Archive for September, 2005

Walmart Meets Katrina: Responding to Catastrophe

Tuesday, September 13th, 2005

The Insider has been pretty tough on Walmart, and for good reason. In their passionate pursuit of lower costs, they squeeze vendors, they squeeze contractors, they occasionally lock cleaning crews into the buildings at night, and. perhaps most egregiously, they squeeze their own employees to the point where many require public assistance to survive. In his invaluable book, The World is Flat, the brilliant Tom Friedman details the many reasons why Walmart is in the forefront of today’s business models. They are really good at a lot of things. Friedman attributes the company’s tin ear on issues of worker fairness to their rural Arkansas origins. I suspect that Friedman is implying that they do what they do because they are rednecks. Maybe so, but they are rednecks with dazzling business acumen.
Efficiency
It would be foolish to question the efficiency of the Walmart model. This efficiency came into dramatic play in the days following the disastrous landing of Katrina. No one was better than Walmart at analyzing and delivering the goods that are most needed in the storm-ravaged regions of the south. Whatever we may feel about the impact of Walmart on small town America, there is little question that the world’s biggest retailer is uniquely situated to analyze post-hurricane needs and deliver the goods. It would be nice if FEMA could do the same, but they certainly can’t under the current inept leadership, and it’s hard to imagine any government program matching the efficiency of a Walmart.
Friedman’s book, written prior to Katrina, outlines the Walmart scenario for responding to lesser storms:
During hurricanes…Walmart knows that people eat more things like Pop-Tarts — easy-to-store, nonperishable items — and that their stores also sell a lot of kid’s games that don’t require electricity and can substitute for TV. It also knows that when hurricanes are coming, people tend to drink more beer. So the minute Walmart’s meteorologists tell headquarters a hurricane is bearing down on Florida, its supply chain automatically adjusts to a hurricane mix in the Florida stores — more beer early, more Pop-Tarts later.
We read at Investors. com that Walmart has given generously to relief efforts

Taking care of the unsung heroes

Monday, September 12th, 2005

On the anniversary of 9/11, many of us took time to honor the victims of that sad day, including the many working heroes who gave their lives to try to rescue others. Last Friday, President Bush presented posthumous Medals of Valor to the families of 443 first-responders who were killed on the scene. But one sad story that is getting short shrift is the fact that while we honor the dead, we are ignoring the plight of many of the still-living heroes of that day who are suffering severe and incapacitating disabilities.
Few are aware that the death toll among rescue workers is still mounting. NYC EMT and volunteer firefighter Timothy Keller recently died after succumbing to respiratory problems related to his rescue efforts four years ago. And despite $7 billion in funds earmarked for victims, Keller died in poverty and financial ruin. Until weeks before his death, he had been denied both workers compensation and line of duty injury benefits.
Keller’s story is not unique:
A study by the World Trade Center Medical Monitoring Program, a federally funded program following 12,000 Sept. 11 responders, found last year that half of more than 1,000 examined had persistent respiratory and mental health problems. “We remain surprised and disturbed at how chronic the World Trade Center consequences are,” said Dr. Robin Herbert of Mt. Sinai Medical Center, which administers the program.
“We’re still seeing a record number of new patients as well as follow-up visits for respiratory and mental health issues,” said Dr. David Prezant, deputy chief medical officer for FDNY. Prezant said that between July of last year and June of this year, the fire department’s Bureau of Health Services has seen about 2,000 firefighters and EMTs with respiratory complaints and another 3,500 with mental health issues connected to Sept. 11 — not including those already on medical leave.

Fighting for benefits
Many other 9/11 rescue workers are suffering similar ailments and are having trouble securing workers compensation or disability payments.
A group of Ground Zero recovery workers made a trip down to Washington, D.C., last week to lobby Congress about the $125 million that is slated to be taken away from the New York Workers’ Compensation Fund. The money had been earmarked for Sept. 11 claims, and workers blame the state for dragging its feet in distributing the money.
The funds are still being debated as part of the 2006 federal budget – a move which angers and surprises many Sept. 11 responders. “This is something I can’t comprehend as a person of faith,” said Joann Hale, a member of the United Church of Christ – one of the denominations that has actively funded and participated in the Sept. 11 recovery.
“It’s amazing that these were the people who were risking their lives trying to save others and keep the area safe – just trying to help their fellow person. I don’t quite understand why they have to be penalized for that.”

Other rescue workers, other risks
Today in New Orleans, we may have a similar situation brewing. Rescue workers are saving lives and recovering bodies while working in a toxic environment with dangers that are not yet fully documented. These workers risk their lives while giving little thought to the potential longterm effects on their own health. Shouldn’t it be part of our public trust that we care for our rescue workers if they suffer long term debilitation related to their efforts? We should do better by our heroes than posthumous medals.

State news roundup: Problems in KY, OH, CT

Friday, September 9th, 2005

KY: “Joint and several” liability at work
A Circuit Court judge has ruled that members of the failed AIK Comp self-insurance group must pay millions in assessments to cover benefits for injured employees. We wrote about this matter in December, discussing the concept of joint and several liability and the so-called ‘long tail’ of workers comp claims. At that time the liabilities were in the $50 million range – the deficit is now more than $97 million, the expected costs to pay employee claims. Ouch. The moral of the story here is not to get in bed with a group of other employers unless the group has been carefully vetted for management practices of both the group administrator and the individual members.
OH: Another BWC official fired in Coingate
The chief investment officer of the state’s beleaguered Bureau of Workers Compensation was fired yesterday for poor performance in handling the $14 billion investment portfolio. The Bureau has been under scrutiny since a $50 million investment in rare coins came to light in April. About $13 million of that investment is “missing.” In all, about $300 million has been lost, much of the losses stemming from investment in controversial hedge funds. For a complete roundup of the evolving scandal see:
May 13: Ohio’s Great Workers Comp Coin Caper?
May 27: First Head Rolls in Ohio Coin Caper
August 23: Governor Taft’s Ethic Violations
CT: Broker probe results in $30 million settlement
Joe Paduda reports that another large broker – HRH (Hilb Rogal and Hobbs) – has agreed to pay $30 million to a compensation fund and a $250,000 fine in relation to rebating, account steering, and compensation practices in Connecticut. Joe notes that this hefty penalty is associated with one client in one state and wonders if there are other shoes to drop.
Joe has been a good watchdog on these matters. See also: Insurance Industry Scandal Watch

Katrina: Who Pays?

Thursday, September 8th, 2005

As the water levels finally begin to recede in New Orleans and the astonishing scale of the property damage throughout the region becomes clearer, the question for many people is painfully simple: who is going to pay for the damage? Thousands of homeowners are facing an enormous problem of coverage. If hurricane winds destroyed the house, they are covered. If, on the other hand, the rising flood waters caused the damage, homeowners may not be able to collect, due to a standard policy exclusion for flood damage. The stakes couldn’t be higher.
One news article put it this way: falling water is covered by homeowner’s insurance, but rising water is covered only if you carry optional federal flood insurance. So if your roof blows off and rain falls in, that’s a homeowner’s insurance issue. But if the levee breaks and water floods into your home, you need flood insurance.
It’s not difficult to imagine the arguments between insurers and homeowners: sure, the wind damaged your house, but the floods destroyed it, so we’re only paying for part of the damage. Yikes! The Wall Street Journal, in an article by Theo Francis and others (subscription required) quotes a lawyer, formerly the proud owner of a coastal home in Gulfport with 6,000 square feet of living space: “I know when I file a claim, the insurance company is going to say the house was destroyed by flood…A neighbor down the street saw our roof and furniture flying by his house long before the deluge, so I know it was the wind that knocked the place down.” I can hear defense counsel already, cross-examining the neighbor: “How did you know for sure that the sofa flying past at 100 mph belonged to Mr. Woodall?”
Good News May Be Bad News
One of the many ironies in all this: if your house is still standing, relatively intact, you may have a harder time collecting on your homeowner’s policy. For homeowners whose houses were totalled, the insurer will have difficulty separating the damage caused by the wind from that caused by the rising water. There is simply no evidence to examine. If the house is still standing (which under ordinary circumstances would be good news), it will be relatively easy to distinguish between wind damage (covered) and flood water damage (denied). So the “lucky” homeowner with less damage (but a home rendered uninhabitable by toxic waste and mold) might be confonted with bad news indeed.
Class Action Litigation
The Journal article notes that famed class action litigator Richard Scruggs has taken the hurricane personally and is contemplating a loss suit against all the insurers. Scrugg’s own beachfront house in Mississippi, which carried flood insurance, was partly destroyed by Katrina. Mr. Scruggs said he plans to urge Mississippi Attorney General Jim Hood to try to override flood-exclusion clauses in homeowners’ policies in that state in the interest of public policy, a move that could force insurers to pay many billions more toward rebuilding costs. Through a spokesman, Mr. Hood said: “I’m reviewing these contracts to determine if there are unconscionable provisions.”
Needless to say, the insurers are not impressed with his argument. Industry officials argue that they can’t afford to take on flood risks because they haven’t been paid to do so.
“Where does that money come from?” said Allstate Corp. spokesman Mike Trevino. “We didn’t collect any premiums that contemplated flood as an exposure that we would have to cover.”
I tend to agree with another attorney, Stephen Cozen, whose Philadelphia firm does extensive work for the insurance industry: “This is not a public-policy issue. This is simply an insuring agreement between two parties in plain English where there’s plenty of notice.” It’s a simple and painful matter for thousands of homeowners: read the words in your policy (which you probably never read before) and weep.
Everyone Pays
All we know for sure is that Katrina has caused damage in the vicinity of $100 billion, with around 25% of it covered by conventional insurance. It’s also safe to say that one way or the other, we are all going to pay for it. The greatest and least quantifiable cost falls on the homeowners themselves, whose lives have been utterly compromised. For the rest of us, it’s a matter of rising costs in fuel, insurance premiums and goods from the regions damaged by the storm. Given the proposed federal expenses beginning at $50 billion, there should be the shared cost of increased taxes, but somehow I think that’s just not going to happen — we’ll put it on the deficit tab for future generations to pay. All this is a reminder that despite our presumption that we are in control of our destinies, nature calls the shots. No word-smithing of insurance policies or act of congress is going to change that.

Gradual Onset Stress: A New Diagnosis Heading South?

Wednesday, September 7th, 2005

There are some interesting developments impacting workers compensation stress claims in our neighbour to the north, Canada. Here in the States, comp stress claims are very difficult to prove. Most states require that the “predominant cause” of stress in the claimant’s life must be work related. This tough standard leads directly to a defense strategy of aggressive discovery: every aspect of the employee’s private life is fair game. Whatever the causes of stress at work, they must exceed the stressors at home. For most of us, that might be difficult to prove — and too embarassing to risk.
In the lovely Canadian Province of Nova Scotia, government employees are now explicitly covered for two types of stress claims: post-traumatic stress and gradual onset stress. While we are all pretty familiar with the former, the latter is something new. Unlike traditional “traumatic stress” — which involves a single event — “gradual onset stress” is a reaction to unusual and excessive work-related stressors acting over time. (Keep in mind that these new protections are limited to government employees.)
Policy wonks can view the policy here. A detailed discussion is available here.
Setting the Bar
Nova Scotia has taken some prudent steps to limit the application of the new diagnosis. Claims for psychological or psychiatric injuries resulting from gradual onset stress may be compensable if all of the following four criteria are satisfied:
i. The work-related events or stressors experienced by the worker are unusual and excessive in comparison to the work-related events or stressors experienced by an average worker in the same or similar occupation;
ii. The worker is diagnosed with a mental or physical condition that is described in the DSM IV;
iii. The mental or physical condition is caused by the work- related events or stressors; and
iv. The condition is diagnosed in accordance with the DSM IV by a health care provider being either a psychiatrist or a clinically trained psychologist registered with the Canadian Register of Health Service Providers in Psychology.
In addition, government employees may not site ordinary employment actions (performance evaluation, demotion, termination) as “gradual stressors.”
Nova Scotia has set a reasonably high standard of proof. For example, the stressors must be unusual and excessive for the work. In other words, in confronting daily situations of violence and stress, police and prison employees might have a difficult time proving that the stressors were unusual and excessive. (We discuss just such a situation below.) On the other hand, workers in normally sedentary jobs would have an easier time meeting the standards.
Not covered by Comp: You can Sue!
At first impression, those of us who monitor comp developments might assume that in establishing the gradual onset diagnosis, Nova Scotia has opened the door to a rash of new claims. It’s important to keep in mind, however, that by recognizing that stress might occur over time, the province has actually insulated itself against lawsuits. In Nova Scotia, an employee suffering from what may be gradual onset stress would have to pursue a remedy through the comp system. On the other hand, across the water in Newfoundland, the opposite is true: because their comp statute omits any reference to gradual onset stress, employees can go outside of the comp system (under which you cannot sue your employer) and file a lawsuit.
Here’s a real-life example:
A jail guard in an Royal Canadian Mounted Police (RCMP) lockup in Grace Harbour, Newfoundland, sued the federal government for damages suffered from severe harassment at the hands of his supervisor. The harassment began after the guard gave a damaging statement during a force investigation into conduct by his supervising corporal. The guard understood that the statement would remain confidential; in fact, it was disclosed to the supervisor during disciplinary proceedings, which culminated with a dismissal or withdrawal of all allegations against the supervisor. After returning to work, the supervisor retaliated against the guard with repeated verbal threats, aggression and intimidation. RCMP officials were aware of the harassment, but did not assist the guard and a 1999 harassment investigation conducted by the force dismissed the complaint for lack of corroborating evidence.
As a result of the harassment, the guard gradually became anxious, insecure and, ultimately, suicidal, eventually being diagnosed with post-traumatic stress disorder (perhaps more accurately, with gradual onset stress disorder). In 2000, he commenced a court action against the supervisor and the RCMP. One of the issues was whether the guard could sue in the courts or was barred from suing because he was entitled to workers

Weblog roundup: In the aftermath of a disaster

Tuesday, September 6th, 2005

Local reports from the blog community: Noted legal weblogger Ernie the Attorney, a New Orleans resident, has been posting his perspective of Katrina-related events, along with resources and links to reports from other local bloggers. We’re relieved that he is OK, and we extend our condolences to him for the tragedies that are befalling his beloved city.
GruntDoc is a blog by an emergency physician in Texas who has been posting some great items about medical response, medical issues, and first-person accounts from medical staff. Two that we found interesting were five days of reports from Dr. Mattox at the Astrodome and a reporter’s notebook about treating those left behind.
For other local reports: The Times Picayune has a breaking news weblog; WWLTV, Channel 4 in New Orleans, also has a breaking news weblog; and The Interdictor is a blog run by an entrepreneur who runs a network operations center in downtown New Orleans. He’s kept the business running throughout the entire disaster, all the while posting regular updates about the experience. He also has had a webcam trained on Poydras Street throughout.
Job loss and employment: One of our readers recently posted a comment about how a job is closely entwined with identity, so loss of a job as a result of a disability can add insult to injury. It’s a good comment, and we can’t help but note that this loss of job/identity will be one more blow for many of Katrina’s victims. Many lives that are already shattered may suffer further devastation from loss of job and livelihood. HR Blog looks at the anticipated toll on jobs in the Delta region, and Strategic HR Lawyer posts about some preliminary employer responses to Katrina. George’s Employment Blawg urges employers to hire refugees and posts a message from SHRM on the importance of jobs.
Regulatory relief: Two interesting posts from BenefitsBlog. One is about the status of federal courts affected by hurricane Katrina and another discusses relief measures that some federal agencies offer affected employers in terms of filing requirements for benefits.
Economic and insurance costs: Katrina’s economic impact could be much broader and more prolonged than originally thought. Several bloggers are discussing the specific impact on insurance. Specialty Insurance Blog discusses Katrina and insurance prices; RiskProf specifically addresses Katrina’s effect on Florida insurance prices; and Joe Paduda discusses Katrina’s anticipated impact on specific insurers.
Giving or getting help: RawblogXport suggests some ways to help. Inter Alia points us to a site by the American Bar Association offering Katrina-related resources for victims, for lawyers needing help, lawyers wanting to volunteer, military personnel needing help. MSSPNexus suggests that this might be a good time to review your FEMA’s Emergency Preparedness Information.

Katrina

Thursday, September 1st, 2005

With my mind reeling from images of devastation in the aftermath of Katrina, I try to focus for a moment just on the implications for workers compensation. The hurricane hit on a weekend, so most people were not working. But some were — working for companies that may have been obliterated: no payroll records, no employment records, nothing left. How would you prove that you were an employee? How can you file a claim when the entire apparatus governing workers compensation has disintegrated?
We tell employees that the first step in managing injuries is to report to your supervisor and then secure appropriate medical treatment. In all this chaos, how can I possibly find my supervisor? How can I secure medical treatment when the hospitals are on the verge of collapse, their generators running out of gas, their harried personnel stretched to the limit? I hope I don’t need an ambulance, because there aren’t any — there aren’t any roads, for that matter. There is no way for the medical provider to verify insurance coverage or talk to my employer. When I list my home address, does it matter if the building has been lifted off the foundation and collapsed on a lot three blocks north?
Old Cases are History
What happens to the hundreds of cases in litigation prior to the hurricane? From law offices to government offices, the files will be inaccessible for months and may have been destroyed. The people familiar with the details are living in distant cities or have disappeared altogether. Indeed, the claimants themselves may or may not be alive to pursue their day in court. Are the key witnesses still alive and if so, how can we possibly find them? What happens to statutory time limits when the courts are under water?
Unacceptable Risks
We can assume that many of the rescue workers are employed. They may be covered by workers comp. They face ubiquitous and unprecedented exposures: fetid water covering everything; bodies floating along with oil, excrement and chemicals; no running water or toilets; a simmering rage among the desparate people they are trying to help. Toxic mold will be a constant risk in the coming months. If you follow the general duty of clause of OSHA literally — as we are all supposed to do — you cannot allow anyone to work, because under these horrendous conditions there is absolutely no way you can provide a safe workplace.
Our World = Third World
It is eerie to watch these third world images of despair and dysfunction rolling out in our own country. It’s something we are used to seeing in remote corners of the world, not on our own shores. But this is all too real: the total disintegration of civil society, the uselessness of the usual management “best practices.” This is a crisis where the most rudimentary needs — food, clothing, water and shelter — cannot be provided. Between the Christmas tsunami and Katrina, two things have become all too clear: when confronted with the full brunt of nature’s power, we are defenseless against the blow and pitifully ineffective in response. Let’s keep that in mind when we position our species — and our country — in the forefront of all things civilized.