Archive for May, 2011

New York: A Matter of Trust(s)

Wednesday, May 11th, 2011

New York continues to deal with the failure of the self insurance groups (SIGs) managed by CRM. As is so often the case, the question is who pays? Who assumes the debts incurred by the failed management company? When a conventional insurance company fails, the state usually covers the benefits for the injured workers and then passes some of the costs on to insurance companies and their clients, in the form of assessments. Given the large number of insurers and their clients, these assessments are relatively small for any individual company. In the CRM failure, unfortunately, the financial implications for all SIG participants are enormous.
The New York approach to SIG failures has been to expand the concept of “joint and several liability” to include not just the companies in a given (failed) SIG, but any and all companies who participate in SIGs. In other words, when NY companies join a SIG, they are responsible for their own losses, the losses of other companies in their group, and the losses of all companies involved in SIGs. Such open-ended parameters for exposure should raise red flags for any risk manager thinking about joining an Empire State SIG.
In April 2010, Justice Kimberly O’Connor ruled that the assessments on healthy SIGs were unconstitutional. She appeared to strike a blow for fairness. Alas, she has been over-ruled by the state supreme court, which has determined that the comp statute allows the state to seek reimbursement from all SIGs. The sins of the few are to be borne by those who played by the rules.
Misplaced Trust
CRM, which has filed for bankruptcy, apparently managed SIGs like a Ponzi scheme: they under-priced the insurance to attract new customers; they under-reserved claims to give the appearance of profitability; and they charged exorbitant management fees every step of the way. Like all Ponzi schemes, tt worked beautifully until it collapsed. By the time the state uncovered the problem (therein lies a tale), CRM was on the ropes. The state settled CRM’s liabilities for about 10 cents on the dollar. Where does the rest of the money come from? The state is reaching into the pockets of all SIG participants, those who participated in CRM SIGs and everyone else, thus including companies that paid fair rates for insurance, focused on managing their losses and, in general, played by the rules.
Well, as they say, let no good deed go unpunished. The comp statute protects the interests of the state. The law is quite clear. Members of the solvent SIGs share the liabilities incurred by SIGs that failed to live up to their responsibilities. Is it legal? Apparently, yes. Is it fair? Well, no.
The state legislature is tinkering with the assessment plan, trying to come up with ways to ease the pain of the current assessments and insure the solvency of SIGs going forward. Don’t hold your breath.
The Nature of Trust
Trust is defined as having belief or confidence in the honesty, goodness, skill or safety of a person, organization or thing. The saga of CRM has shown that trust can be misplaced, and that when it comes to participating in SIGs in NY, any and all trust is misplaced.
My advice to NY companies is simple: forget about SIGs. Find yourself a nice, guaranteed cost plan from a conventional insurance carrier, then go to sleep knowing that your premiums will reflect two things, one good, one bad: the good? The premium you pay will be based upon your own losses; you are not responsible for anyone else. The bad? You operate in a state where, despite inadequate benefits paid to injured workers, the cost of comp insurance is way too high. But that’s a tale for another day.

New OSHA focus: Dairy Farms

Tuesday, May 10th, 2011

Suffocation in a manure slurry pit. Being attacked and crushed by a bull. Being crushed by an 1800 pound bale of hay. Being run over by heavy farm equipment. These aren’t the things you think of when you drive by a pastoral, picture-postcard scene of a herd of grazing dairy cows. Yet dairy farms are among the most hazardous and deadly work environments in the nation.
In this month’s Risk & Insurance, Cyril Tuohy discusses how OSHA is ramping up inspections at Wisconsin dairy farms – partly in response to the death of a migrant worker last spring in a manure pit – and in response to an overall high industry fatality rate.
Of the industry’s lethality, Tuohy reports:

The labor statistical category for dairy farming, which includes all agriculture, forestry, fishing and hunting, reported 26 fatal work-related injuries per 100,000 full-time equivalent workers in 2009, the latest year for which numbers are available. That gives this occupational category the highest ratio among all categories.

Its fatality rate is more than double the No. 2 deadliest category, the mining sector with its 12.7 fatal work-related injuries per 100,000 full-time equivalent workers, the BLS statistics reveal. Transportation and warehousing (12.1 fatal injuries), construction (9.7 fatal injuries) and wholesale trade (4.9 fatal injuries) round out the top five deadliest occupations.

There were a total of 551 deaths reported in 2009 in agriculture, forestry, fishing and hunting, up from 286 fatalities reported in 2008. A total of 4,340 workers died in 2009 in all sectors, down 17 percent from 5,214 in 2008.

In his paper Dairy Farm Safety and OSHA – Approaches for effective management and worker training David Douphrate discusses the most common safety hazards in dairy farms:

One of the most common causes of death and serious injury on farms is related to the heavy equipment required to run a dairy farm. A high number of farming fatalities are due to tractor turnovers. Other causes of fatalities include silage bunker collapse, manure pits, tractor power take offs (PTO) and large animals such as dairy bulls.

Recent research studies show that the two main causes of workers’ injuries (fatal and non-fatal) are incidents with machinery and animals [Mitloehner and Calvo 2008]. Machine-related accidents include tractor rollovers, being run over by tractors and being entangled in rotating shafts. Animal-related injuries include kicks, bites, and workers being pinned between animals and fixed objects. Other causes of injuries include chemical hazards, confined spaces, manure lagoons, use of power tools, and improper use or lack of personal protective equipment [Mitloehner and Calvo 2008].

Douphrate’s paper also documents the most common citations that resulted from 736 diary inspections between 2000 to 2010:
* Lack of proper injury and illness prevention program.
* Lack of work injury recording and reporting.
* Lack of mounting or proper tagging of portable fire extinguishers.
* Inadequate communication program about hazardous chemicals.
* Inadequate process safety management of highly hazardous chemicals.
* Inadequate hazardous waste operation management and emergency response.
* Inadequate respiratory protection.
* Lack of roll-over protective structures (ROPS).
* Inadequate guarding floor and wall openings and holes.
* Inadequate eye and face protection.
* Inadequate medical services and first aid.
* Inadequate guarding of field and farmstead equipment.
An industry fueled by immigrant workers
As damning as some of the injury and death statistics are, the reality might be even worse. Many farm workers may be reluctant to report injuries due to their illegal, undocumented status – a fact that makes these workers an easy population to exploit. A 2009 article in High Country News documented this Dark Side of Dairies, portraying a broken system that leaves immigrant workers invisible – and in danger. According to the article:

The majority of the West’s nearly 50,000 dairy workers are immigrants, according to U.S. Department of Agriculture sociologist William Kandel. Many of them are undocumented, monolingual Spanish speakers like Gustavo. Such workers are unlikely to report injuries or file claims with the state for money to recover medical bills and missed pay for fear of getting fired or deported.

To make matters worse, agricultural workers are not afforded most of the federal labor law protections that are extended to workers in other industries.

Other dangerous industries, such as meatpacking, logging and construction, have specific safety standards mandated by state or federal labor agencies. While dairies fall under the general agricultural safety regulations for tractors and heavy machinery, there are no specific standards for how workers should be protected while milking or moving cows. Dairy workers in Washington, Nevada, Oregon and California are entitled to lunch and rest breaks, but legal aid organizations in these states say the laws are rarely enforced.

What dairy operations can expect from OSHA
An article in Hoard’s Dairyman discusses OSHA’s dairy initiative and talks about what dairy farms might expect:

As OSHA begins to take a closer look at dairy farms, there are a number of areas they will be evaluating. “If you have grain bins, and many dairies do, they will look at procedures for the confined space entry,” says Carter. “Perhaps a bigger concern will be manure pit guarding. The State of Wisconsin requires guarding per your manure pit application. Many states may have similar rules,” he notes.

The article also offers advice to farmers for what to do if OSHA makes a visit, and what the range of fines are for violations.

NCCI Reports: A Sobering Look at Risk

Monday, May 9th, 2011

NCCI has released two reports that are essential reading for risk managers and anyone else who enjoys the Big – albeit somewhat gloomy – Picture.
The first report is a summary of workers comp performance through 2010: while many indicators are positive or at least neutral, the major concern is overall performance. The combined ratio for insurers (losses plus expense) is creeping steadily upward: 101 percent in 2008, 110 percent in 2009, 115 percent in 2010. In other words, in 2010 carriers spent 15 percent more than they earned through premiums. Even with improved returns on investments, insurers are caught in the zone where many are losing money, especially those whose combined ratios have drifted above the average.
The troubled economy has complicated matters: as payrolls go down, premiums go down with them. Comp premium peaked in 2005 at $47.8B; in 2010, premium totaled $33.8B. To be sure, fewer people are working, but that often results in increased stresses – and risks – for those who still have jobs.
Finally, there is the highly politicized issue of rates for comp insurance. No state wants to be the first raise the rates, as this increases the cost of doing business and makes the state less competitive in attracting new business. So states hold the line or even force reductions, making all businesses – except insurance related – happy.
The Really Big Picture
For those of you who seek perspectives beyond comp, into the broadest possible, world-wide view of risk transfer, Robert Hartwig of the Insurance Information Institute offers slides that are compelling viewing. He examines the dual specters of terrorism and natural catastrophe. Bin Laden’s unlamented death may increase the risk of attack in the coming months, resulting in open-ended exposures for workers comp and property insurance. As for natural disasters, with the spate of earthquakes, tsunamis, and tornadoes, any actuary who is paying attention is having trouble sleeping these days.
Japan’s earthquake, tsunami and nuclear plant meltdown appears to be the most expensive natural disaster in history. The total losses are expected to run between $100-300B, of which only a relatively small portion ($45B) is insured. (Government will bear the brunt.)
Tornadoes tearing through mid-America thus far have avoided major population areas, but the recent event at the St. Louis airport raises the specter of urban disaster.
Who Pays?
When calamity strikes, the impact is greatest on reinsurance, which kicks in when limits are reached in-front line policies. With the unprecedented scale of recent events, the cost of reinsurance must go up, and as it does, the cost of insurance for the consumer (business and personal) goes up with it. We live in risky times and the increasing costs of risk transfer reflect our darkening world.
One final note: Hartwig reveals that the 9/11 attacks added 1.9 percent to the combined ratio for 2001, which totaled a robust 121.7 percent. That’s a sobering thought for this beautiful spring morning. My advice? Slap on some sunscreen and get out for a stroll. There’s no better cure for gloomy data than a walk in the sunshine.

Cavalcade of Risk, Naked Beast Edition

Thursday, May 5th, 2011

The latest edition of Cavalcade of Risk is up, hosted by David Williams of MedPharma Partners LLC. If you have any interest in liability for dog bites, insuring exotic animals (kangaroo, anyone?) or the percentage of drivers who admit to driving without insurance (about 10% – yikes!) – among other interesting items – check it out. It’s brief and very much on point.

NFL and Dementia: A Changing of the Guard

Wednesday, May 4th, 2011

Last month we blogged the suicide of Dave Duerson, a former NFL star who killed himself at the age of 50. In order to preserve his brain for study, he took the unusual step of shooting himself in the chest. He suspected – and the subsequent autopsy confirmed – that he suffered from chronic traumatic encephalopathy, a degenerative and incurable disease that is linked to memory loss, depression and dementia. A definitive diagnosis is available only through an autopsy.
Among the many ironies surrounding this sad tale is the fact that Duerson sat on the six person NFL committee that reviewed claims for medical benefits submitted by retired players. Duerson was known for his harsh line on these claims, apparently voting to deny benefits in many cases (the votes of individual committee members were not recorded). He even testified before a Senate subcommittee in 2007, supporting the NFL’s position that there was no definitive relationship between repeated concussions and subsequent dementia.
The days of denial appear to be over. Dr. Ira Casson, who represented the “prove it” mentality of the NFL, is no longer actively involved. The medical evidence is accumulating; while some refuse to connect the dots, it’s increasingly clear that repeated brain trauma (concussion) is often directly related to a precipitous decline in brain function in the post-gridiron years.
Old Game, New Order
The NFL is trying to improve the safety of its players. The new rules limiting return to the playing field after a concussion are taking root. Helmet to helmet hits are being penalized with increasing financial severity. But even as the league tries to limit future exposures, the fate of retired players looms large. There will be increasing numbers of claims for disability, including workers comp where applicable, by players who face a substantially diminished burden of proof to connect dementia to playing field (“workplace”) exposures.
It is painful to contemplate the agony of Dave Duerson’s final days. Confronted with the incontrovertible evidence of his own demise, he must have realized how wrong he had been in taking the company line on dementia. He knew what his own autopsy would reveal: a brain damaged by chronic traumatic encephalopathy, caused by repeated trauma. His choosing to shoot himself in the chest was a farewell gesture, not only to his own life, but to the beliefs that had led him to take a hard line with his former colleagues. A loyal member of the “old guard,” he ended his life with the unmistakable and moving embrace of the new order.

9th Annual ASSE Kids’ Safety-on-the-Job Poster Contest

Tuesday, May 3rd, 2011

In honor of NAOSH week, we thought it might be nice to feature a sampling of safety tips from the next crop of safety engineers. It’s nice to see these kids are learning such important lessons early. Good job, kids!
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Camille D. Soto, 6, FL: Make sure you wear safety glasses…
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Tamaya Olivia Bush, 8, SC; Come Join the Crew
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Da’moreon Travis, 10, KY, Make Safety First or You Won’t Last
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Sai Pravallika Velicheti, 12, Kuwait; Confined Spaces Can Kill
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Robin Newman, 14, AL; Don’t be the sender to cause a fender bender