This document discusses the increasing trend of larger self-insured retentions (SIRs) and deductibles to lower insurance premiums. However, this also increases the responsibility of insureds to pay claims costs. It has led to more focus on properly tracking and exhausting the SIR. Coverage disputes are emerging where the full erosion of the SIR cannot be proven. Some cases have resulted in errors and omissions claims against third party administrators for alleged mishandling of claims files. Technologies exist to track SIRs and deductibles from the start of claims to demonstrate exhaustion and manage litigation costs, protecting insureds and carriers. Transparency in claims handling can be increased through workflow technology to track costs and reduce ambiguity

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SIR and Deductible Tracking – Relieving the Risk of E&O Claims,
Coverage Disputes and Exposure
October 2010
As world economies have tightened, so has the trend towards larger SIR’s (self-insured retentions) and
policy deductibles. By increasing an SIR or Retention limit, premiums can be negotiated downward by
the insured. The flip side of reduced premium’s, is increased responsibility on the part of the insured
for settling (in the case of SIR) or contributing towards claims costs (in the case of Retention).
This change has manifested itself into an increased focus and attention to detail on the exhaustion or
erosion of the SIR. Also, with larger deductibles, insurance carriers are being challenged legally as to
their rights of settlement, where the deductible forms a significant part of the payout, for both
expenses and indemnity/damages. Several cases have been tried in favour of the carrier related to
deductibles.
Coverage Disputes:
Coverage disputes are not uncommon in the insurance industry. However, a growing and worrying trend
is beginning to emerge related to claims for coverage, where the SIR be fully and properly
demonstrated as completely eroded. Effectively, coverages are being disputed where it cannot be
proven that full erosion or exhaustion of the SIR is proved. Several cases can be cited, with a
proportion spawning fresh E&O claims for claims mishandling or alleged lack of meeting fiduciary duty,
amongst the most common.
E&O Claims:
E&O claims are also being brought against TPA’s (third party [claims] administrators), wherein claim-
file mishandling is being alleged by the insurance carrier or in some cases the insured, where a large
deductible is involved in settling the case/claim.
Offsetting Risk and Exposure:
There are technologies and other tools designed and available to assist in the tracking of SIR’s, in order
that proper and full exhaustion or erosion may be proven and demonstrated to have been managed in
accordance with the terms of the insurance policy.
These tools will provide for the application of current litigation and legal spend management protocols
to be applied from dollar one, thus protecting the needs of the insured, as well as satisfying the
requirements of the insurance carrier, under the policy.
They also lend themselves to tracking the deductible or “early claims costs”, in order that the
insurance carrier can make better informed decisions over settlement and resolution of the claim.

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Transparency is the key:
By utilizing workflow technology and electronic matter management, SIR and Deductibles can be
tracked from “dollar one”. The data from this process provides for transparency on the effectiveness of
the claims adjusting/handling and reduces ambiguity over coverage.
ABOUT THE AUTHOR
Gary R Markham is a New York State and International Chair and Fellow of CLM and Chief Executive of
Legal Solutions Group. More details from www.lsg.com or directly from: grm@lsg.com