Gary Veeder had the kind of job TV viewers love: for 31 years he was a scientist in the New York State Police Forensic Investigation Center. He specialized in trace evidence, examining fibers, arson residue, footwear impressions, glass, hair and other evidence gathered in criminal investigations. His findings carried significant weight in criminal trials. People went to jail based upon his evidence. Alas, a state investigation found significant problems in 29 percent of Veeder’s 322 cases. That’s a lot of problems – and a lot of jail time – for people who may or may not have committed crimes.
As the investigation into his work unfolded, Veeder first retired and then committed suicide by hanging himself in his garage. Given that the stress leading to the suicide was predominantly caused by work, his widow filed for workers comp benefits. The claim was denied, on the basis that the stress was the result of personnel actions, which are excluded from comp eligibility.
The case wended its way to the Appelate Division of the NY Supreme Court, where the decision to deny benefits was reversed and the case sent back to the workers comp board for reconsideration.
Nothing Personnel
The reversal was based upon a simple, rather stark conclusion: at the time of Veeder’s suicide, no personnel actions had been implemented. The state was investigating the situation; they had uncovered problems in Veeder’s work, but they were on a narrowly defined “fact finding” mission. No action had been taken against Veeder: he was not suspended or demoted or disciplined in any manner. Thus the stress was purely the result of the investigation, not of any personnel action.
In other words, had the employer simply announced to Veeder that the investigation was the initial phase of a disciplinary process, he would probably not have been eligible for workers comp. The only facts that count: he was under enormous work-related stress (of his own making) and he killed himself as a direct result of the work-related situation. And because comp is no fault, it appears that Veeder’s widow will be eligible for burial and indemnity benefits.
Is this fair? Is this just? Maybe yes, maybe no, but these questions themselves are not relevant in the determination of compensability. The claim may still be denied, but some other basis of denial must be found.
Hard Time
Veeder did his job poorly, but he was never held accountable by his superiors. A case can be made that Veeder’s widow is an innocent party, that she is entitled to benefits for her husband’s “work-related” death – despite the fact that virtually all of the stress was of Veeder’s own doing. Meanwhile, quite a few people convicted on corrupted evidence are serving hard time. Some were probably guilty, others completely innocent. But in cases where the lynchpin of conviction was Veeder’s incompetent work, all deserve to go free. This is unlikely to happen. Is this fair? Is this just? Nothing “maybe” about it. Justice – to this point, at least – has certainly not been served.
Posts Tagged ‘New York’
New York: What Is Compensable May Not Be Just
Monday, July 18th, 2011New York: A Matter of Trust(s)
Wednesday, May 11th, 2011New 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.
CRM: Wreaking Bi-Coastal Havoc in Self Insurance
Monday, December 6th, 2010You may recall the New York saga of Compensation Risk Managers (CRM), who single-handedly brought down the entire workers comp self-insurance group (SIG) industry in the empire state. Well, CRM is back in the news, this time in California, where their dubious business practices have collapsed a self-insurance group for the construction industry. The name of the failed SIG is “Contractors Access Program – get it? “CAP.” As in, “your exposure is capped; you have nothing to worry about.” To paraphrase a legendary President, “we have nothing to fear except fear itself” – to which we must add, unfortunately, the legitimate fear of predatory insurance administrators.
New York regulators took a very hard line in their response to the insolvency of a dozen SIGs operated by CRM. Someone had to make up the deficit created by CRM’s mismanagement, so they decided to penalize all the SIGs operating by the rules. This harsh and rather expansive definition of “joint and several liability” led the well-managed SIGs to abandon the state.
At this point, it’s not clear how California is going to pursue the $38 million shortfall. They will probably go after the actual participants in CAP, but it’s highly unlikely they will find anywhere near the cash to cover the insurance deficit. Meanwhile, eleven of the SIG members are suing CRM, the agent who sold the product and the SIG’s board of directors (some of whom are SIG members). If you total up the premiums paid by those filing the lawsuit, you only come up with $5.2 million. So the scale of the losses – $38 million – appears large enough to put every one of the SIG members out of business.
Promises, Promises
One of the interesting aspects of the lawsuit is the way the plaintiffs have quoted the marketing spiel right back at the defendents. They were promised “superior underwriting, claims oversight, loss control and administration.” The “rigorous underwriting” would provide savings “while preserving the integrity of the program.” Potential clients were assured that their exposure was limited to the premiums paid (a complete misrepresentation of the nature of SIGs) and that reinsurance kicked in on any claim above $500,000. (In reality, there was no reinsurance.) The agent who sold this dubious product promised to function as “much more than a broker.” They brought “particular expertise” to the program and would serve as the clients’s “partners in risk management functions.” Some partner!
What apparently was not disclosed to members and prospects was the fact that the SIG was losing money almost from the very beginning. CRM had a fall out with the original broker, which resulted in $6 million of SIG funds being used to pay him off.
The CRM website is still up, where you can read about “the CRM advantage.” They have an advantage, all right: they take advantage of naive and trusting companies seeking a little edge in the competitive comp market. It’s a killer edge, to be sure.
Thanks to Work Comp Central (subscription required) for the heads up on this case.
Risk carnival, election wrap-up, and tooting our own horn
Wednesday, November 3rd, 2010This week’s Cavalcade or Risk is posted by Ironman at Political Calculations. This biweeky roundup of risk posts is a sampling or “carnival” or topic-related posts. Ironman grades the entries for topicality, quality and readability – check it out.
Election results – Washington’s Initiative 1082 to privatize workers’ comp was soundly defeated last night, as about 58% of the voters opted to keep the system that has operated since 1911 in place. Obviously, this is a disappointment to private insurers and independent agents that hoped to open the state.
In Louisiana, it looks like Amendment 9 passed, but news reports we found are still vague. This change would require that claims would have to be re-argued before a panel of at least five appeals court judges before an agency’s decision could be reversed or changed.
In Arizona, Oklahoma and Colorado, voters cast ballots on constitutional amendments that would bar healthcare reform’s mandate that individuals buy insurance. Opt-out measures were passed in Oklahoma and Arizona, but was defeated in Colorado. Missouri had rejected the mandate in August, but not by a a state constitutional amendment.
At Comp Time, Roberto Ceniceros took a pre-election look at what gubernatorial wins might mean in California and New York. He notes that Jerry Brown was very quiet on the issue of workers compensation in California, but in New York, Andrew Cuomo has employee misclassification on his radar screen. As the state’s Attorney General, he recently joined attorneys general from Montana and New Jersey in an intent to sue FedEx.
And as long as we are on politics, it seems like a good time to bring up today’s news that the Treasury expects to earn a profit on AIG investments. Overall, despite the controversy, the Troubled Asset Relief Program (TARP) bailout looks as though it is earning a healthy return.
CT Commissioner resigns – somewhat upstaged by yesterday’s election brouhaha was news that Connecticut’s Insurance Commissioner resigned abruptly. National Underwriter reports that Thomas Sullivan resigns amid pressure over healthcare rate hikes. He faced criticism after approving a 47% rate hike by Anthem BC/BS of CT.
Workers Comp Insider again named to top WC blogs
We were gratified and pleased to be named to 2010 roster of the LexisNexis Top 25 Workers Compensation and Workplace Issues:
“Consistently at the top of the heap when it comes to workers’ comp blogs, the Workers’ Comp Insider is a rare combination of breadth and depth. Now in its eighth year, the Insider covers comp issues, risk management, business insurance, and workplace health and safety from Anchorage to Miami. It provides in-depth analysis concerning workplace legislation, occupational medicine, and best practices from Maine to Hawaii. It should be in the “favorites” folder of every comp attorney’s web browser.”
We thank you, our readers, for your continued interest and support. We were happy to see many friends and colleagues on the list as well – we’re honored by the company in which we find ourselves. Be sure to check out some of the other fine blogs on the list. Also, if you haven’t discovered the gem that is the LexisNexis Workers’ Compensation Law Community, we urge you to check that out, too.
It’s fresh Health Wonk Review and news roundup day
Thursday, September 2nd, 2010Grab a coffee and head on over to Hank Stern’s InsureBlog, where he’s posted Health Wonk Review: In the Here and Now. He describes it as a “minimalist” style, which means more meat, less potatoes!
And in other noteworthy news this week:
Twittering insurers – Terry Golesworthy features an interesting post about how insurers are using Twitter, along with lists of insurance leaders by number of followers, by growth and by activity. He observes, “Twitter continues to be used by most insurers to provide soft marketing messages about promotions, sponsorships and customer endorsements. Other activities include financial quizzes, insurance related education materials, warnings regarding impended natural disasters and Facebook announcements. Some insurers do respond publically to customer questions but, largely, this is not the significant activity.” In the comments on his list, insurance agent Ryan Hanley (@AlbanyInsurance) notes that agencies are actually driving the social media movement, and that is based on their using the channel for relationships rather than as a broadcast tool.
Safety is #1 – At The Pump Handle, Celeste Monforton posts that “just in time for the Labor Day holiday,” a new study has been released by the University of Chicago’s National Opinion Research Center, indicating 85 percent of workers rank safety on the job as their top labor standard.
Misclassification – State efforts focusing on employer misclassification continue to be strong and there appears to be a deep vein to mine.
- In California, Country Builders Inc is paying a whopping $3.9 million in back pay, fines, and payment to the work comp fund as a settlement with a suit filed by the Attorney General for various labor law infractions, including misclassification to avoid workers comp payments. In addition, the company is barred from working on government-funded public works for three years.
- The New York construction industry should go on notice. Governor Patterson has just signed the Construction Industry Fair Play Act, “…which creates a clear litmus test to distinguish the difference between a worker and an independent contractor. It also provides a method to clearly define which business on a construction project is responsible for which workers. Finally, for the first time in State history, it imposes monetary and criminal penalties specifically for the act of employee misclassification on construction projects.”
- A new Wisconsin law strengthens enforcement tools for targeting construction misclassification. The law will take effect on January 1.
- While the construction industry has been a major area of focus, other industries such as the trucking industry have also been targets of probes. And then there is the continuing FedEx driver saga, which my colleague has posted on frequently.
Other employment law litigation – Wal-Mart has appealed for a review by the Supreme Court in a discrimination suit the largest employment discrimination suit in U,S. history. The decade-old case involves more than a million current and former female workers. Steven Greenhouse of The new York Times discusses the issues in the case and the potential $1 billion or more in damages that Wal-Mart could face if the Supreme Court allows a class action suit to proceed.
September is National Preparedness Month – FEMA has designated September as and offers emergency preparation resources for employers. At the Risk Management Monitor blog, commercial risk management expert Brian Smith replies to Emily Holbrook’s questions about disaster preparation and business insurance.
Fanning the Flames in Erie County
Monday, August 2nd, 2010Erie County (NY) executive Chris Collins was frustrated by an annual outlay of about $11 million for workers comp. So the county implemented a policy requiring workers collecting indemnity (about 300 in all) to pick up the checks in person from the supervisor. Collins hoped that this face to face contact might lead to quicker return to work for employees capable of performing light duty.
Not surprisingly, the state comp board had serious concerns with the new “return to work” program.
“It places an additional burden upon an injured worker at a time when the claimant is not medically able to return to the workplace.” Oh, by the way, it’s also illegal.
The Collins administration fired back, saying that the board lacks the authority to halt Erie County’s new policy and that it will continue, at least for workers with temporary injuries.
Erie spokesman Grant Loomis blasted the comp board: “We were not surprised that a board full of Albany bureaucrats would raise objections to getting municipal workers back to work as soon as possible.” (With his demonstrated talent for distortion, Loomis may have a future in politics.)
Loomis said Collins wants to revise the program to call in only the recently injured who might have substantially recovered and can perform light tasks, currently about two dozen people. Collins wants workers to receive their checks directly from their supervisors, who then would ask whether they could return to work in some capacity.
Compounded Errors
The Erie folks are making a couple of basic mistakes: first, they issue a blanket policy covering 300 people, even though they only want to target about two dozen. Then they ask supervisors to do things they are not qualified to do: determine whether injured workers can perform light duty tasks and, while they are at it, distribute checks. All in all, not a very good idea.
The missing piece is obvious: no one is talking to the treating physicians. Only doctors can determine the medically necessary restrictions – what the injured worker can and cannot do – and whether temporary light duty would be appropriate.
Now before Erie County implements a policy requiring doctors to show up in person for their checks, here is an alternative: establish lines of communication with the treating doctors. Track medical visits and ask doctors to update restrictions each time the employee sees the doctor. Supervisors should be kept in the loop, especially in regard to available light duty tasks, many of which are seasonal, but they should not be asked to manage the entire process. That is a job for county administrators. Heck, even Grant Loomis could help out, provided, of course, he takes a class in diplomacy. Angry rhetoric might work for politicians stirring up the masses, but it is usually counterproductive in the challenging world of workers comp.
Bad Back: New York Toil and Trouble
Monday, July 12th, 2010Today we examine one of the great conundrums in workers comp claims: the old injury that may or may not be defined as a new injury.
In 2006 David Poulton worked for Martec Industries in Rochester, New York, as a laborer. Poulton had a bad back, having already filed workers comp claims in 1998 and 2000. When he visited his treating physician in June 2006, he had the same old complaint: his back hurt, as it had virtually every day since his first injury in 1998. He told his doctor that he re-injured his back at work the prior day while lifting materials. At this appointment, a discouraged Poulton told his doctor he wanted to quit working.
In consideration of Poulton’s long-established problem, apparently compounded by the prior day’s incident, the doctor disabled him from work. He cited “old injuries and his continued decline.” He characterized the situation as involving “episodic increases in pain” that had troubled Poulton for several years. The doctor, in fact, had been encouraging Poulton to stop working prior to this particular visit.
An independent medical exam determined that Poulton suffered from degenerative disc disease and that his disability was caused primarily by preexisting problems.
So is this a new injury, as reported by Poulton, or simply the recurrence of an old one?
Who Pays?
An administrative law judge found in Poulton’s favor, determining that the lifting incident at Martec aggravated the pre-existing condition. However, this ruling was reversed by the appelate division of the NY supreme court, which found no evidence of a new injury and remanded the case for further consideration.
Poulton may yet succeed in re-establishing his workers comp claim, but it will draw upon the resources of the carrier for his prior employer, not the carrier for Martec. As is usually the case in workers comp, the narrative is driven by the evidence. In this case, the history of pain and suffering is so unrelenting and consistent, the “new injury” theory goes up in smoke. With his working days apparently at an end, Poulton probably does not care who pays for his troubles. He has suffered for a long time.The remaining question, of course, is who pays and how much.
Sewer Dweller
Monday, June 21st, 2010A sewer may not be the preferred place to begin the work week, but the working world calls and we must follow. About a year ago, we blogged the sad story of Shlomo and Harel Dahan, respectively the owner and heir of S. Dahan Piping and Heating company in Queens, New York. They were hired to vacuum an 18-foot-deep dry well at a plant owned by Regal Recycling. Harel went in first. When he failed to emerge, his father went in after him. When the father failed to surface, an employee of Regal, Rene Rivas, went in after them. All three were overcome by deadly fumes at the bottom of the well. All three died.
Now we read in the New York Times that Sarah Dahan, Shlomo’s widow and mother of Harel, brought the remains of her husband and son to Israel for burial. She left the company in the hands of Ygal Lalush, a trusted employee. In her absence, Lalush changed the locks, stole the company’s four trucks, wrote $30,000 in company checks for his personal benefit and started running the company out of his own home under a different corporate name.
Ms. Dahan discovered the problem when she returned from Israel. She first tried to resolve the issue directly with Lalush. When that failed, she went to the authorities. Lalush has been charged with fraud, grand larceny, forgery, possession of stolen property and falsifying business records.
Lessons from the Underground
We could conjecture about the frailty of human nature and the dark shadows that accompany us all as we make our way through the world. We could wonder at the transformation of a loyal employee into a pathetic crook. (Perhaps his lawyer will chalk it up to post-traumatic stress syndrome!) That aspect of this tale will remain forever hidden, like the contents of the sewers cleaned by S. Dahan Piping and Heating.
The take-away from this tale lies within the Dahan family: the father who tried in vain to save his son. The mother who fulfilled a commitment by burying her husband and son in Israel and who tried unsuccessfully to convince her wayward employee to abandon his demented plan. There is genuine dignity in these people, who deserved both a better fate and a higher class of employee.
New York: Joint and Infinite Liability
Friday, June 18th, 2010The saga of the New York self insurance trusts continues. We reported in April that justice had been served by Judge Kimberly O’Connell, who ruled that requiring solvent trusts to pay for the sins of insolvent trusts was unconstitutional. Now, according to Work Comp Central (subscription required), O’Connell herself has been overruled by a four judge panel, which has reinstated the assessments on the solvent trusts. While the justices are undoubtedly correct in their literal interpretation of the law, the ruling comes under the heading of “let no good deed go unpunished.” It may be legal, but it is in no way just.
Here’s the (rotten) deal: 15 self-insurance trusts are shut down by the state. They ran out of money because they under-priced their premiums, under-reserved claims and sold insurance like a ponzi scheme. Oh, they also paid themselves handsomely for their fine work as administrators. These defunct trusts are in the hole to the tune of $500-$600 million. State oversight? There wasn’t any.
Who Pays?
The WCB decides to assess the remaining, solvent trusts to make up the deficit. In other words, the “joint and several liability” within a trust group now expands to include liability for all trust groups. To be sure, the enabling legislation allows the WCB to do this. After all, someone has to pay and this is New York, so deal with it. In this case, the trusts that operated by the rules, fairly pricing and fairly reserving claims, are penalized for the sins of the clowns who are no longer in business.
As we pointed out in yesterday’s post, a task force has recommended that New York get out of the self insured trust business. We concur. Any state that loads the dice of “joint and several liability” to this absurd point makes a mockery of the concept. Self-insurance is based upon the ability to limit risk and contain exposures. Given New York’s operating rules for self-insured trusts, conventional management tools are rendered useless. The liabilities of operating a group trust are uncontrollable and virtually infinite. Why would any company choose this path for managing risk?
New York: In Trusts We Trust Not
Thursday, June 17th, 2010Two years ago, New York Governor Patterson convened a task force to examine the status of self-insured trusts for workers comp. He was forced to take action when a number of trusts failed, most notably those administered by Compensation Risk Managers (CRM). The insolvent trusts left behind a deficit of $500 million. (See our prior blogs here and here.) The task force recently presented its findings to the governor. In 189 pages of closely reasoned text, the commission recommends that New York abandon this particular model for insurance. The risks, in their view, outweigh the benefits and perhaps most important, the state lacks the resources to adequately monitor how these groups operate from day to day. You cannot trust the trusts.
The commission zeroed in on what it considers to be the (fatal) flaws in the group trust model:
: Joint and several liability, where prudent employers are held accountable for the actions of the weakest members
NOTE: it’s one thing to have “joint and several” liability; as the commission points out, it’s quite another to actually collect on these obligations: less than 15% of what is owed by participants in the failed trusts has been collected to date.
: potential conflicts of interest involving group administrators and TPAs, who seek to grow the business by keeping rates artificially low and by understating losses
: inability of trustees to understand what is really going on
: inability of the state to monitor and assess the true status of each operating trust
Death Spiral
Self insurance groups currently operate successfully in 18 states, but not in New York. As we pointed out in a prior blog, the NY comp board tried to assess all trust members – not just those in the insolvent trusts – to make up the $500 million deficit. The solvent trusts sued and for the moment, have prevailed. (The Held decision can be read in the appendix of the task force report).
There is a certain logic to assessing all members for the failings of a few, but this only works when you are dealing with very large numbers, so the individual assessments are relatively small. This was not the case back in 2008, when there were about 18,000 employers participating in NY trusts. After all hell broke lose, the number dwindled to 4,000.
The crippling assessments issued by the comp board to cover the trust deficit created a death spiral, with solvent trusts folding their tents and moving out of the state. Even though those assessments have been retracted by the courts, that action comes too late to save the viable trusts. New York probably has no choice but to abandon the group trust model.
Rotten Apples
The New York narrative, as written by the governor’s commission, attributes the trust failures to fatal flaws in the business model. But where New York sees an insurance approach that cannot work, other states see vulnerabilities that can be addressed through prudent management. Self-insured groups still operate profitably and effectively in many states. What happened in New York was the result of rogue and perhaps felonious trust management combined with inadequate state oversight. The state failed to see the true status of the troubled trusts in a timely manner and then took exactly the wrong action to correct it. That’s not a problem with trusts themselves, but with the people entrusted to run them.
