Cost sharing agreements have become a very effective tool in the administration of claims involving multiple insurance carriers. Instead of all of the insurance carriers having to devote their time and energy to this task, a single carrier representative can assume the role of “the lead carrier” thus freeing up the other carrier representatives to concentrate on their other accounts.

The lead carrier monitors legal bills to insure that the charges are appropriate and reasonable and comply with any case management guidelines and monthly budgets that may exist. The lead carrier contacts defense counsel and resolves any questions or issues that may have arisen during the review of the invoices and then apportions the bills to the various carriers in the manner specified in the cost sharing agreement. The lead carrier then tracks the payments made by the insurance carriers to insure that the invoices are paid in a prompt manner. In the event of settlement, the lead carrier can work with defense counsel to allocate the proper amounts of indemnity to the proper carriers and to the proper policy years. In years past, the role of lead carrier was usually filled by either the current carrier on risk at the time the cost sharing agreement was constructed or by the carrier who, under the terms of the cost sharing agreement, has the largest share of defense. On occasion, the lead carrier may actually be the insured rather than an insurance carrier.

In more recent times, “the lead carrier” has sometimes elected to hire an independent administrator to administer the cost sharing agreement, especially if the administration takes an inordinate amount of time or is unduly complex. This frees the lead carrier to tend to other accounts and not become involved in the day to day administration of the cost sharing agreement unless the independent administrator decides that the lead carrier should become involved on a particular issue. The independent administrator can either be paid by the lead carrier or by the members of the cost sharing agreement, in their proportionate shares.

Enviro-Tox Loss Services has had a great deal of experience serving as the administrator of cost sharing agreements. Our staff will create an invoice tracking/share allocation system specifically designed for the parameters specified within your cost sharing agreement. Our vast claims experience allows us to perceive small problems and create solution alternatives for those problems before they become major problems. Enviro-Tox Loss Services can help make the administration of your cost sharing agreement a well oiled operation rather than an exercise in futility.

Example:

Enviro-Tox Loss Services was asked by its client, an insured with the largest share of participation who was also charged with fronting all legal expense, to administer two cost sharing agreements which involved two different groups of insurance carriers joined in the same litigation. Each group insured one of two corporations which elected to merge together in the mid 1980s. Each cost sharing agreement used a different method of allocation (one was on an equal shares basis while the other was on a time on risk basis) based on the product lines of the pre-merger companies. All legal bills had to be allocated between the two cost sharing agreements and the reallocated using the parameters contained within each agreement. Enviro-Tox Loss Services has been administering these agreements for almost ten years.