The folks at Murray Bresky Consultants are just trying to scratch out a living by raising chickens – not just any chickens, but free range chickens that are “happy and healthy.” Their signature breed is “fed an all-natural and all-vegetable diet that, combined with plenty of exercise, makes our birds the leanest on the market. The leisurely lifestyle eliminates the need for antibiotics to prevent diseases commonly found in chickens as a result of stress and confined living conditions. Minimally processed, without the use of preservatives or other artificial ingredients, Murray’s Certified Humane Chicken is truly all chicken.”
Unfortunately for the company, they secured workers comp insurance through New York Compensation Managers (NYCM), the now defunct operator of a dozen self-insurance groups in New York. NYCM claimed to offer favorable rates, strict underwriting standards and exemplary claims services. They ended up with egg on their face with their inadequate rates, suspect underwriting and rampant under-reserving of claims. In retrospect, the operation ran around like a chicken with its head cut off. By the time the problems emerged (in 2006), it was too late to shake a feather and correct the problems.
Following the SIG’s failure, Murray Bresky Associates was hit with a $1.2 million assessment to make up their share of the SIG’s deficit. That ain’t chicken feed.
A Game of Chicken
Murray Bresky is not chickening out of a fight. Indeed, the chickens have come home to roost in the form of a lawsuit filed against NYCM and its board of trustees. The lawsuit seeks to recover the $1.2 million and then some, alleging breach of contract and breach of fiduciary duty. The case worked its way up to the NY Supreme Court, Appellate Division, where the motion by the defendents to dismiss the lawsuit was, for the most part, dismissed.
Now the defendents are walking on egg shells, facing the prospect of personal liability for the failures of the SIG. Where they once feathered their nests with the proceeds of the operation, their financial security has flown the coop. This is a legal mess perhaps best described by the late Lyndon Baines Johnson: “Boys, I may not know much, but I know chicken poop from chicken salad.”
Roles and Irresponsibilities
One of the former trustees of the SIG is squawking that he was not aware that he was, in fact, a trustee. He may have signed off on a few trustee documents, he may have performed some of the functions of a trustee, but he insists that he had no memory of being appointed. He insisted that he was not a bad egg and claimed that he had no place in the pecking order. The court, however, ruled otherwise.
As the saying goes, you have to break eggs to make an omelette. Quite a few more eggs will be broken before this particular concoction is served up. Hard-boiled attorneys will parse the details to figure out who, if anyone, owes Murray Bresky Consultants and exactly how much they owe.
Pecking Orders
The courts now rule the roost. They have upheld Murray Bresky’s right to sue, with the exception of some actions that are time-barred. There may well be a sunny side up in the chicken company’s quest for justice. We look forward to the final resolution of this stew, the chicken scratch of a judge’s signature that will put a final number on the liability of an insurance operation that flaps my wattles (ie., annoys me).
Here’s a little unsolicited advice to Murray Bresky Consultants: don’t count your chickens before they hatch. This one has a long way to go before the company can feather its nest with the proceeds of a complex litigation. In the meantime, their free range chickens have the run of the coop, enjoying their cage-free, stress-free lives right up to the very end. Bon appetite!
Posts Tagged ‘liability’
New York Self Insurance: Chicken Stew
Tuesday, May 28th, 2013Entrustment: Risk on the Road
Wednesday, October 3rd, 2012When risk managers scan the virtually infinite horizon of risk, they often overlook the single greatest exposure in the working world: driving cars and trucks on the roads of America. Today we approach the issue through the back door, wherein an individual killed in an accident was deemed not be in the course and scope of employment. It might be the backdoor, but it still leads to the same conclusion.
Linda Gadbois was a cook for the California prison system. She suffered a work-related injury and was sent to a doctor. When this doctor proved unsatisfactory, she was allowed to choose another medical provider from a list. After completing her appointment in May of 2008, she headed back to work. She was involved in an accident: Gadbois was killed; the other driver, Kenneth Fields, was seriously injured. Under the theory that Gadbois was “in the course and scope” of employment, Fields sued Gadbois and the state of California, her employer. No need to ask why: the state’s pockets were significantly deeper than those of the late Gadbois.
Going to Work
Field’s case rested on the interpretation of the “coming and going” rule: was Gadbois, leaving a medical facility after work-related treatment, inside or outside of employment? The court noted that she had requested the second treatment on her own. Her employer did not require her to drive to the appointment, nor was she required to drive as part of her employment. As a prison cook, the essential job functions were limited to her cooking: how she got to work was not her employer’s concern.
As a result, the fifth district appeals court concluded that the state was not liable for any injuries Gadbois caused while on her way to work. Field’s suit against the state was dismissed; the status of his suit against Gadbois is not known, though presumably he collected up to the limits of her personal auto insurance policy.
It is worth noting that Gadbois’s death was not compensable under workers comp. Gadbois was paid for the day of her death in accordance with a death benefit policy that covers all workers who die on a regular work day, whether at work, on the way to work, or on paid vacation or leave. Gadbois received her full salary for the day of the accident, but received nothing from workers’ comp. Had she received death benefits under comp, Fields would have had a stronger case.
Drivers: Good, Bad and Indifferent
While the specific circumstances proved Gadbois to be the exception, many people do drive in the course and scope of employment: obvious examples would be tradesmen, salespeople on the road and people whose customers are visited in their homes. But the circle of drivers must be expanded to include any and all employees who run errands or perform any aspect of their jobs in company cars or in personal vehicles.
Some employees do this company-related driving on a regular basis; others only sporadically. But any employee driving “in the course and scope” of employment is a representative of the employer. Whether consciously or not, the employer has endorsed the driving skills of employees whose work involves driving. Even if the employee is in a personal vehicle, the employer has, in effect, entrusted them with the keys. This “entrustment” may well comprise the riskiest part of the working day.
Basic Management
How should employers manage this risk? It’s really quite simple. Any and all employees who drive – or who might possibly drive – while working should be required to submit annual copies of their driving records. If there is a cost in obtaining the records, the employee should be reimbursed. The employer should review the records carefully and place restrictions on any employees with marginal or poor driving records. Indeed, the employer may well find that some employees who drive while working do not hold valid licenses. If these unlicensed drivers have accidents while working, the employer is on the hook for anything that happens.
In addition, employees should be required to report any moving violations, on or off the job. A speeding violation on the weekend might not preclude an employee from driving during work, but a formal warning would be appropriate.
Finally, prudent employers should have written policies on limiting the use of cell phones while driving and, needless to add, prohibiting texting. These policies should be enforced, with appropriate documentation and disciplinary action for any violations.
The risks of driving permeate our lives. When we drive in the course of work, the risks are shared by employee and employer alike, even if the latter is oblivious to the exposure. For the savvy manager, a well organized approach to the risks of driving goes a long way toward containing the ever-present perils of the open road.
“All the dogs want to kill me”
Monday, May 21st, 2012
“All the dogs want to kill me” is the plaintive plea of former mail carrier Ryan Bradford, who logged snapshots of dogs lurking on his postal route a few years ago. The public was much amused by the photos and he made the circuit of morning news shows. But despite the humor, occupational dog bites aren’t a particularly amusing prospect to the postal workers, delivery people, police and firefighters, outdoor workers, and home service providers who have to contend with the reality every day.
This week is National Dog Bite Awareness Week, and the Postal Service is at the forefront of trying to raise awareness about this issue. Every year, about 800,000 dog bites are treated in emergency rooms – and the vast majority of the bite victims are children, followed by seniors. Work-related dog bites are also a significant injury problem – letter carriers and postal workers are third on the victim list. Last year, 5,577 postal employees were attacked in more than 1,400 cities – resulting in a nearly $1.2 million price tag.
A worker who is bitten by a dog in the course and scope of employment would likely be eligible for workers comp, but the insurer may subrogate (file against a third party) to recoup losses, which can be substantial. The Postal Service will hold pet owners liable for medical expenses and other costs. With some exceptions, most homeowners and rental policies will cover dog bites up to the limits of liability coverage (generally $100,000 to $300,000). An analysis of homeowners insurance data by the Insurance Information Institute found that the average cost paid out for dog bite claims was $29,396 in 2011, up 12.3 percent from $26,166 in 2010. In fact, dog bites accounted for more than one-third of all homeowners insurance liability claims paid out in 2011, costing nearly $479 million.
Bite Prevention Tips from the Pros
We searched everything from animal trainer and vet sites to letter carrier message boards to amass some bite prevention best practices for workers whose jobs expose them to dogs:
- Be aware of your surroundings and anticipate so you aren’t caught by surprise. Be aware that dogs are protecting their master’s territory. Don’t approach strange dogs and try to avoid startling sleeping or eating dogs.
- Carry something to keep between you and the animal. Some suggest a dog stick, others suggest an umbrella which can be opened, and some letter carriers use their bag to hold between them or to throw down as a distraction. Consider protective clothing such as padding, footwear or gloves.
- Many postal workers are required to carry dog spray. If you carry a spray, attach it to a belt or bag with short bungee cord to offer quick access and to ensure you don’t lose or drop it.
- Pepper spray or mace should be a last resort. Sprays may not stop all dogs and can also pose a blow-back risk when used in windy conditions. Also, sprays require care if other people are around.
- Be careful with door slots. Postal worker message boards hold many stories of close calls to fingers and tugs of war with dogs on the opposite side doors. Some frustrated workers say they feed these aggressive dogs the most important looking mail first!
- While many pet lovers suggest that delivery persons carry dog treats to tame savage beasts, this is neither practical nor wise. It is also against the work policies of many organizations.
- Do not run from an aggressive dog. Easier said than done, but you do not want to be perceived as prey because most dogs will give chase. Stay still and avoid eye contact.
- If attacked, stay as still and calm as possible and do not fight back, which may increase the dog’s agitation. If pushed to the ground, cover your ears and lie still. If bitten, push into the dog’s mouth instead of pulling away.
Additional resources
- CDC: Dog Bite Prevention
- USPS: 2011 brochure with tips for dog owners and delivery workers (PDF)
- OSHA: Avoiding Animal Bites (PDF)
- UMN: Dog Bite Injuries and Fatalities
- Learn to Speak Dog
- Bulli Ray’s Occupational Dog Bite Safety, which includes some safety products, including a dog bite sticks and batons.
New York: Busted Trusts and the Law of Small Numbers
Wednesday, April 18th, 2012We have been following the fate of self insurance groups (SIGs) in New York, where the innocent pay for the sins of the guilty and where what is legal is by no means fair. We read in WorkCompCentral (subscription required) that an appeal to over-rule the onerous assessments imposed on the trusts who played by the rules, to cover the liabilities of trusts who did not, has been rejected by the U.S. Supreme Court. [The Insider is quoted at length in the article.] Had employers known just how expansive the risks of SIG participation were, they would likely have chosen to purchase conventional insurance.
The appellate court wrote that “a fair reading of [comp law] within the context of the related provisions and the legislative history, leads to the conclusion that group self insurers were intended to be included among those to be assessed to provide the funds to cover the defaults of all private self-insurers, including groups.”
The court went on to say that the liability of individual employers “is proportional to their role as self-insurers within the workers’ compensation system.”
The New York appellate court has expanded the concept of joint and several liability way beyond the members of a given trust, including not only all those who participate in self insurance groups, but virtually every self insurer in the state. There is no way a company can reasonably assess the scope of this risk. Why would anyone put their trust in trusts?
The Law of Small Numbers
The problem for the dwindling number of employers who participate in New York SIGs is the inverse of the law of large numbers: because their numbers are relatively small (compared to the total number of employers and comp premium in the state), they own a disproportionately large share of the open-ended liabilities generated by the failed trusts. Given the now-established legality of the assessments, and given the impossibility of verifying the viability of every self-insured risk, New York has basically eliminated self insurance as an option. That’s too bad, especially in the context of the state’s relatively high costs for comp.
Perhaps the state’s 800,000 employers could push for fundamental changes in the way workers compensation is managed: they could argue that the system is too complex and too costly for employers, even as the benefits for injured workers are way too low. As a group, they would have the law of large numbers in their favor, which is certainly more than can be said for the hapless remnants of the state’s self insurance groups.
NOTE: For access to the Insider’s numerous blogs in this issue, enter “New York trusts” in the search box.
Cavalcade of Risk #134: Security theatre, zombies, cats ‘n cars & more
Wednesday, June 29th, 2011We’re pleased to be hosting issue #134 of the Cavalcade of Risk. We kick off this issue with an excellent TED presentation by Bruce Schneier on The Security Mirage which talks about how the feeling of security and the reality of security don’t always match. He looks at why we spend billions addressing dramatic but rare risks that make headlines while neglecting more probable risks — and how we can break this pattern.
Schneier is a renowned security technologist and author with an excellent blog. Recently, Morgan Housel of The Motley Fool related the five cognitive biases that Scheir spoke about to lessons for investors.
Our regular roundup
This week, our blogger participants have submitted a tasty smorgasbod of entries on a variety of risk-related topics.
We start with a pair of posts by our fearless leader, Hank Stern, from InsureBlog. Have you heard about the growing practice of personal car sharing? Hank looks at the consumer risks associated with the newly expanding “peer to peer” car sharing services industry in his post Stupid Client Tricks: P & C Edition. It’s a great and informative post, but we would be remiss in leaving his blog without directing you to another post entitled Bark, Screech, Yowl. You’ll have to click through to see the topic but here’s an inducement to click: this post includes a video of a cat driving a car.
While on the topic of insurance, we have a pair of posts that look at other aspects of your personal coverage. For your auto coverage, Philip Taylor asks what’s the catch when it comes to Safe Driver Discounts in a post that examines the fine print of safe driver discounts. And do you know your financial exposure if your home should be destroyed in a disaster? At Canadian Finance Blog, Tom Drake asks if you have enough insurance on your home.
Speaking of disasters, we know that catastrophic weather events are expensive, but rain? At Risk Management Monitor, Jared Wade looks at the the high economic costs of routine weather events. And on the topic of everyday-weather-related risks, we point you to our recent post here at Workers Comp Insider on lightning and lightning strike survivors in what we call “the one in a million club you don’t want to join.”
Businesses & cyber exposure
At Terms + Conditions, Claire Wilkinson posts about the recent spate of cyber attacks, highlighting the exposure that many businesses face. (And we would note that you don’t have to be a bank or financial institution to have exposure. Note this recent item on how employers are vulnerable to a security breach by their own employees’ ignorance of phishing scams.)
Data risks are here to stay. At DePaolo’s Work Comp World , the topic is the convenience and risk of electronic records. He notes that the real real issue is the ease by which sensitive information may be obtained in large quantities, then analyzed and/or utilized for malicious purposes, and underscores the above point that employees rather than hackers likely constitute the biggest risk.
Healthcare related matters
How did one hospital address the increasing risk that nursing home patients will be transferred to a hospital for their end of life care? Jason Shafrin of The Healthcare Economist explores the issue in his post about maximizing utility for end-of-life care.
David Williams of Health Business Blog demonstrates the risk of being an early adapter of online services in his post about the disappearance of Google Health. He also offers a case study in physician risk in a post dissecting a medical malpractice defense related to a paraesophageal hiatal hernia repair and Nissen Fundoplication procedures.
Does providing user-friendly, patient-centric, clear, concise and objective information about the risks, benefits and alternatives of various treatment options enable consumers to choose wisely and forgo risky, dubious and expensive options. Jaan Sidorov posts about Health Advocacy Groups, Evidence-Based Medicine & Shared Decision Making at Disease Management Care Blog .
Safe retirement planning
Variable annuities are often promoted as a risk-free way to receive consistent retirement income. Kevin Mulligan of Retirement Planning Blog looks at the truth of the matter in his post on the risk of variable annuities.
If you plan to retire before Medicare kicks in, what are your healthcare coverage options? Free Money Finance looks at various ways to get retiree health insurance before the age of 65.
Assorted terrifying perils
For our final entry, Consumer Insurance Blog poses the most important question of the day: Are you ready for the Zombie Apocalypse? Find out before it’s too late.
That concludes this week’s edition – thanks to all submitters!
The next issue of Cavalcade of Risk is scheduled for July 13 at the Notwithstanding Blog – see you there!
The Pizza Delivery Chronicles, Part One: Liability
Monday, October 4th, 2010Every time I see a marginal car with a pizza delivery sign slapped onto the roof, I think about the driver. How old? How experienced? How desperate to make a few bucks in a tough economy? And from the employer’s viewpoint: how competent is the driver? Just how far must an employer go before they entrust a driver with the plastic logo and the insulated bag for delivering pizza to those of us who want dinner delivered in a box?
These thoughts congeal like day-old pizza in the sad case of Nicole Fisk, an 18 year old driver who worked (briefly) for Pizza Hut. Nicole only had her license for 3 months when hired by Pizza Hut in Clairemont CA. She was delivering pizza in November 2008 when she blacked out and drifted across the solid line into oncoming traffic. She slammed into a car operated by Shari Novak, 62, who suffered permanent brain damage and can no longer take care of herself. Shari’s mother, Olena, suffered a broken neck.
Who Pays?
The Novaks sued Pizza Hut, arguing that the company was responsible for the collision because they hired Fisk, a relatively inexperienced driver, who had a history of suffering blackout spells. Ah, there’s the rub. What did the employer know about Nicole Fisk? Only what she told them. She had a clean record, she carried the necessary insurance and her references were fine. She was not diagnosed with epilepsy until after the crash. Pizza Hut called it an “unforeseeable medical emergency” – which can be used as a defense to a negligence lawsuit.
Jurors rejected the defense, awarding Shari Novak $8.6 million and her mother $2.2 million. As one juror put it, “Fisk should have known she could have a blackout episode because of her medical history.”
Here’s where it gets interesting and where the issue of employer accountability comes to the fore. A consultant attorney points out that Nicole lied continuously about her health problems. When she first experienced blackouts, she was put on medication for acid reflux (a seemingly bizarre diagnosis, but perhaps based upon the limited information she provided her doctors). She apparently under-reported subsequent problems to these doctors. When she applied for a driver’s license, she failed to disclose her medical condition to the Registry. And when she applied for a job at Pizza Hut, she once again lied about her condition and its potential impact on her ability to perform the job safely.
It’s not difficult to feel some sympathy for Nicole. She is only 18. Her medical condition frightens her – she probably prefers not to think about it. Like any 18 year old, she wants to drive like her friends and earn a few bucks. In her own mind, she was not endangering herself or anyone else.
Impossible Standard?
While it’s important to note that the jury did not find Pizza Hut guilty of negligent hiring, it did conclude that the company is responsible for damages because Fisk was their employee at the time of the accident. John Gomez, the attorney for the Novaks, said that the verdict should send a signal to other companies “to be a little more careful when hiring professional drivers.” This is a bit disingenuous. Surely, the attorney is not suggesting that employers (illegally) research medical records on every potential hire. In this case, Pizza Hut followed its own reasonable procedures. Other than hiring a relatively inexperienced driver, they did nothing wrong.
Nicole Fisk was initially named in the personal-injury lawsuit but was later dropped from the case. Not because she was innocent – she is responsible for the tragic events on that November day – but because she had no assets of the magnitude sought – and secured – by the Novak attorneys.
There are few lessons to be learned here. Employers are routinely held accountable for many things which they do not control. It’s not so much a matter of accountability as the crass ability to pay. In a case of this scale, with damages this severe, someone must pay. That someone, obviously, is the corporate entity that was unfortunate enough to hire Nicole Fisk.
