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The California workers comp experience as a cautionary tale

Thursday, June 17th, 2004

We’ve just posted an article that Tom Lynch authored for the Winter 2004 edition of The Journal of Workers Compensation entitled Good Grief! Does Our Future Lie in California? Although the article was published just prior to the ouster of Grey Davis and the subsequent adoption of a workers comp reform plan, the overall examination of why some states work well and why some *break* may be instructive.
Here is an excerpt:

The United States did not invent workers compensation. That honor goes to Germany, which first introduced the concept in 1884. By the middle of the 20th century, most countries throughout the world had some kind of workers compensation or employment injuries legislation. Some systems take the form of compulsory social insurance; in others, the employer is legally required to provide certain benefits, but insurance is voluntary. In most countries, employers finance some type of employment injury benefits for workers.

In common law countries, such as the United States, workers compensation is based upon a doctrine of strict liability, or liability without fault. This is a departure from the principle of tort law in which the injured party receives no damages unless it can be shown that someone else maliciously or negligently caused the damage. The rationale for the “social fault doctrine” is that, under conditions of modern industrial employment, employers are in the best position to prevent accidents and disease, and they should therefore be given economic incentive to take preventive action.

In 1911, after failed legislative attempts in Massachusetts and New York that had been ruled unconstitutional, Wisconsin successfully followed the lead of Germany and England and became the first state in America to enact a workers compensation statute. Over the next few years, the rest of the nation followed suit. Today, our 50 states have 50 different laws.

One might be tempted to say that what we really have are 50 bottles of identical wine with 50 different labels, but the differences go far beyond that. Benefits differ by state, as do systems for medical reimbursement. The workers compensation system in most states operates through some form of private insurance, but in some states, such as Ohio and West Virginia, the system is operated by the public sector; there are even two states, Texas and New Jersey, that make workers compensation insurance optional for employers.

The differences that abound among the states in their approaches to workers compensation lead to some states having economically “healthier” systems than others. Nowhere is this difference in wellness more vivid than in California, the state that, if it were a country, would have the fifth leading gross national product in the world. (Read the full article).

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Terrorism Risk Insurance Act (TRIA) to expire

Monday, June 7th, 2004

The three-year Terrorism Risk Insurance Act (TRIA) is set to expire December 31, 2005 unless Congress acts to extend it. This is of great concern to insurers who will soon be negotiating and writing business insurance policies for 2005 and beyond. Any policies that are written after 1/1/05 will not be fully protected by federal backstop insurance.

An industry coalition of concerned insurance parties is petitioning Congress to extend TRIA, stating that “Without a risk-spreading mechanism, the right attack could very well bring the insurance industry to its knees, and significantly destabilize our economic infrastructure.”

Although the original measure was intended to be a bridge, industry spokespeople are united in calling for an extension as being essential for the stability of the industry. The following were among the points made in Senate banking Committee testimony:

“The commercial property-casualty insurance sector continues to lack the financial capacity to handle catastrophic terrorism losses on its own. Certain plausible event scenarios estimate insured losses from another catastrophic terrorist attack on U.S. soil could exceed $250 billion, far exceeding the entire commercial property-casualty industry’s estimated capacity.

“Terrorism risk cannot be modeled or predicted. Because terrorism defies the normal underwriting and rating principles, that limits the ability of property-casualty insurers to advance a private mechanism for that risk. For example, the complex and deliberate nature of terrorism prevents insurers and policyholders from using loss control as an effective tool to minimize the risk.”

Backstop insurance is of particular concern in workers compensation. Workers comp is different from other types of insurance where events occur and they are paid for within a short amount of time. Workers comp claims have a long tail by their very nature, meaning that payment can extend over many years after the original event. Insurers must maintain reserves to cover the expected cost until the claim is closed.

With the September 11 event, workers comp insurance was on the line for the death benefits for workers killed in the attack; it is also the “exclusive remedy” for any workers who sustained injuries during the attack, or who were in the “course and scope” of employment during the extensive cleanup projects in the aftermath of the attack. Recently, we’ve seen alarming reports that the dust from the World Trade Center attacks is more toxic than originally estimated, and that the associated range of health problems may be severe. We may have only seen the tip of the iceberg in terms of survivor health problems. This is a dramatic example of the “long tail” claims that can be associated with workers comp.
For more on this topic:
Terrorism risk and workers compensation
Workers Comp and Terror: The Long Shadow

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Heart attacks on the job: are they covered by workers compensation?

Tuesday, June 1st, 2004

Lately, we’ve had several visitors to the site searching for information about heart attacks. We take that to mean that people are trying to determine whether a heart attack that occurs in the workplace is a compensable event. Not everything that occurs in the workplace is deemed compensable and that is particularly true of illnesses. Generally, a heart attack in and of itself would not be a compensable event. The acid test for compensability would revolve around whether it can be determined that the heart attack is an event that has arisen out of and in the course of employment.

First, as with anything related to workers comp, your state law will prevail. Because workers comp legislation varies by state, there is no universal dictate that would apply nationally so we are speaking in generalities here. Heart attacks and strokes can be complex issues and may require legal consultation.
“Arising out of employment” means that a heart attack would have to be job related, or in other words, did the heart attack happen because of the work? Was there a causal connection? “In the course and scope of employment” generally would have to do with the time, place, and surrounding events.
Illnesses and conditions are often progressive in nature, and they may be due to other or unknown causes, such as family history, obesity, smoking, etc. It would be up to the worker to prove that the heart attack was related to or caused – at least in part – by the work. Were there precipitating work factors, such as unusual physical exertion or mental stress? Also, in any discussion of heart attacks, the issue of pre-existing conditions often comes into play. While pre-existing conditions would generally not be compensable, they would also not necessarily be a bar to compensability. If it can be shown that the work aggravated or accelerated a pre-existing condition, compensability may be granted.

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Workers Comp and Terror: The Long Shadow

Thursday, May 13th, 2004

An article by Anthony DePalma in today’s New York Times (registration required) outlines the onging saga of workers’ compensation claims stemming from the attacks on 9/11. In the immediate aftermath of the attacks, most of the approximately 3,000 fatalities probably involved workers comp: these people were working. They died at work. (Death benefits in New York are capped at a relatively paltry $50,000.) But what about the survivors? What about the first responders? And in ever-widening circles, what about people who suffered post traumatic stress simply by their proximity to the horrifying events?

In the 9/11 aftermath there have been nearly 8,000 claims filed with the New York State Workers’ Compensation Board. While the events themselves were unique, when it comes to workers compensation, it’s business as usual. Claimants must be able to prove a causal relationship between the 9/11 disaster and their disabilities. A number of the claimants with respitory problems are offended that insurers are not forthcoming with benefits. They tried to help after the horrendous events. They breathed the chemical-laden air. Over time, they developed chronic breathing problems, what is now referred to as “World Trade Center cough.” They believe their injuries — and the link between the injuries and their permanent disabilities — is obvious. But in the world of workers comp, one person’s “obvious” is another’s “ambiguous.”

DePalma describes the Brooklyn courtroom where the compensability of claims stemming from 9/11 is determined. He provides the example of a former subway conductor who handed out bottled water immediately following the collapse of the towers and then worked at the 34th street station, keeping order on the platform. Despite wearing a mask, he breathed in the dust and debris brought into the station by incoming trains. In the following months, his breathing became more labored. In August 2002 he suffered a massive heart attack and was unable to return to work.

Should he collect workers compensation? Company lawyers have brought up his long-time smoking habit as a potential factor in the heart attack. How can you distinguish between the work and non-work related factors in this situation? A lot of money is at stake. Ultimately, it will have nothing to do with the iconic stature of the 9/11 events. It’s simply a matter of the judge determining whether or not there is a disability, and whether the disability is work related.

Post-Traumatic Stress

One of the fundamental lessons of workers comp is that people respond to adversity in different ways. Two people witness the same event: one moves on with life, the other suffers from lingering post-traumatic stress and is unable to function in any work environment. The former continues to earn a living; the latter may collect disability payments for being unable to work. And the “one size fits all” workers comp system has to make sense of it all.

What is striking about the 9/11 situation is the scale of the event. It does indeed cast a long shadow. It has been described as the “largest acute environmental disaster” in New York history. Despite the magnitude, workers compensation will play out as it usually does: in a court of law, with the presentation of evidence on both sides. Workers comp may be “no fault,” but it is by no means “no friction.” It is a constant drama of human suffering, of medical interpretation, of “expert” testimony, of point and counterpoint. What is taking place in the Brooklyn courtroom plays out in a similar manner every day across America.

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Posted in Compensability | 2 Comments »

Compensability: Driving “To and From”

Tuesday, April 20th, 2004

In most states, an individual in the normal commute to and from work is not considered “in course and scope” of employment. If employees have accidents on the way to or from work, they are usually on their own and will not have access to benefits under workers compensation. However, there are a number of circumstances when employees may be covered during the commute. For example:

  • An on-call employee is called back to the workplace. This individual is usually covered from home to work and then from work back to home.
  • An employee has no geographic starting point for employment (e.g., a salesperson). He or she heads off in a different direction every morning. There is no single “workplace.” This individual is covered from the time of leaving the home until returning.
  • An employee conducts a work-related errand. An employee is asked to pick up some supplies on the way home. This “deviation” is considered part of employment and any accident or injury during the “deviation” from the regular route would be covered.
  • An employee heads out for lunch in his personal vehicle (a “personal errand” not covered by workers compensation). A supervisor asks the employee to “pick up some fries.” This errand now has a work-related aspect and workers compensation may well apply under the “dual capacity” concept.

What is striking about these “to and fro” exceptions is how common they are. Even though employees in the above situations might drive only rarely under the workers compensation umbrella, in most states they are covered by workers compensation. Hence, any accidents would have a direct impact on the employer’s experience rating (or self-insurance, for those who cover their own losses).

Sometimes coverage may begin even before an employee gets into his or her car. On-call employees are covered from the moment they receive the call back to work; a fall down the stairs at home might be considered workers compensation! In a case from Connecticut, a salesman was asked to go out on the road immediately after a snowstorm. He didn’t want to go, but his supervisor insisted. While shoveling the snow from his driveway, he had a heart attack. The Connecticut Supreme Court determined that he was “in the course and scope” of employment, because he had to clear the driveway in order to operate the car. And he had to operate the car in order to carry out his job.

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Reducing medically unnecessary disability

Sunday, April 18th, 2004

Any regular visitor to Workers Comp Insider would know that we are not ones to minimize the seriousness of workplace injuries, and we bemoan the frequency with which work injuries occur. Essentially, we believe that if American businesses can aspire to total quality management and zero defect philosophies for parts and processes, they can do at least as well for their greatest asset, their people. Prevention is a key mandate that all of us in the industry should and must embrace.
That being said, a good part of our focus as a company has been on teaching employers how to respond to and manage work injuries if and when they do occur, with the twin goals of fostering maximum recovery for the employee and minimum cost for the employer. These are goals that should not be mutually exclusive if approached thoughtfully and with care, through good management, communication, and planning.

I was reminded, recently, of a survey of occupational doctors on the topic of lost time that was conducted by Dr. Jennifer Christian. In this survey, occupational physicians were asked to assess how many of the work-related injuries they treat typically require more than a day or two away from work for medical reasons. Most physicians placed this number at less than 10 percent; more than half of the responding physicians placed the figure at less than 5 percent.

So with an occupational medicine consensus being that between five and ten percent of all work injuries require time away from work for medical reasons – or one injury in 10 or 20 – why is it that, on average, about one injury in four, or 24 percent, results in absence from work long enough to become a lost-time claim? (Most states have a three to seven day waiting period before compensabilty benefits begin.)

So the question is, why do so many work injuries result in medically unnecessary time away from work?

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You’re fired! Should you terminate an employee who is on workers compensation?

Tuesday, April 6th, 2004

Donald Trump’s TV series has everyone joking about firing or being fired, although for anyone who has ever been on either end of the equation – as the manager who fires, or as the employee who is fired – it is rarely a joking matter.

Some would make the case that in today’s litigious society, most companies don’t ‘fire’ employees outright anymore, fearing a charge of discrimination or wrongful termination. It does seem as though downsizing, outsourcing, re-engineering, plant closings, mergers, and a host of other euphemistic group actions have all but replaced the plain vanilla one-to-one termination, at least for large companies. Nevertheless, when there’s a continuing employee performance issue, terminating employment is sometimes the only course of action. And, in some instances, an employer may even be sued for not terminating an employee, such as when that employee poses a danger to other employees.

What about firing an employee who is out on leave for workers compensation?

That’s a question we often get. In these cases, we will often hear a long litany of complaints about the employee, sometimes going back years. From the employer’s perspective, the workers comp claim is often viewed as the final straw in a continuing series of problems with that particular employee; at other times, it simply may appear to be a convenient, neat way to resolve an ongoing problem.

Firing an employee while he or she is out on workers compensation disability leave is almost always a bad idea. For one thing, many states have laws that prohibit retaliatory firings for workers who file claims. Even if this were not the case, it’s not a good idea to use workers comp as a tool to resolve human resource issues.

There may indeed be some instances where termination would not violate the law, such as in cases of business necessity or for an egregious breach of policy.

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