From Risk to Profit Benchmarking and Claims Studies

Claims Closed with Indemnity Payment

HOW MANY CLAIMS ARE PAID Many claims are closed without payment above the firm’s deductible obligation. Nationally, from 2010 - 2019, 16.6% of all claims reported ended up with the insurer paying for property damage, economic loss, or bodily injury because of the policyholder’s negligence. This varied by firm size. Firms with higher deductibles absorbed much of the cost of correction or harm. For larger firms, insurance indemnity payments occurred, on average, 10.3% of the time. Smaller firms, however, required payments 22.7% of the time. Even if no payment is made to correct harm, defense costs can be significant. Defense costs occurred, on average, in another third of all claims. But this graph only represents the percentage of claims where insurance funds were used beyond the deductible obligation of the policyholder. Because the Victor and CNA program allows for incident reporting where CNA funds are used—without the commitment of the deductible—to prevent incidents from becoming claims, those insurance costs are not documented as claims- related expenses.

$5 million and below annual billings Above $5 million annual billings

25%

20%

15%

10%

5%

0%

2015

2016

2017

2018

2019

Claims Closed with Defense Payment Only

$5 million and below annual billings Above $5 million annual billings

10% 15% 20% 25% 30% 35% 40%

0% 5%

2015

2016

2017

2018

2019

Firms could argue that if payment by an insurer on behalf of policyholders for their responsibility for causing property damage or personal injury through negligence in performing or furnishing professional services happens only in about 17% of the claims filed, the other 83% must not have a level of merit against the insured firms that signifies culpability. Thus, 83% of all claims against insured firms insured could be considered “meritless” using a tort liability measurement. Almost 34% of these “meritless” claims, however, require defense expenditures above the firm’s deductible obligation and all could be assumed to require expenditures of time and money by the firm. This unproductive use of time and the commitment of defense funds by a firm increase costs. Clearly, claims that result in no payment to correct damage or harm drain the design professions and the economy of productive time and force an increase in the cost of providing services to the public.

9 • From Risk to Profit - Benchmarking and Claims Studies

Victor

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