Archive for April, 2007

Breaking the Covenant at Covenant

Thursday, April 12th, 2007

Covenant Transport describes itself as a “faith based” company operating out of Chattanooga, Tennessee. Their website states: “At Covenant Transport, our values drive our performance, as proven by industry statistics ranking us one of the ten largest truckload carriers in the United States measured by revenue.”
That’s an interesting sentence. The fact that they rank in the top 10 largest carriers “proves” that their values drive their performance. No. It just proves that they are big. When it comes to values, whether faith based or not, Covenant is downright pagan.
We read in the Insurance Journal, in an article by Bill Poovey, that Chancery Judge Frank Brown has blocked Covenant from forcing employees to sign away their workers’ compensation benefits. Employees had been asked to sign a form, entitled “notice of waiver by employee for benefits provided by the Tennessee workers’ compensation law.” The form appeared to originate at the state’s Division of Workers Comp. It’s apparently a forgery. Beyond that, under Tennessee law (and in most states) you cannot sign away your rights to workers compensation. It’s part of the covenant, if you will, between employers and their employees.
A quick search of the web finds some distinctly negative views of Covenant’s operation (here and here). While postings from a few disgruntled truckers is nothing definitive, Covenant is about to answer to a higher (if not the highest) authority: the judge has scheduled a hearing for April 24. Covenant will likely learn that forging documents and coercing employees to sign them is illegal, if not an act of “bad faith.” Not exactly what you’d expect from a faith-based company.

Hazardous work sites: is your organization in the top 14,000?

Wednesday, April 11th, 2007

Last month, more than 14,000 employers got missives from OSHA informing them that their workplaces were at least twice as hazardous as that of the average U.S. workplace. In 2005, the average workplace has a rate of 2.4 injuries or illnesses that resulted in days away from work for every 100 workers. In contrast, employers who got OSHA notices had rates of 5.3 or higher. Rankings were determined through employer-reported data secured from a survey OSHA conducted in 2006 relative to 2005 work-related injury and illness occurrences.
Included in this correspondence, employers also received their injury and illness data and a list of the most frequently violated OSHA standards for their specific industry. OSHA says that the list is meant to raise awareness and is not an indication that a workplace is targeted for an inspection.
You can download a zip file of the list of 14,000 from OSHA and scan by state. Or you can get an Excel spreadsheet of the file from a posting on The Pump Handle, where Celeste Monforton of has taken a closer look at the list, offering some observations and breakdowns by state:

“Recipients of the OSHA letter include: Lowe’s, Home Depot, United Parcel Service, Wal-Mart, Harley-Davidson, and two Jelly Belly candy factories, with the highest percentage of letters (23 percent) sent to residential nursing care facilities. More than 3,200 employers in 3-digit SIC code 805 or NAICS 623 receive the notice from OSHA … including 67 sites operated by Beverly Enterprises, 46 Kindred Care sites, and 32 Evangelical Lutheran sites. Among all workplaces, employers in Pennsylvania, Ohio and Texas received the most letters; none were sent to worksites in the 21 States that operate their own OSHA State Program.”

One of the people commenting on this post suggests that the list shows that the bulk of injuries “don’t come from the so-called ‘low road’ employers, they come from the median employers, maybe even from employers which pay better wages benefits and provide better working conditions than the median in their sector.”

Racist Clerk Puts Dillard’s on the Defensive

Monday, April 9th, 2007

Dillard’s is a major department store chain, with 330 stores in 29 states, mostly in the south. Their motto is “The Style of your Life.” I am not sure what that is supposed to mean, but one thing is clear: Dillard’s does a lot of hiring. Their website, featuring a handsome African American in a three button suit, tells you what they are looking for in an employee:

Are you a professional person of integrity who enjoys working with the public, is outgoing, energetic, reliable and who wants to join a dynamic retailer?

We can assume that they are not looking for bigoted individuals with a particular hatred of African Americans. But they hired one (with a spotty employment record) and they kept her (after several ugly incidents with customers). Now they find themselves on the defending end of a lawsuit.
A federal appeals court ruled that a Kansas City couple could pursue its racial discrimination lawsuit against Dillard’s. The 8th U.S. Circuit Court of Appeals reversed a lower-court judge, who had thrown out the lawsuit filed by Rodney and Charlan Green in 2004.
Big Trouble in a Simple Purchase
In August 2002, the Greens went to a Dillard’s store in Kansas City to buy a handbag, purse and watch. They asked a clerk to help them, but she refused and then followed them around, glaring at them and muttering something under her breath. When the Greens made a $500 purchase from a different clerk, the first clerk questioned their ability to pay for it.
Rodney Green asked the clerk to leave them alone, then asked the other clerk to call the manager. While Green waited for his wife to purchase the watch, the clerk used a racial epithet and walked away.
After the manager arrived, the Greens decided that they had had enough of the Dillard’s life style and returned their just-purchased items.
The manager apologized for the clerk’s behavior and admitted that the store had had past problems with her. The clerk was fired the next day.
The Sales “Contract”
The Greens sued Dillard’s two years later, alleging the company had violated their right to “make and enforce contracts,” a civil rights protection adopted shortly after the Civil War and amended in 1991. In the Greens’ case, that right was in the context of a simple retail purchase.
The federal court determined that “their evidence includes not only a most egregious racial slur, but also a series of actions which a trier of fact could find as a whole thwarted their attempt to make and close a contract with Dillard’s for the wristwatch.”
If you are thinking that it’s a stretch to include the purchase of a retail item as a “contract,” you’re right. This is a new interpretation of a long-standing law. The Greens are hoping to parlay this innovative interpretation into $5 million. While the federal court allows the case to continue, that in itself is no guarantee of success. Given that the Green’s voluntarily returned their purchases, the lawsuit may be a long shot.
HR Fundamentals
Win or lose, Dillard’s careless approach to human resource management raises an important issue for all employers whose workers are in contact with the general public. Dillard’s apparently hired a woman with some serious attitude problems. They compounded this mistake (“negligent hiring”) by keeping her on the job (“negligent retention”), despite racist behavior toward certain (minority) customers. Regardless of whether the purchase of a watch ends up being a “contract,” I suspect that Dillard’s will settle with the Greens. Dillard’s put the wrong person on their sales team. They kept her there, despite poor performance. They have deep pockets, so they are going to pay.
One final thought: I sure hope Dillard’s followed their own written procedures when they terminated the racist sales clark. The prior problems had better be well documented. If not, Dillard’s could find themselves defending a wrongful termination claim filed by the (“misunderstood, maligned”) clerk. It’s the American way.
Thanks to Overlawyered for the heads up on this situation.

New York Labor Law: No Such Thing as a Free Fall

Friday, April 6th, 2007

When you talk to insurers doing business in New York, they are quick to point to New York Labor Law as a very big problem. The law, going back to 1885, holds employers absolutely and completely liable for any injuries resulting from a fall. This liability is over and above workers compensation. Injured workers can (and often do) sue for damages that go far beyond the wage replacement and medical bills paid by comp. I imagine that the building of skyscrapers was a big factor in the law’s original passing. But it applies to every form of building, from Trump’s glitziest tower to a strip mall in Poughkeepsie.
Any law that’s been around for 120 years has an extraordinary pedigree, and this one is no exception. Attorney Andrew Siracuse – a proponent of the statute – has made a lot of useful history and case law available here. The original statute (S.18) required proof that the owner “knowingly and negligently” caused the injury by fall. That was was soon amended (in 1897) to remove any mitigating circumstances for employers. In other words, the law does not take into account prior safety training, the availability of personal protective equipment or other attempts to reduce job site risk. Nor does the law care if the employee acted negligently, was stoned, or failed to use available safety equipment. Employee falls, employer pays. Employers are absolutely liable. It’s that simple.
The law holds employers to perhaps the highest standard for safety in the world. Here’s the language of an amendment from 1921:

A person employing or directing another to perform labor of any kind in the erection, repairing, altering, painting, cleaning or pointing of a building or structure shall furnish or erect, or cause to be furnished or erected for the performance of such labor, scaffolding, hoists, stays, ladders, slings, hangers, blocks, pulleys, braces, irons, ropes and other mechanical contrivances which shall be so constructed, placed and operated as to give proper protection to a person so employed or directed.

Any fall is presumed to be the result of a failure on the part of the general contractor/employer. In New York, there is no such thing as a free fall.
Impact of Workers Comp Reforms
The arguments, pro and con, continue to this day. Attempts to modify the law have repeatedly failed. To be sure, the law provides an important safety net for seriously injured construction workers. (It also pays the painter, standing on a bucket in a closet, who injures himself in a fall totalling 24 inches.) Given the historically paltry benefits available under the state’s workers comp law (see our prior blog here), some form of additional benefits was probably necessary. Try living in New York on $400 a week indemnity. The new reforms up the maximum indemnity to $600, but that will still not support a well-paid construction worker and his/her family. If New York really wants to make the Labor Law obsolete, they need to mirror Massachusetts in offering a maximum weekly benefit of $1,000+.
There is one part of this situation that puzzles me. Every state builds tall buildings. Every construction project involves the risk of falling. But only New York has chosen to move beyond comp’s “exclusive remedy” benefits to offer tort liability to workers in construction. Only New York has held contractors to the highest possible standard – and has done so for 120 years. Has this unique standard actually reduced the number of falls in New York? Has New York succeeded in creating safer workplaces, by hammering employers and their insurers with higher costs? I doubt it.
On the other hand, there are times when I am happy that workers carry the extra protection. One only need glance at a recent fatal fall in Buffalo, involving Jonathan Fundalinski, a 24 year old worker. We read in the Insurance Journal that the construction crew began erecting a safety railing minutes after Fundalinski plunged 30 feet to his death. According to police, the crew ignored repeated orders to stop as paramedics battled to revive the victim. The irony is that even if the crew was able to convince authorities that the railing had been in place before the fall, it wouldn’t make any difference. It might support their case in some other state, but not in New York. Railing or no railing, the contractor is liable for the fatal fall of a young worker. They are going to pay, big time. And in this particular case, that’s a good thing.

Health Wonk Review – hot off the presses

Thursday, April 5th, 2007

Jane Hiebert-White has posted a new edition of Health Wonk Review at Health Affairs Blog, with a special thematic focus on “Health Reform 2.0.” There’s no doubt about it – health care reform is in the air – and a bi-weekly reading of Health Wonk Review is a great way to stay up on issues, news, and opinions from those in the trenches. As our friend Joe Paduda notes, it’s time to be paying attention – there is probably no other single issue that will affect us all more than health care reform, consumers and employers alike.
The hosting blog is an adjunct to the highly esteemed Health Affairs, the leading peer-reviewed journal of health policy thought and research, which is issued six times a year. Published since 1981, Health Affairs is nonpartisan and presents a wide range of timely research and commentary on health issues of current concern in both domestic and international spheres. Washington Post has deemed the publication “a must-read for anyone with a serious interest in medicine, health care, and health care policy.” You can view Web Exclusives free for a two-week period following posting. Their blog, which is viewed as a way to engage readers in the health policy debate, also offers informed commentary. It’s a welcome addition to the online health policy blog community.

News roundup and weekly web finds

Wednesday, April 4th, 2007

Tool of the week – Kearney-Abrams offers a pretty cool tutorial on office ergonomics – helpful for anyone who works on a desktop computer. It’s a slide show with a voice over that discusses ergonomics in general, offers self-assessment tools to identify risks for potential pain and strain, points out common ergonomic risks in an office environment, and explains how to set up your desktop to minimize risks.
Firefighter study – Harvard researchers recently published a study in the New England Journal of Medicine that suggests that firefighters face a greater risk of dying of heart problems while fighting fires than was previously recognized, with the risk of a heart-related death while fighting fires being up to 100 times higher than the risk during down time. Every year, about 100 firefighters die in the line of duty, and nearly half those deaths are due to heart disease. The study suggests that fire departments should put more priority on health, fitness, training, and wellness programs for firefighters to limit risk factors.
In related news, the Orange County Fire Rescue Department is taking an active approach to reducing risk factors: it mandates that all of its firefighters exercise for an hour every day. The initiative to improve the health of firefighters started six years ago, and this preventive approach appears to be working:

“Since then, the number of workers’ compensation cases has decreased 43 percent, from 295 in 2001 to 167 in 2005. Workers’ compensation claims cost the department about $672,400 in 2005, down from $1.84 million in 2001, according to department reports. In the same period, the department’s ranks grew from 750 to 1,100.”

Blog news – We are sorry to see that another of our favorite regular blog stops is changing from a daily to an occasional posting format. This posting of March 18 at rawblogXport indicates that after 6735 posts since February 2003, the blog will be slowing down on future postings. This is too bad following so closely on the closing of Confined Space, but we would like to thank Dave Livingston for the excellent work he has done over the years. Blogs are relentless, they require a lot of dedication and time so we appreciate his efforts. And we are happy to see that this is not a good-bye, he is still posting occasional stories.
In the new discovery arena, we have enjoyed exploring Mike The Actuary’s Musings. Mike is both an actuary and a techno-geek with a penchant for gadgets, patterns, complex designs, algorithms, and puzzles. Sounds like it is a blog worth following.
Pay attention! – that’s the word from Joe Paduda who tells us that no matter how busy our lives are, there is an urgent matter pending that requires our attention because “it will affect you more than anything else going on in the US today.”
PDA and Smartphone Ergonomics – tips to avoid the dread Blackberry thumb.
The Pandemic in Your Plans – Peter Rousmaniere makes a case for catastrophic planning in Risk & Insurance.
The Risk Manager’s Survival Guide – William J. Kelly discusses the politics of survival in this month’s Risk management.
Silly stuff
Lawyer cartoons and lawyer jokes – talk about shooting fish in a barrel. Also, Law Comix.
“Sorry, gotta go …” – you know the person that you can never get off the phone? Here’s the solution.

Risk Management for Dummies

Tuesday, April 3rd, 2007

Restless modern minds have developed some new approaches to risk. These examples of thinking “out of the box” will eventually end up back in the box – as case studies in business schools across the country: “Risk Management For Dummies – and we really mean dummies!”
NINJA Mortgages
Let’s begin at the micro level: the collapse of the sub-prime home lending businesses, one bad mortgage at a time. This once hot market gave rise to some interesting schemes, none more absurd than what Steve Pearlstein of the Washington Post dubs “the NINJA mortgage” – no income verification; no job verification; no asset verification. You walk in with empty pockets, you walk out with a mortgage. Why didn’t I think of that?
Of course, the mortgage starts out at a very low rate, one that even the NINJA householder can handle. After a year or two, however, the rates go up – way up. The homeowner (and I use that term advisedly) defaults, so the bank kicks them out and takes over the loan. Unfortunately, the value of the mortgage (issued at the peak of the market) exceeds the value of the house. As any good accountant will tell you, these numbers simply don’t work. The once proud homeowner is forced to become a tenant; and the once proud lender (did someone say “New Century“?) skips the first ten chapters of the morbid story and heads straight for Chapter 11.
Florida’s Insurance Shingle
Which brings us to some foolish thinking on a much larger scale, a scale as big as the state of Florida. Water views – the state’s greatest asset – have become, with global warming, something of a liability. We are less than two years removed from the worst hurricane season in history, with three of the most destructive storms on record hammering the state’s extensive coastline. Property insurers have gotten skittish. They want more premium for the risk of writing coastal property. But higher premiums make homeowners and politicians unhappy. While there’s not much a homeowner can do, politicians could do a lot: they could tighten coastal zoning regulations. They could severely limit coastal development. They could establish barriers between the open ocean and development. They could raise construction standards. They could, but of course, they won’t.
No. The first thing the politicians did was roll back the insurance rates. They put a couple of hundred bucks in the pockets of voters — oops, I mean homeowners. Take that, Property Casualty Insurers! Then in its infinite wisdom, the legislature jumped head first into the property risk business. With a mere $1.9 trillion in coastal property exposure, the state has decided, essentially, to self-insure. That is, the state is underwriting future losses through future bonds. If another big one hits, the state will finance recovery by borrowing. How will they pay for the loan? Simple: by adding a surcharge to every business, auto and homeowner policy written in the state. It might cost the average homeowner $14,000 or more over the life of the bond, but at least they have a couple hundred in their pockets right now.
Unlike conventional insurers, who try to set aside adequate reserves to cover future losses, Florida has entered the gray zone of post-event funding. I suppose it might even work for a modest storm. But what about another major hit like Katrina – or, dare we think, two or three major hits? (I know. I’m a Nervous Nelly. With this country’s pro-active, can-do approach to global warming, these hypothetical risks will remain…hypothetical!)
If you’re interested in exploring the implications of Florida’s Brave New Risk Retention program, Towers Perrin has a nice study here. They are careful to avoid any value judgments. They call their paper “a study of recent legislative changes to Florida property insurance mechanisms.” I’m inclined to give it another title: Blowin’ In the Wind: Florida Stakes its Future on Loaded Dice.

NY Second Injury Fund: the clock is ticking for recovery opportunities

Monday, April 2nd, 2007

Employers and insurers in NY take note: if you have claims with potential for second injury fund reimbursement, your window of opportunity for recouping recovery dollars has narrowed significantly. New York just passed legislation which includes provisions to phase out their fund. Also in the works, South Carolina legislators are discussing a schedule to close their fund as well, bringing a plan that has been under discussion for years one giant step closer to enactment.
New York Special Disability Fund – phasing out by 2010
The New York workers compensation reform bill, which was recently signed into law by Governor Eliot Spitzer, lays out a schedule for shutting the Special Disability Fund (aka Second Injury Fund) to new claims on or after July 1 of this year, and closing the fund down for all new reimbursement claims by July 1, 2010, regardless of date of injury. These are the major legislative provisions, but as the saying goes, the devil is in the details, which the folks at Insurance Recovery Group have explained in greater detail: NY Workers’ Compensation Reform Impact on Second Injury Fund.
South Carolina Second Injury Fund – next up?
After years of debate around workers compensation reforms, the South Carolina Senate and executives of the Second Injury Fund are looking at possible schedules for closing the fund. Some proposals under discussion have this happening by 2013.
More information: For a primer on second injury funds, see our April 2005 post Maximizing recovery: Second injury funds.