Insurance. When the Brooks’ property was vandalized, J&B submitted a claim to Hanover on their behalf. Hanover denied the claim, stating the Brooks’ failed to comply with the initial policy by not installing a fence around their property. The Brooks’ blamed J&B for this oversight and asserted negligence in a demand letter.

However, J&B never received that letter, which instructed the brokerage to “tender this demand letter to your errors and omissions carrier.” The Brooks’ letter also stated J&B had 20 days to respond, or the claimants would file a lawsuit against J&B.

A J&B mail room clerk, thinking the letter only pertained to the Hanover case, forwarded it to the insurer. Sure enough, 20 days later, the Brooks’ filed suit. J&B notified its insurer, Republic-Franklin Insurance Company. When Republic reviewed the Hanover folder and discovered the letter, it denied the claim.

J&B had to hire its own attorney to defend against the underlying Brooks’ lawsuit, which later settled for $80,000.


However, still feeling like they’d received the short end, J&B took Republic to court with a civil action suit alleging claims for breach of contract, negligence and bad faith, and for attorneys’ fees and litigation expenses that stemmed from the underlying suit.

Republic said it denied J&B’s claim on the grounds that the broker failed to notify the insurer in a timely manner after receiving the demand letter from the Brooks’. J&B argued that, due to clerical error, they had not seen the letter until Republic discovered it.

A district court granted Republic’s motion to dismiss, stating J&B failed to comply with its policy’s notice provision. It saw J&B’s “excuse” for delay as unreasonable under state law.

In the Court of Appeals, the court ruled: “[State] courts determined that when a delay in notice is due to the insured’s own negligence, the delay is unreasonable as a matter of law … the insured failed to demonstrate sufficiently a justification for failing to comply with the policy’s notice requirements. In the light of these decisions, we agree with the district court.”

Scorecard: Despite the clerical error, Johnson & Bryan Inc., will not receive defense costs or attorney reimbursement from its insurer, Republic-Franklin Insurance Company.

Takeaway: Dutiful employees know the value in reading company documents carefully. Training is key to make sure documents get into the right hands, especially if the company faces legal action.

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]