Wednesday, June 28, 2017
Intersection of Workers' Compensation and Worker's Tort Action Expertly Reviewed by Law Student in New Article
The intersection of an injured employee’s workers’ compensation and third-party tort rights – how that interface works, and how the equities are best balanced – has long been the subject of academic and practical study. Under the Pennsylvania practice, most lawyers know the essential rules by heart. In this regard, the injured worker, as is the case universally, can sue a third party alleged to have been culpable in causing the work accident. The third party, however, cannot implead the employer, even if alleged to have been negligent. Heckendorn v. Consolidated Rail Corp., 465 A.2d 609 (Pa. 1983). That same allegedly-negligent employer, however, is fully subrogated to the employee’s recovery.
In a sophisticated new article, the author (a skilled student) conducts a comprehensive survey of the issue. She identifies the various approaches that have been undertaken over the decades by various states and critiques their strengths and shortcomings. She focuses, particularly, on what she perceives to be unfair results when the employer (as in Pennsylvania), cannot be joined and fault is hence not appropriately apportioned to it in the third-party action. The author concludes her impressive review with a bold proposal of her own, which she says better balances the equities. See Margaret H. Teichmann, The Burden of the Bargain: Revisiting the Predicament of Meshing Workers’ Compensation and Tort Law in Light of Widespread Acceptance of Aligning Liability with Fault, 3 Belmont Law Review 259 (2016).
Tuesday, June 27, 2017
With the important 2016 title, The Myth of the Litigious Society: Why We Don’t Sue (Chicago 2016), Professor David Engel published a book on the widespread phenomenon of non-claiming in the sphere of personal injury. (I reviewed that book in the December 2016 edition (#128) of my Pennsylvania quarterly newsletter.) As it turns out, empirical studies show that the common wisdom is incorrect: most Americans do not sue at the drop of a hat. Indeed, the contrary is true: many individuals, even with serious injuries, do not pursue the responsible tortfeasor.
The thesis of the Engel book was foreshadowed, for purposes of our field, in 2011. In that year, the journalist Peter Rousmaniere published his essay, When Injured Workers Don’t Claim, in the IAIABC Journal. See Peter Rousmaniere, When Injured Workers Don’t Claim, 47 IAIABC Journal 65 (2011), available at https://iecdp.files.wordpress.com/2011/08/journal_fall2010_complete_publication11.pdf.
Rousmaniere’s article is a review, evaluation, and analysis of the literature on the issue. He finds that literature to be compelling and, while he states that the precise level of non-claiming is impossible to discern, he believes that this pattern of behavior is common and calls into question the integrity and perhaps even the reason for being of the system. The lack of claiming when it comes to occupational diseases is particularly troublesome. The author publicized at least two studies that have since been the topic of discussion within the community. One study showed that many workers who suffer amputations have their medical expenses sponsored by group health insurance, and another showed that many roofers who sustain nail-gun injuries, never receive care. Little ambiguity as to causation usually surrounds these types of injuries, but many, nonetheless, do not seem ever to be the subject of a comp claim.
The issue of non-claiming has always been present in the Pennsylvania workers’ compensation system. As a lawyer, I encountered many instances of volunteer firefighters failing to prosecute even obvious trauma cases. They failed to do so largely because of ignorance of the law, the availability of collateral insurance, and a desire to not rock the boat. In addition, many such workers would obsequiously roll over as soon as the insurance denial was issued, regardless of whether the denial was legally cognizable.
As a defense lawyer I would also, in general, strategize on occasion with adjusters in ambiguous factual and legal situations to deny the claim and place in the injured worker’s court the decision on whether to seek legal counsel and pursue the claim. Presumably, this practice, which is in fact universal, eliminates many claims from ever being pressed beyond the reporting stage.
As a judge, meanwhile, I see many cases where the claimant was going to walk away from an obvious injury cases (like from trauma, or poisoning) and “eat” the time lost, but then is leveraged to pursue claim petition litigation because of medical bills. Many a compensation claim would never have been pressed were it not for the remorseless demands of providers (the E.R., the MRI vendor, the PT folk), that their often-considerable bills be satisfied.
Finally, both as a lawyer and a judge I have always been impressed that some workers walk away from injuries sustained in fault situations, like horseplay, unable to conceive that they are entitled to insurance benefits when they have culpability in the injury. Indeed, on occasion I see “fighting,” “horseplay,” “employee did not follow procedure” as the grounds – all non-cognizable – for a denial. I am seeing these denials, of course, because the worker then lawyered up and pursued the issue. Yet, I sense that for every tenacious litigant there is another poor devil of a workman who acquiesced in the denial and decided not to press his claim further.
Rousmaniere, for his part, identifies a number of major reasons that he believes injured workers do not claim. He notes that in academic literature these factors are referred to as “filters.” In any event, they include:
(1) The sophisticated worker’s belief that collateral benefits, like group health, sick leave, and long term disability, will be superior to workers’ compensation.
(2) Peer influence at the worksite not to claim, due to pressure to meet a management-imposed incentive program, or due to good old-fashioned “bravado.”
(3) Fear of retaliation by management.
(4) Worry about being driven into “an exhausting and potentially contentious process, as workers’ compensation is often and with some justification portrayed.”
(5) Ignorance surrounding the availability of benefits.
(6) Late manifestation of injury or disease, which makes it impractical to press a claim.
Rousmaniere recommends that state agencies be proactive in studying the issue of non-claiming, and he voices frustration that no interest has been shown by such state officials. That frustration may have to endure: the business interests that have a voice in the overall regulatory process hardly desire workers’ compensation agencies to be promoting claims. In any event, Rousmaniere’s observations and advocacy are essential to those who desire the system to work.
Monday, June 26, 2017
The editor/updater of the Larson treatise has set forth a summary and commentary on the Protz case here:
He points out, among other things, that several other states feature a "most recent edition"-type phraseology in their state workers' compensation laws (and he lists them). And, of course, while Protz is not authority in other states, "the argument put forth by Justice Wecht could, nevertheless, be persuasive in any future litigation" in those other jurisdictions.
For his part, he finds sympathy with the Protz critique: "Setting procedures and standards is hard work; many legislators would prefer to kick the can toward some other group who would make the decision. The Pennsylvania Supreme Court has signaled that the state legislature may not just give up its proxy to others."
Saturday, June 24, 2017
In the 1970’s, when liberalizing comp reforms brought, often for the first time, injured worker freedom of choice of physician, that development was seen as a significant victory. No longer would the worker be stuck with the “company doctor,” that is, the plant physician, whose credentials were not always the best and who, perhaps more importantly, was inherently conflicted.
With freedom of choice, a working class individual could receive the same type of medical services as did his middle-class neighbors a few blocks over.
As the sociologist Elaine Draper noted in her book, The Company Doctor: Risk, Responsibility, and Corporate Professionalism (Russell Sage Foundation 2003), these doubts about the quality of the company doctor (the “negative reputation” they often enjoyed), were longstanding. Draper also points out that the subject of the company doctor has been treated in literature and film.
She doesn’t mention, however, Philip Roth’s first novel, Letting Go, published in 1962. In that book (as I recently learned), the company doctor received what is surely its most negative depiction in literature.
Roth’s long novel depicts the travails of the early adulthood of three highly dysfunctional Jewish young people (a young married couple, Paul and Libby; and Gabe, a former infantry officer), in the years immediately after World War II. Among the many summits and valleys of their road towards stability is the supremely unstable Libby’s unplanned pregnancy. This development forces the pair to drop out of graduate school and sentences Paul to a place on the assembly line in a Chevrolet plant. There, distracted by his ruminations from his tasks of bolting car trunks, he suffers a serious gash to his wrist and is dispatched to the plant infirmary. There, the physician, Dr. Esposito, stitches the wound.
And gives Paul the name of an abortionist.
This theretofore non-considered option launches the couple into a (well-considered) tumult of emotion and decision-making. The preliminary trip to the office of the abortionist (Dr. Smith, a D.O. – a type of physician that also gets bad play), is horrifying (the doctor is a cold corporate executive type and his nurse anesthesist is obese and smelly). The fee, meanwhile, is $450 and will ruin their savings. Worse, an officious neighbor discovers the plan and threatens to report them to the police. In the end, the couple decide, ill-advisedly, to go through with the procedure. The rest of the book portrays the already neurotic Libby suffering the consequences of their mistake.
But in the short term, there's Paul’s follow-up visit to the company doctor: “Had everything worked out? Wife all right? Satisfied? Fine. He did not mean to pry. Only one had to check on Smitty. He fed the osteopath patients – almost one a month – but still it was wise to keep an eye on the fellow. Every once in a while Doctor Tom seemed to forget about slipping Dr. Esposito his few bucks. You know what I mean? Not an entirely professional group, osteopaths. And how’s the wrist?”
A contemporary review can be found at http://www.nytimes.com/books/97/04/20/reviews/roth-letting.html. See also generally https://www.loa.org/books/231-novels-and-stories-1959-1962.
Friday, June 23, 2017
AMA Guides Disapproved for Use Under the Pennsylvania Act: Part II (Initial Thoughts on the Law of Retroactivity)
The Supreme Court, in its Protz decision, set forth no admonition with regard to retroactive application of the decision. In lieu of such directives, resort must be made to common law doctrine. Of course, guidance from the high court would have been most welcome. Indeed, initial law firm website postings (see, e.g, http://www.postschell.com/publications/1385-pa-supreme-court-declares-ires-unconstitutional); lawyer commentary in the legal press (see, e.g., Ms. Sherri Okimoto’s top-notch column at the pay-site WorkCompCentral.com); and hearing room chatter, have all focused on this extremely practical issue. (As to Ms. Okimoto's column, the important remarks of attorney Lawrence Chaban merit special attention.)
On this topic, in any event, I have long included in the Torrey-Greenberg Treatise (Thomson-Reuters 3rd ed., 2008), at section 1:92, the following brief discussion:
A statute found unconstitutional is usually considered void for all purposes and “unconstitutionality dates from the time of … enactment, and not merely from the date of the decision so branding it ….” Thus, “an unconstitutional law, in legal contemplation, is as inoperative as if it had never been passed.” …. [C]ourt pronouncements are [consistent with this rule] usually held retroactive. [A] competing, well-recognized rule, however, is that a final judgment is final and not to be collaterally attacked. This is so notwithstanding the fact that the law which supported the judgment is later found unconstitutional.
For the initial, familiar, declaration, we cite Buradus v. General Cement Products Co., 52 A.2d 205 (Pa. 1947). For the latter, we cite a U.S. Supreme Court case which has been applied in Pennsylvania, Chicot County Drainage Dist. v. Baxter State Bank, 60 S. Ct. 317 (U.S. 1940). That case indicates that exceptions can exist to the general rule that declarations of unconstitutionality void everything that has unfolded in the past. The Pennsylvania Supreme Court, in a 1984 case, stated:
Any broad statement of absolute retroactive invalidity must be taken with qualifications . . . “The actual existence of a statute, prior to such a determination [i.e., unconstitutionality] is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects …. [Q]uestions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. (Citation omitted, quoting Chicot County ….).
Cianfrani v. Commw., State Employees’ Retirement Board, 479 A.2d 468 (Pa. 1984).
Watch for my next posting for further thoughts on the retroactivity issue. I won’t be taking positions on the issue, given my role as a neutral ALJ, but I’m hopeful that I can comprehensively identify what appear to be the competing authorities.
Wednesday, June 21, 2017
AMA Guides Disapproved for Use Under the Pennsylvania Act: Review and Analysis of Protz v. Derry Area School District (Pa. 2017), Part I
The leading text by Babitsky & Mangraviti, Understanding the AMA Guides in Workers’ Compensation, now in its Fifth Edition, includes a subchapter, “Constitutional and Other Legal Challenges.” We have long known from this discussion that trial lawyers (in particular) have always mounted challenges to use of the text in the comp context under a variety of constitutional arguments. One type of challenge, advanced in North Dakota (1997), New Mexico (1996), and Arizona (2011), has been based on the argument that legislatures cannot, in effect, delegate lawmaking authority to the American Medical Association via provisos that the evaluator is to use the “most recent” or “most current” edition. These assaults on the AMA Guides all failed, as the courts reasoned (to use the North Dakota court’s characterization), that “most recent” should be interpreted to mean the “most recent at the time of the statute’s enactment.” See Babitsky & Mangravati, § 3.04 (Supp. 2012).
In a new case from the Pennsylvania Supreme Court, however, this injured worker argument prevailed. In a case filed on June 20, 2017, the court, in a 6-1 decision, held that the Pennsylvania Act’s proviso (dating from 1996) that the most recent edition is to apply, violated the non-delegation clause (Article II, Section 1), of the Pennsylvania Constitution. See Protz v. WCAB (Derry Area Sch. Dist.), ___ A.3d ___ (Pa. 2017), 2017 Pa. LEXIS 1398, affirming as modified, 124 A.3d 406 (Pa. Commw. 2015). The issue in general is discussed in the Torrey-Greenberg Treatise, § 6:51.70 (Thomson-Reuters, 3rd ed. Supp. 7.2016), which is quoted in the majority opinion. At the time of the decision, we were using the 6th Edition; the Fourth Edition was, meanwhile, in place at the time we first adopted the text.
I have, for easy reference, posted PDFs of the Protz opinion on my research website, www.davetorrey.info.
The court actually struck the entire provision of the law (Section 306(a.2)), that provided for the use of the AMA Guides in the partial disability context. Thus, in that context, no version of the AMA Guides (including the Fourth Edition – see below), is authorized for use under the Pennsylvania system.
It is important to note that the Pennsylvania Act does not, outside of hearing loss, feature percentage awards of permanent partial disability, the model of compensation that likely predominates among states. Pennsylvania law, in the partial disability context, applies the AMA Guides in a more limited way: if, after receipt 104 weeks of total disability, a worker is determined under the Guides to have less than a 50% whole person impairment, he or she is thereupon limited to a maximum of 500 further weeks of partial disability – perhaps counterintuitively, at the total disability rate. This determination does not establish a 500-week cash entitlement; it merely provides for the employer’s potential future liability and the worker’s potential future entitlement. (Note: Presumably the Fourth Edition endures as our reference in hearing loss cases. In my opinion, it does.)
The court’s rejection of the law in question was more broad than that of the Commonwealth Court (the middle levels appeals court), which had similarly found the statute offensive to the constitution, but which remedied the situation by holding that henceforth the 4th Edition – that is, the edition in force at the time the law was passed in 1996 – was to apply.
It is conceivable that the employer may decide to seek review in the U.S. Supreme Court. However, that court (to this writer’s knowledge) has only accepted two workers’ compensation cases from Pennsylvania from 1915 to date, and both of those dealt not with matters of state constitutional interpretation but cases where federal issues were involved.
An immediate, straightforward upshot of the ruling is that injured workers in Pennsylvania who have received 104 weeks of total disability are no longer subject to Impairment Rating Evaluations. They will remain presumptively totally disabled until they actually return to work, compromise settle their cases; or until their employers move forward to adjust benefits in the familiar ways – submissions of full recovery medical opinions, showings of available modified duty via earning power assessments, accommodations by way of actual job placement back at the shop, undertakings of outplacement thru basic vocational rehabilitation strategies, and showings of work availability via innovations like funded employment.
The decision, in any event, has raised a number of practical questions for the workers’ compensation community. Among these are (1) whether the decision is retroactive and can somehow inure to the benefit of injured workers who have, since 1996, been adjudicated as less than 50% impaired – and hence limited to 500 weeks of partial disability; (2) how insurers are now to reserve permanent disability cases (presumably, with the 500-week cap, the “horizon of liability,” as it was called, a level of certainty as to maximum exposure was discernible); (3) whether this same elimination of a liability horizon necessarily translates into materially higher settlement values in permanent disability cases; and (4) how the legislature is possibly to respond.
Perhaps a more general question to ponder is whether the Pennsylvania Supreme Court’s ruling will inspire challenges in other states to the Guides under the injured worker’s prevailing argument. I would bet against the same and am not looking for any “dominoes to fall.” On the other hand, the court’s utter hostility to the AMA Guides, in this opinion and two others which preceded it, is remarkable and may be the subject of national dialogue.
I will take a stab at addressing these issues (and more), in successive posts. As you might expect, any opinions are purely my own and not those of my agency.
[Thanks to my academic research assistant, Justin Beck, Pitt Law 2017, for his review of these issues with me.]
Tuesday, June 20, 2017
A top-notch new book has been published by the Upjohn Institute in which a veteran economist and his younger colleague undertake an analysis of U.S. workers’ compensation programs. The focus of the authors, H. Allan Hunt and Marcus Dillender, is on how workers’ compensation is, in the present day, performing in what they view as its three critical areas: providing adequate benefits to support beneficiaries in the wake of work injuries; facilitating workers’ return to work at time-of-injury employers; and promoting workplace safety through the financial incentive of mandatory insurance and experience rating. See H. Allan Hunt & Marcus Dillender, Workers’ Compensation: Analysis for Its Second Century (2017).
To a great extent this short book is an updated overview of the literature in these three areas. A frequent theme, meanwhile, is the familiar complaint that, as workers’ compensation is a state-based program, study of overall performance is difficult in the extreme. This is particularly so in the area of benefit adequacy, where analysts must compare wage-loss jurisdictions (like their home state of Michigan), with permanent impairment states – while at the same time trying to make some stab at judging the adequacy of the lump sum compromise settlements that so predominate in the present day. The authors ultimately render no broad conclusion on whether U.S. programs are providing adequate and equitable wage replacement. And, on a depressing note, they posit that policymakers have “insufficient interest” in the question.
To this writer, the most interesting discussion centers on returns to work by employees to their time-of-injury employers. While hardly a new concept, the authors portray early and aggressive attempts to return employees to work as part of the broader disability management movement that has evolved in the last few decades as a cost control strategy. An observation that rings particularly true is that return to work has to a great extent displaced ambitious (and often expensive) vocational rehabilitation programs run by state agencies. Of course, on the ground, we perhaps see the process most dramatically in the tension between injured workers’ lawyers and employers, as the latter utilize nurse case managers (who often can be aggressive) to facilitate prompt return to work. Claimants’ counsel on occasion view such nurses as partisans – mere extensions of the adjuster – while the employer and carrier view such interventions as in good faith and critical, in many cases, to get the claimant the best care and ease the worker’s return to his or her job.
The Hunt & Dillender book is an excellent overview of the system. The book would be especially valuable for the law student who desires to go beyond the legal principles and rules which dominate claims adjustment and litigation and craves exposure to, and sophistication surrounding, all aspects of the program. At 129 pages the book is highly digestible. It’s also flawlessly edited and produced and features an excellent bibliography.
Workers’ Compensation: Analysis for Its Second Century can be read online for free. See http://research.upjohn.org/up_press/244/. Hardcopies can be purchased for $14.99. See https://www.upjohn.org/sites/default/files/pdf/17-18-Upjohn-Pubs-Catalog.pdf.
> Thanks to my colleague Tim Schmidle, Ithaca, NY, for connecting me with this important new work!
Friday, June 9, 2017
The regular Florida legislative session ended in May, and today is scheduled to be the end of a 3-day special session called to address state budget items. The clock has now officially run out (for this year) on a legislative fix to Florida’s workers’ compensation law, which was recently found to be unconstitutional in two respects by the Florida Supreme Court. Prior coverage here: http://lawprofessors.typepad.com/workerscomplaw/2016/07/florida-testing-the-limits-of-the-grand-bargain.html
The main sticking point between the Florida House and Senate on competing workers’ compensation reform bills appears to have been a difference in maximum hourly rates that could be used by a JCC (Judge of Compensation Claims) to calculate a reasonable attorney’s fee departure from the statutory sliding scale. The House version would have capped reasonable fees at $150 per hour, while the Senate version capped reasonable fees at $250 per hour. Both versions were attempts to counteract a significant (14.5%) premium rate hike that is being largely attributed to the Supreme Court’s decision in Castellanos v. Next Door Co., holding that a mandatory statutory fee schedule with no possibility of departures for reasonableness violated the U.S. and Florida Constitutions. Somewhat ironically, this impasse leaves in place the remedy ordered by the Court in Castellanos: when the statutory fee schedule results in an unreasonable fee, the claimant’s attorney is “entitled to a fee that deviates from the fee schedule.” – with no specified hourly rate cap.
Both of the competing bills would have also fixed the constitutional problem identified in Westphal v. City of St. Petersburg by increasing the maximum duration for temporary total disability benefits from 104 weeks to 260 weeks. The Senate bill would also have switched Florida from a “full rate” system (in use in only seven states) to a “loss-cost” rating system that would incorporate individual insurer loss-cost multipliers for approval by the Office of Insurance Regulation.
A separate legal challenge to the OIR’s approval of a 14.5% rate hike has also suffered a setback. The First District Court of Appeals has now ordered reinstatement of the OIR’s approval of the hike: https://edca.1dca.org/DCADocs/2016/5408/165408_DC13_05092017_103647_i.pdf
A Republican-dominated Florida legislature was unable to accomplish even relatively narrow fixes to the two constitutional deficiencies identified by the Florida Supreme Court last year. It will be interesting to see whether more comprehensive reforms are attempted next year, or whether the legislature continues to pursue the whack-a-mole approach to plugging constitutional holes in the statute.
Jason R. Bent
Tuesday, June 6, 2017
A staple of risk management advice that lawyers have long given to claims professionals is that they should be serious about, and attentive to, the potential for subrogation on claims.
That advice was again provided recently, at a conference, by top experts in this particular niche of the workers' compensation field -- including the subrogation guru Gary Wickert, Esq. See "Top Subrogation Mistakes,” https://www.workerscompensation.com/news_read.php?id=26290&type=7 (posting of May 25, 2017).
A top 10 summary of the panel’s comments has now appeared on the Safety National website, as reproduced at the workerscompensation.com link reproduced above. (I’ve reworded their admonitions!)
These practice hints would be invaluable to share with young attorneys or even sophisticated law students who are entering the field.
1. Don’t delay in engaging skilled subrogation counsel. The adjuster who is being ignored by
claimant or his counsel regarding a third party action, or potential for the same, should not delay until the 11th hour to take action on a possible subrogation action. The risks of delay are that evidence may be hard to collect and the tort action statute of limitations may expire.
2. Scrutinize the accident/injury circumstances to discern whether a third-party action, and the potential for subrogation, are present. If necessary, recruit counsel to assist. “Attorneys,” the authors declare, “have recovered sizable amounts in third party claims in cases which initially appeared to [feature] no third party.”
3. The subrogation investigation must be immediate and meticulous. The hours and days immediately after the casualty, the authors insist, “are the key to potential recovery.”
4. Avoid Discount “Vendors.” Subrogation lawyers who promote themselves by advertising a small fee should be avoided. “Low rate vendors,” the authors state, “focus on speed” and may hence not be as thorough as they should.
5. If plaintiff’s counsel is protecting the carrier’s interest, vigilance is still merited. The authors recommend the carrier have its own counsel, at least in serious cases (This writer’s inference.) After all, no lawyer can really serve two masters. If plaintiffs’ counsel does take on this role, a contract should exist, “spelling out the expectations …..”
6. Beware the subrogation waivers you may have (unfortunately) agreed to. Insureds sometimes ask that the carrier waive its right to subrogation and, when the carrier agrees, it demands a premium enhancement. If the carrier has allowed a waiver in a case, so be it, but the authors point out, grimly, that such waivers do, indeed, “eliminate your opportunity for recovery.” However, they also note that care should be undertaken when such waivers are given in the first place. The language must not be so broad that it allows the insured to be impleaded. When that happens, exposure could follow for the carrier under Part 2 of the Policy (Employers Liability).
7. Any required notice rules must be promptly satisfied. As far as the authors are concerned, all potential third parties should be placed on any required notice of potential suit. Also, for state or municipal liability to accrue, many laws require that notice be provided. These notice limits may be shorter than the actual statute of limitations. Also, states often have required language for the notice letters and if you do not follow this precisely potential recovery could be barred.
8. Consider the potential situs of the third-party action. Laws of the various states differ with regard to the cognizability of subrogation claims. As Mr. Wickert has observed elsewhere recently, for example, some states do not allow subrogation until the injured worker/plaintiff has been “made whole.”
9. Don’t rush into a subrogation waiver in the C&R just to pare off reserves. The authors assert, “Carriers are too quick to waive liens as they see it as an easy opportunity to take down a reserve.” The lien, in fact, has value, and responsible adjustment calls for close case evaluation. They counsel, “Don’t give up all or part of it for nothing.”
10. Hire the right expert. If the carrier is to be in charge of the subrogation suit, the correct expert must be retained. In the workers’ compensation/personal context, of course, a key expert is a physician who must be prepared to testify in court.
In a new article prepared for the IAIABC, the American Insurance Association official Bruce Wood (now retired but working as a consultant), takes his turn in critiquing both opt-out and the non-subscription plans which have become popular in Texas. Mr. Wood succinctly sets forth the familiar, persuasive arguments that opt-out defeats the workers’ compensation goals of (1) affording most workers (within a particular state, in any event), with equivalent injury recoveries; (2) promoting safety via experience rating; and (3) affording due process through independent adjudication via state agencies and courts, as opposed to internal employer panels. See Bruce C. Wood, What are the Public Policy Implications for Alternatives of Non-Mandatory Work Injury Compensation Arrangements?, IAIABC Perspectives, p.24 (March 2017).
A prominent aspect of his criticism is the dubious “free market” claim of opt-out promoters. “What is the social cost,” he queries, “of a system of work injury compensation that effectively rewards employers for refusing to assume the costs of protecting its workers, including survivors, from the financial travails of work injury or death, by permitting them a cost advantage over the competitor subscribers to the workers’ compensation system. Is this a defensible result of the free market?” Workers’ compensation, he reminds us, “is not merely a product, with its merit judged by cost alone. It is a system of social insurance governing relationships between and among employers, employees and political institutions ….”
An important part of Wood’s commentary focuses on the safety-promotion purpose of the law. He explains that classification and experience rating means that “safe employers do not subsidize injury costs generated by less safe employers…. For employers opting out or not subscribing, there is no experience rating system. Furthermore, if substantial numbers of employers do not participate, workers’ compensation will lose actuarial credibility for those employers remaining under it…. [A]lso, by not participating, employers with ‘bad’ claims experience can ‘dump’ their bad experience and avoid the financial consequences of a more hazardous workplace.”
Monday, June 5, 2017
In a new article for the IAIABC, the tech analyst Jeffrey White introduces readers to coming innovations in the insurance industry for which, he says, members of the workers’ compensation community should prepare. These innovations in insurance placement, claims adjustment, and payments are made possible by computer technology and, more immediately, by advances in artificial intelligence. See Jeffrey Austin White, Insurance On-Demand: Are You Ready for Disruption?, IAIABC Perspectives, p.8 (March 2017).
The innovations are the subject of an exploratory program known as the Blockchain Insurance Industry Initiative, or B3i, organized by insurance giants including Allianz and Zurich. Their goal, White states, is to “explore the potential of distributed ledger technologies to better serve clients through faster, more convenient and secure services.”
So, what is “blockchain technology”? A reliable source explains that a “blockchain” is a “distributed database that is used to maintain a continuously growing list of records, called blocks.” A “distributed ledger,” similarly, is “a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.”
How would insurance utilize such technology? White explains that these technological advances constitute “a new way to store documents, financial transactions, and businesses workflows without the need for central authority or intermediary. In the world of insurance, it is being considered to facilitate payments, collect premium, process claims, store policies, and execute contracts. It allows for the automation of business processes typically managed by a company but without the overhead of employees and paperwork.”
Of course, Bitcoin is the classic blockchain technology product with which most are familiar. See https://en.wikipedia.org/wiki/Blockchain (this note also briefly referencing insurance).
E-technology, the author details, has in fact fostered the development of at least four innovative insurance models. These are (1) “Usage Based,” such as “Pay How You Drive”; (2) “Bought-by-Many,” whereby insurance agents “scour the web” looking for individuals with similar lifestyles, and offer them corresponding insurance; (3) Peer-to-Peer, a modern form of mutual insurance; and (4), the most futuristic, Decentralized Autonomous Organizations (DAO) – a form of peer-to-peer insurance, but which eliminates any central insurance company and is entirely managed, anonymously, over a “blockchain implementation.”
White’s major theme is that these concepts are not receptive to insurance regulation. This is particularly true for the Bitcoin-style DAO. In fact, the DAO is “anonymous by design” and hence “it would be extremely difficult for the government to limit or impose sanctions because it is anonymous … and technically difficult to shut down.”
It is in part for this reason – the problem of regulation – that White states, in his conclusion, that these insurance innovations will be delayed in their introduction to the workers’ compensation market. Technological issues abound; carriers and vendors “would need to be open to sharing data”; a sophisticated “standalone platform does not yet exist for a true peer-to-peer network in the insurance field”; and the “limited amount of cooperation, slow adoption of technology, long tail nature of the claims, and the huge amount of regulation in the industry will continue to temper true innovation in the workers’ compensation industry.”
White says don’t look for these innovations in our field for another three years but, with this parade of obstacles, one senses that, for better or for worse, the wait will be much longer.
See also Kevin Aang & Ali Safavi, Blockchain is empowering the future of insurance, Tech Crunch (AOL, Inc., October 29 2016), available at https://techcrunch.com/2016/10/29/blockchain-is-empowering-the-future-of-insurance/.
Saturday, June 3, 2017
Walmart “Crowdsourcing”: Worker’s Compensation Considerations in Utilization of Employees to Make Deliveries During their Homeward Commute
The Washington Post recently featured a story about Walmart’s apparent plan to use employees commuting home to deliver packages to customers’ homes as part of the “last-mile” portion of the delivery process. That could sure change the complexion of rush hour.
Workers’ compensation professionals are well familiar with the “going and coming” rule: for an employee having fixed hours and place of work, going to and from work is covered only on the employer’s premises. The obvious question presented by these developments—and I discuss the matter partly because Walmart is one of the largest employers in my home state of Wyoming and employees often drive a VERY long way home—is the precise location of a “premises” when an employee occasionally, rather than regularly, delivers packages on his or her way home. The employee would presumably be “furthering the interest” of his or her employer. One also supposes that injuries suffered by employees in such commutes may be said to have transpired during “special missions” for employers, arguably bringing the injuries within workers’ compensation statutes. On the other hand, suppose an employee is compensated differently for delivering packages after work. Is the employee an employee for the purpose of her regular job but an independent contractor for purposes of delivery? Or suppose the delivery is covered by the “dual purpose rule.” The Larson’s Treatise, citing an old chestnut, states that rule as follows:
[W]hen a trip serves both business and personal purposes, it is a personal trip if the trip would have been made in spite of the failure or absence of the business purpose and would have been dropped in the event of failure of the private purpose, though the business errand remained undone; it is a business trip if a trip of this kind would have been made in spite of the failure or absence of the private purpose, because the service to be performed for the employer would have caused the journey to be made by someone even if it had not coincided with the employee’s personal journey.
“I would have gone home despite the delivery, but if I did not have to go home I would not make the delivery.” One could argue that under such circumstances the “trip” in question was personal and an injury suffered therein not compensable. On the other hand, “someone (though perhaps not the employer’s employee) would have delivered the package if I had not done so.” Thus, maybe it was a business trip. The problem can be argued, in other words, in (at least) two ways.
It is often at this point when I will read an article despairing that these kinds of problems are insoluble within the workers’ compensation system and insisting that a “third way” is necessary given a new “disruptive” economy. Not at all. One simply creates a new rule that fits with the logic of the larger underlying system. (It would take most of my readership about two minutes). One need not explode the system. In fact, that kind of “so-new-no-one-has-ever-thought-of-such-a-thing-before” reaction betrays a commentator who has either not read enough workers’ compensation cases or who has a preexisting deregulatory agenda (and I include proponents of "federalization" as advocating, de facto, deregulation). “We think crowdsourcing is a mechanism of the future,” says Walmart. Maybe so, but the colorful term “crowdsourcing” does not change the underlying reality of workplace injury. Someone must bear the cost; and, in the end, it will be the injured worker, the taxpayers-at-large, or the employing entity (through its customers). No tale of crowdsourcing or disruption can persuasively interrupt this central truth.
Michael C. Duff
Friday, June 2, 2017
Alternative Dispute Resolution (ADR) is one of those efficient-sounding, indisputable ideas that no one could argue against – until you are the one being forced to exchange what you thought were clear statutory rights determinable in a public form for ADR.
This concept is squarely at the center of a dispute between the Florida Society of Ambulatory Surgical Centers, two affiliates of the HCA hospital chain (Oak Hill Hospital and Parallon Business Performance Group), Automated HealthCare Solutions (a firm that submits claims to insurers after doctors dispense medications to injured workers) and the Florida Division of Workers' Compensation. The Division has apparently implemented rules which, among other things, would defer resolution of fee disputes between workers’ compensation medical providers and insurers who have a “managed care arrangement” to a private grievance process. But, say the impacted regulatees, “the Agency’s failure to resolve such disputes will force Petitioners to incur substantial additional time, effort and expense to fully resolve them and collect amounts owed.” Yes – that is the point of ADR.
Why, you might ask, does the Division not want to resolve the disputes? According to Automated Healthcare Solutions’ petition administratively contesting the Division’s rule, at least part of the reason claimed by the Division is that “it cannot decide disputes regarding compensability and medical necessity because [it] lacks sufficient personnel or expertise to address those issues, [it] has the authority and the duty to acquire the personnel and expertise it needs to implement the workers compensation statutory scheme, including the reimbursement dispute resolution process.”
While there are also some interesting jurisdictional (where, precisely, within the administrative structure is the locus of authority with respect to promulgation of such rules) and administrative law (is the agency’s rule generally within the scope of its statutory authority, and who gets to answer the question?) questions at play, it is clear that agency resource preservation has much to do with the brewing dispute. The relevant Florida statutory language (at Title 31, Ch. 440.134(15)(a)) states:
A workers’ compensation managed care arrangement must have and use procedures for hearing complaints and resolving written grievances from injured workers and health care providers. The procedures must be aimed at mutual agreement for settlement and may include arbitration procedures. Procedures provided herein are in addition to other procedures contained in this chapter.
The question is whether the use of a grievance process must be resorted to as a condition precedent to invoking “statutory” fee dispute mechanisms. The agency seems to be saying it does not have the manpower or technical knowledge to resolve such disputes, so it wants the disputing parties themselves to resolve them. Can the agency do that?
There is, as it turns out, an analogous administrative model of which I am aware. For decades, the National Labor Relations Board has compelled employers and unions (and sometimes others) alleging a violation of the National Labor Relations Act (NLRA) to resort to the private grievance-arbitration machinery of collective bargaining agreements before invoking statutory procedures. An award resulting from a “regular” arbitration has historically been nearly automatically upheld. Nowhere in the NLRA is such a procedure authorized. While I do not like the approach—and the procedures have been somewhat modified in recent years—it is hardly a novel development for an administrative agency to compel utilization of ADR prior to “firing up the engines” of the State. My sense is that those arguing this kind of compulsory ADR exceeds the scope of the agency’s authority will have a steep hill to climb in disputing that such a model is not within the inherent powers of an administrative agency. On the other hand, Title 31, Ch. 440.13(7)(c) states, “Within 120 days after receipt of all documentation, the department must provide to the petitioner, the carrier, and the affected parties a written determination of whether the carrier properly adjusted or disallowed payment.” But I suppose a written determination might be that the “department” has decided to defer resolution to the parties’ private arrangement, and could primarily serve to protect the parties’ timely filings.
I should mention that the NLRA model presumes the existence of a valid collective bargaining agreement. By analogy, a “managed care arrangement” should perhaps be evidenced by explicit, written terms so as to justify the implementation of 440.134(15)(a).
I am not a fan of compulsory ADR, but I do find it ironic that those who support the idea in many contexts may sing a different tune when their own statutory interests or right to a public remedy and forum are threatened. An administrative hearing on the matter will be held on June 23.
Michael C. Duff