Navigating the Future of Workers’ Compensation with Todd Lewis: Litigation Trends, AI, and Claims Management

Rancho Mesa President and CEO Dave Garcia sits down with Todd Lewis, Vice President of Claims at Republic Indemnity, to discuss the growing challenges facing California’s workers’ compensation system, including rising litigation and cumulative trauma (CT) claims. They explore how AI is helping claims organizations investigate and manage claims more effectively, along with practical strategies employers can use to reduce claim disputes, support employees, and foster a stronger workplace culture.

Dave Garcia: Hi, everyone. This is Dave Garcia, and you're listening to Rancho Mesa's StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia, president of Rancho Mesa, and I'm joined today by Todd Lewis, Vice President of Claims with Republic Indemnity, one of the leading workers' compensation carriers here in California.

Todd, welcome to the show.

Todd Lewis: Hey, thank you for having me, Dave.

DG: Great. So Todd let’s jump in to some of the general industry,  state of the union types of things. So, what do you see—from your position, what do you see as the biggest challenges facing workers' compensation claims organizations today?

TL: Well, I think it's, you know, I think the obvious answer to that and what we're all seeing is the increase in litigation, you know, primarily CT. I mean, that's the buzz phrase these days in workers' compensation. But, you know, when we, and also too, I think we hate to just kind of blame all the changes in the world on COVID. But you can really see a change in workers' compensation that took place. And, you know, a lot of claim professionals such as myself, we tend to scratch our head because there's nothing that really changed primarily in the law. There's nothing that changed in work comp. But yet we've seen dramatic differences. You know, some of the primary differences that we see now is that the amount of new claims that come into our shops that are litigated from day one.

DG: Really?

TL: That's increased dramatically.

DG: What do you attribute that to?

TL: You know, I think when we look back at how the world changed when COVID hit is that you had a lot of non-essential workers go home. We all thought it would be days or weeks. It turned into months. And I think even applicant attorneys sat back and all of a sudden they looked at their clients dry up and they had to look for ways to keep their businesses going. So I think that they started to lean into an area that was always there and the opportunity was there. But I think that they had to figure out a way to do what they needed to do to keep their business going and then also to be able to do so in a world where we weren't going to be in person. And so, CT really lent itself to that.

And we started to see a lot of these workers that were at home and they started to file CT claims. And we started to see a very, very large spike in that. It's odd because a lot of folks think that litigation rose at the same rate that CT did, but it really didn't. I mean, if you look at most claim operations, you'll see that litigation over the last six years rose primarily about 10%, yet CT has gone up 20%, 25%. You know, as an industry, it's up 21% in the last five years. And so, it's just really odd to see things shift in that direction.

DG: Yeah. When you look at some of the fixes that might be out there, and everybody talks about AI. It's on every street corner, every conversation you have. How do you see technologies like AI maybe helping defending against some of the CT claims that you're seeing?

TL: One of the primary ways that we try to use AI is how we dive into medical records. And I don't want to get too far in the weeds, but from a technical aspect. But CTs, they come in the door with no medical. The employer likely, if they're still employed, many employers don't even know that the CT claim has been filed. Some of these people are even still at work, which is very strange. But most of it's post-term, post-layoff. Obviously, we saw a spike in layoffs after COVID. Many businesses struggled.

And so, there's nothing to support the claim at all. So, one of the things that we have to do as a carrier is to be able to differentiate between the CTs that come in your door. Some of them, even if they're post-term, these are 10, 15-year laborers that quite frankly, could have an injury. And maybe they didn't report something for one reason or another, whatever the case is. You have to handle those a little bit differently. But the way we use AI for these other set of claims that come in the door with no support at all, there really is nothing in there to validate the claim that's being alleged. And there's a laundry list of allegations being made.

We dive into the medical records, the personal medical records, where someone treats for and has been treating. Maybe it's Blue Shield or UnitedHealth. And we get those records and we use AI to dive in and identify prior diagnosis and injuries that have occurred over their lifetime that focus on those body parts. And it's enabled us to shine a light on that and say, hey, this is something that's been with you for quite some time. And we identify fraud that way. We identify other body parts where maybe we're going to get apportionment at the end.

There's many ways to use AI to be able to help you do that because the human being can't go through thousands of pages of records. AI can very quickly, and it can basically outline those facts for you.

DG: So, do you think that's one of the variables that separates a high-performing claims operation from just the average claims operation, amongst carriers?

TL: It does. It really does. I think that you have to be creative. You can't do things by route. And I think many of the, I don't want to say poor claim operations but claim operations that really haven't changed with the times, they're handling things very in a standard way that we've done so for years. The claim comes in, they delay it, they send them their MPN link. They allow the claimant and the attorney to create the claim from scratch on their dime. In California, we pay the first $10,000 if the claim is delayed. So they allow and they basically, they initiate the claim for them, and they allow themselves to be put in a lesser spot from a defense perspective.

DG: Oh, I see.

TL: Yeah, but it's also too, it's as a claim leader, I have to be very careful too, because my message is not, let's deny them all and let's be, that's not what I'm saying. You have to be able to differentiate at the desk level when claims come in. And you have to be able to make first contact, initiate a good investigation, have discussions, and to be able to identify and separate the CT claims that lack merit from those that actually have some substance. And these are good people. We need to take care of them.

DG: Yeah, it's interesting. As you're talking, I'm thinking, you know, AI is such a great tool for lots of different businesses. But there's still a human element to it. And so in your view, you know, what kinds of claims decisions, you maybe have alluded to it a little bit, should remain human decisions?

TL: You know, there's a lot. I mean, there's a few different things that go on in California workers' compensation, such as the way we do utilization review, which is like a doctor makes a request for a specific treatment. It goes through utilization review. We don't want adjusters making medical decisions. Sometimes there's things, though, that may not be approved by utilization review. You have to look at the bigger picture. You have some people that have very complex injuries, very significant injuries. You have to take a look at it and ask yourself what this person needs to get to MMI, which is basically where we're all trying to get. It's financially to our benefit to get this person to the end of treatment. You have to look at it realistically and what's going to benefit this person.

Sometimes there's things that you need to approve at the desk level that before you go to UR and not go to UR and be able to take care of that because it's the right thing to do. It's, it's, it makes sense. And we can't think. We can't be so boxed in in the way our adjuster's mentality works that they're just thinking black and white. They're just thinking process, which is very easy to do when you're at a desk. But you have to be human about it. It doesn't mean that you're giving benefits and things that aren't due, but you're trying to understand where you're trying to go, that you're trying to get this person to be permanent and stationary. How am I going to get there? Because it's going to financially benefit the company, it's going to benefit this person greatly, and it's going to be a win-win.

DG: That's outstanding. So let's shift it to, we get this question asked a lot. from our clients, you know, with CT or just frivolous, fraudulent types of claims, you know, as an employer, what can I do to help me defend against that kind of an onslaught of claim? Are there things employers can do?

TL: Yeah, I think there's things that employers can do overall. to help themselves deal with workers' compensation. And I think CT is definitely obviously part of that. There's the obvious things, where you make it known how to report a claim if you have an injury. You make sure you have good people managers that aren't leveraging people to work the number day sign in the warehouse that says, we've been this many days without an injury. We can't lean into that so much that we're pressuring people not to report claims. We have to do all those things, which are very obvious.

But I think there's a bigger component to it. And much like the way I run claims, much like the way you probably run your business here, I know you well enough to know that you're very conscious of this, is that you want to create an environment where you don't lead and manage by the stick, meaning that people don't fear retribution. They don't fear that they're going to be written up. They're not looking at it that way. They look at you as the president of Rancho Mesa, for example, that I don't want to let Dave down. Dave wants the best for me. He wants the best for this business. He wants to obviously make a profit, but he also wants to advance my career and develop me as an individual because he's smart enough to know that that's going to make his business better. It doesn't matter what you're doing. You could be counting widgets in a corner. And if you have that mentality with your staff and you lead that way, people have a tendency to want to take value in their job and their employer. They're not going to be the type they're going to file a frivolous claim. They're not going to be the type that's looking to litigate or is going to get bitter because something didn't go their way. They're going to understand the greater good, if that makes sense.

DG: Yeah, that's a great point. I think sometimes, you know, we've heard where an injured worker then just feels no longer a part of the company. And so whether it's intentional or unintentional or retaliatory, you know, like, well, fine, if you don't care about me. I don't care about you.

TL: Right.

DG: What is there any advice you could give? You know, post-term claims are a huge issue out there. Sometimes layoffs are necessary and it may be just short term. You know, we just the job completed. We don't need the manpower we currently have. When future jobs come, you know, we want you to come back with us. Is there any advice you can give to an employer how to handle that transition from you're employed to I've got to let you go in a manner that it mitigates, doesn't probably completely remove, it mitigates the opportunity for those post-term claims that are not legitimate claims?

TL: At the point of termination or layoff, you need to be apathetic. You need to have some apathy for the employees who are being let go. If you're able financially, I would highly recommend that you give some sort of consideration. You know, we'll talk to employers that have like a factory environment and they'll lay off 20 people and they gave them their last check. They gave them no notice and they did it on a Friday and that's that. And then they're surprised when they get 10 to 15 claims from the EDD or that were made through the lunch truck or whatever, or the bar where all these gentlemen or women drink after work and they all start to talk. And that surprises them. Why are you surprised? These people, you almost kind of left them with no choice.

If you can have consideration, and by that I mean if it's financial, that's great, you should have an exit interview. You should sit down, try to have an exit interview, have some consideration financially for these folks. If you can, have them sign something that whether or not or have them report something if they have an injury, let's hear about it now. If not, if you could sign this document, I'm going to take care of you. I'm not going to give you consideration to sign the document. That's not the message here. But it's a package. And there's some sort of apathy. I'm doing something for you as it takes place. I think those that go the cold route, they're going to see litigation. That's just the way it's going to work.

DG: Kind of like the golden rule, right? Treat others like you want to be treated. So I know businesses get busy and sometimes they don't have in their mind time to sit down and have that formal conversation letting somebody go. But it sounds like you'd advise, find the time. Find the time to do it because it's probably the right thing to do, but it also is likely to reduce the chances to some degree of those post-termination claims.

Todd, you've got a great reputation in the industry as well as Republic Indemnity. Let's shift gears. I know you've been with Republic now about a year and a half or so. Let's talk about, with that strong reputation kind of already in place, what do you believe that you and Republic do differently than many competitors?

TL: I try to practice what I preach. The way that we lead our claim department is very similar to what I talked about, what I would recommend to an employer. You know, adjusting claims is a difficult job. It's a very hard job. It's something that's hard to do in managing a claim department. My team managers, it's rough. It could be a very challenging job. It's one of these types of jobs that's never done. And people have a hard time adjusting to that. It's not for everybody. So what we try to do is develop organizational skills inwardly.

Also, too, one of the things I do when I come into a claim organization, and I haven't been in a lot of shops, but when I came to Republic was first try to identify what's causing them pain. Here's my claim department. We have three locations. What don't you like? What's causing you pain? Do skip-level interviews and touch points with employees and find out what makes them tick. You're going to hear some of the usual things, but you're also going to hear some things. that means something and things that are changes that can simply be made and bring value, real value to them. But you want to start from day one to create the environment within a claim department that people want to work for.

And it's a very competitive environment. Claim handlers get stolen away by recruiters every day. There's a lot of money to be made as well. It's a good career. And good claim handlers are of great value. And so you have to create an environment that they want to be at. And if someone leaves you, there's a reason why they left you. And you need to understand what that is. You can't just be upset and just be hurt by it and just kind of turn your back on it and go, I don't know why Bob left. You have to understand it. And so what I try to do is create an environment where people want to be at. They want to work for it. They believe in where we're trying to go.

And also, too, you make it very clear to them. You communicate. And if anything, probably if I look at myself critically, I probably overly over communicate. And some like it. Some probably like it's a little much. But I'm a fan of it. I want to know where everyone stands. I want the department to know where we stand, what we're doing, why we're doing it, what our numbers are, and what our goals are. And also, too, to clearly explain expectations.

There's many businesses, especially claim organizations. where people really don't understand clearly what's expected of them. That needs to be black and white and it needs to be forefront. You need to understand what is expected of me daily and what I need to achieve, not only to be successful, but also if I want to move upward, you need to develop me as a leader. You need to understand what my wants are and then also too what my needs are.

DG: Is there anything that you're formally doing? You identify somebody that wants to grow. They'd like to take on more responsibility as their career develops. Is there things within Republic that you're doing to consciously develop those people into a leadership position?

TL: Yeah, definitely. I think mentorship is a great way to do that. We're actually doing that consciously right now with a few individuals. I do require all my people leaders to have monthly touch points, one-on-ones with their staff. Also, too, to be able to have some value brought to that. It's not like, well, my door is always open. Dave knows he could come in and talk to me anytime. That doesn't work. You need to have something on the calendar so Dave can plan on what he wants to talk to me about as his manager. And so that's important. And that's hard for a lot of managers to understand, but that's something that I do require within our organization. And I think it brings a lot of value.

So what we've done is we clearly understand where people want to go as much as we can. And then we try to assign mentors to actually help them get to that next level and explain to them the qualities and what they need to take on from a technical perspective. Because this is a very technical job. You must be a technician first in claim. And you must understand the law. You must understand what you're doing. It's not enough just to say, hey, do A, B, and C. I need you to understand what A, B, and C mean and what you're doing. There's a difference.

DG: So it sounds like the characteristics you're looking for is somebody that utilizes critical thinking, problem solving. All of that is something that your mentors try to work with the people that are mentoring to develop those types of skills. Is that kind of the idea?

TL: Definitely, definitely. I think in a career and in a field where, like I said earlier, like you're never finished, right? There's always something to do. You have to be able to be very organized. You have to be able to prioritize very well. You have to think critically as you commented on. These things are very important. And that's what I look in the interview process as well. And if I'm going to bring someone in and, you know, it's always nice and to bring someone in that's like a known quantity, as I call it.

But I was at a prior job where I actually hired a lot of people out of college and whether they be right out of college or a year or two and trying to differentiate between those that are thinking critically, that are organized. It's not always the smartest person, you know, book smart. You have to find someone that's able to think on their feet and the way they react. And I probably have, I've been told probably a more odd style of interview because it's not about me. asking you what you know about claim or these things. It's me trying to figure out how you think.

DG: Oh, interesting. Is there a claim handling practice at Republic that really challenges the conventional industry thinking?

TL: You know, I think what we're doing right now in litigation is challenging that way of thought. And I mentioned it earlier. I think we have a very aggressive CT litigation strategy, but it's all built around differentiating at the desk level.

To give you an idea of basically in most insurance carriers right now,  over half of the claims that they set up daily come in the door, litigated, blind application, no medical, just here's a letter from an attorney and you don't know much else. And that person's never been to a doctor. In some of these cases, unfortunately, within California and primarily LA County, these attorneys in many cases haven't even met these people. And it'll say signature on file. You have to be able to differentiate between these types of claims and the types that are made by individuals that truly you need to handle in a different fashion.

I think what we do is we're very aggressive with those in the first bucket. I'm going to deny your claim. Your claim has no substantial evidence, not only medical evidence, just nothing. There's nothing there at all. You may or may not even still be employed. No one knows that you've had an injury. There's things listed that just don't make sense. There's nothing to validate it at all. So we're very aggressive out of the chute.

And also, too, part of that goes in, and again, not to get too in the weeds, but once we go to medical legals, things of this nature, we're going to provide the doctor with everything. We're going to make sure that we have what we call a perfected medical legal. And that's important. Many carriers today will send out to medical legals QMEs that you hear. And the doctor comes back and they find a compensable injury. It's a trial of fact issue. This is a CT claim. This person hasn't been employed for months. They may have a diagnosis, but how's that link it to work? And this doctor doesn't have that information. Oftentimes, they don't have any medical records. They haven't been given anything. And so you have to object to that medical. You have to hold your ground and get to a perfected medical legal. And you try to settle these claims early. You try to understand what nuisance value really means. And I think that's something that's kind of lost on the industry. But you need to be very aggressive up front. But most importantly, you need to differentiate the claims that you're going to take that strategy on from those that actually have probably some merit. And you need to actually handle them in a different fashion.

DG: So no one size fits all.

TL: No, no. And the thing I fear most in sitting down with you today is walking away and having people listen to this and think, well, it's just another claim guy that's beating everybody up with a stick. That's not the mentality at all. This is a claim administration system. We are a benefit administrative system. Our job is to pay benefits that are due. We will pay every dollar due, but my job, I'm not going to pay one more. I'm going to pay everything you have coming. I'm going to take really good care of you and so is my staff. But we are going to draw the line once we feel that there's abuse.

DG: Well, I can hear the passion in your voice, Todd. That's outstanding. OK, we're getting near the end. So I've got a couple of questions for you. I wanted to let you brag a little bit. So what accomplishment are you most proud of at Republican Indemnity?

TL: You know, I think that I'd say I'm only a year and a half in. And I think what I've done with the staff and to turn many of our metrics around the way that we're audited. Republic Indemnity has been a great claim department and great insurance company for a long time. It didn't take Todd Lewis to come in to do that. They administer benefits and they audit at the very top of the state rankings and have for a lot of years. We do that very well. I think what I like to think about what we do well now in the recent past is that the way that we've embraced AI. the way that we've actually embraced the strategy to handle increased litigation.

Everyone's getting beat up in California Work Comp. You know that. I know that. We've all seen the combined ratio go up. It's how do you get beat up less? How do you manage this system to be able to understand the strategy that's needed. So much of what I just talked about, our ability to develop the staff and train them to understand and differentiate between these claims that come in the door, because truly you have to take care of people at the end of the day. That's the job. But to understand where you draw the line. And I think that's the thing I'm most proud of. And I think I see our staff now, our walkaway rate, which is like the rate of people that file litigation and just walk away from their claim because it's just not—you handle it in such a way out of the gate that's like, okay, well, this isn't what I was told. I was told that I don't really need to do much here and we'll just get a check and we'll go away. That's just not the way we do things at Republic.

DG: Yeah, that's great. Okay, last question. I'm going to give you the magic wand. If you could change any one thing about the workers' compensation system here in California, what would it be?

TL: Well, I think it's obvious we need reform, but I don't want to sound like the basic claim VP and say all these things that we feel it's too liberal because it is a benefit administrative system. That's the way it's built. But in California, I've managed every state and I've also managed Defense Base Act and Longshore and just about every kind of comp there is. California is set up to basically hurt the insured. We need to make it tougher, and not tougher from a standpoint where we make it hard to collect benefits, but the burden to prove a compensable claim is just too low. We can't allow litigation to be filed months after someone's employment ends. Other states don't do that, and they're able to provide benefits in a very fair manner.

Also, too, though, there's some other reform that's going to have to take place as well, like our permanent disability. There's different kinds of legislative change out there. that, you know, labor is going to want something and they should get it. And maybe we should look

at the PD rate. There are some changes that make sense there. It's been a long time since they've increased their weekly rate. Maybe there's some give take that needs to happen, but it can't be all give. And we need to figure out how to basically keep employers in California, make them solvent, make them want to be here and make them successful. Because right now it's not set up that way.

DG: Yeah, it's interesting. You know, we're, so we talked last night at dinner. We're, here at Rancho Mesa, we're involved in three different peer groups nationally. So we get to talk to other agency owners from every state in the union. And CT, frankly, they don't even, what's it stand for?

TL: Right.

DG: They don't see it. So we know it's fixable. You know, we just have to get there. And I do agree with you. It is going to be a give or take. And we're all in agreement that the PD rates should go up. No problem there. We want to compensate those injured workers accordingly, but that are really injured workers. What we want to try to get away from is everybody feeding into the system that are not the injured worker or the employer that are driving these costs up and creating all these log jams of litigation and things like that.

Well, Todd, I don't have the ability to say I grant your wish, but I wish I did. But I think you know, the audience that's listening to this are people that understand we've all

got to take an action in arms here. We've got to all do our part, whether it's reaching out to our council members, to our state senators, chairs, anybody in Sacramento to say, hey, we need to take a look at this and we need to take a look at it sooner than later to correct some things.

So, Todd, is there anything else before I wrap up today that you'd like to share?

TL: No, that's about it, Dave. I appreciate your time.

DG: Yeah, thank you so much for joining me today. Really appreciate it.

And to everyone out there, thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter. I'll talk to you again soon. Bye.