One of the topics of great interest recently in workers' compensation is occupational disease compensability, and the marketplace perceptions of the questions that presents in our present "pandemic world." What are jurisdictions doing to react? Is the reaction prospective or retroactive, legislative or regulatory, measured or not? There is much to consider.
The Workers' Compensation Research Institute (WCRI) is sponsoring a Free WCRI Webinar on COVID-19 Compensability. There are questions about what states are doing regarding this complex analysis of compensability, as well as about how changes are being accomplished. The long-term effect of patches, reactions, or responses may or may not have been considered, and bear discussion.
The disruption has been significant legally as well. While the term COVID is a recent addition to our vocabulary, a search of WorkCompCentral returns 271 results (as of May 4, 2020). A search on WorkersCompensation.com yielded 418 results. In roughly 60 days, the workers' compensation news has produced an average of 4 to 6 article mentions daily in this little corner of the economy. Everybody is talking about this pandemic and its effects.
Some analysts suggested early that the risks associated with COVID might mean that workers' compensation would end up paying costs associated with the disease. By early March, Washington state had begun the process of providing benefits to "quarantined health workers and first responders." A dichotomous reaction had begun (some argue disparate treatment) in which prejudice in favor of some occupations has been discerned. And, a panoply of various reactions followed. Thomas Robinson penned an overview more recently.
One of the great curiosities of workers' compensation is that it (more aptly "they" as each state is different) remains a largely state-centric system. For decades, the federal government has sought to influence these systems, beginning with the 1972 National Commission report and recommendations. That has produced discussion, but historically minimal state legislative changes. There are many workers' compensation systems in American, not one.
In 2015 some reporters found fault with workers' compensation, leading to a call by ten members of Congress for more federal influence and control. Because one of the proponents was Bernie Sanders, then in the midst of a run for president, there were prognostications that change was imminent. There were predictions of a resurgent American socialism, and that was seen of particular import since workers' compensation is effectively a social program, a collective safety net.
The workers' compensation community was alive with discussions then of "what if," and much industry focus shifted to potential federal influence. A national conversation evolved, and led in 2016 to documentation of multiple concerns of the marketplace, including federalization. But, Senator Sanders did not become President. The interest in a workers' compensation national conversation and federalization waned. Previously vociferous organizations abandoned commitments for studies, discussions, or papers. As the young might colloquialize, the "conversation died."
Today, we still have great jurisdictional variety within workers' compensation in the United States. Certainly, there are similarities from state to state, some very basic and even profound. But, there are differences, equally profound in some instances. The reactions of jurisdictions to the COVID-19/Wuhan/SARS-CoV-2 have been similarly varied. In part, that may have been driven by whether a particular jurisdiction's legislature remained in session as the situation evolved. For example, Florida's legislature started early in 2020 and thus concluded March 19, 2020 just as the COVID-19/Wuhan/SARS-CoV-2 repercussions began in earnest.
The Claims Journal recently characterized the state reactions as "sympathetic," but warned that COVID-19 may be "a major cost driver for workers' compensation insurers." It aptly noted that most regulatory or statutory response thus far is limited to "first responders," but noted this was not perceived as uniform. The USA Today reported recently that there is generalized anxiety of COVID-19 among those who will return to work following the various lock-down, safer at home, and other state activity restriction orders. There is the potential for disease, and the fear of that potential. Truly COVID-19 is a double-edge sword.
Workers' compensation systems are statutory. By their very nature, they are defined through legislative enactment that alters employer and employee rights and duties under the common law (tort systems). Everything that is workers' compensation starts therefore in a statute or code. Each system in America also involves rules promulgated by regulators; there is Executive branch influence on the implementation of those statutory changes. Thus, change can come legislatively or regulatorily. Change can be profound and abrupt or evolutionary. The COVID-19 worker' compensation reactions can be considered from these perspectives.
Where are state compensation systems as regards occupational disease? For the most part, these systems that were envisioned and enacted to compensate and treat accidents have expanded to include coverage for occupational disease. Some lament that when business was burdened with this expansion, there was no corresponding quid pro quo. Some argue the "grand bargain" was impaired by that evolution.
Though there is generally coverage now for occupational disease, various statutes today exclude such coverage for everyday illness. Thus a statutory distinction between disease such as pneumoconiosis (asbestosis, silicosis, or black lung disease) and the common cold. Through a variety of definitions and constraints, compensability is dependent upon proof of workplace exposure and thus causation. In Florida, the Courts established a requirement for such maladies that:
"if the disease is an ordinary disease of life, the incidence of such a disease must be substantially higher in the particular occupation than in the general public."
Lake v. Irwin Yacht & Marine Corp., 398 So. 2d 902, 904 (Fla. 1st DCA. 1981). Such parameters or interpretations suggest a disinclination toward compensability of something like a cold, the flu, or even COVID-19.
The other end of the spectrum is Hawaii, featured just this week in Bob Wilson's We Don't Pay for Viruses Do We? There, he details Tom Robinson's recent scholarship on compensability of infuenza in the Hawaii system. That describes a very broad and encompassing acceptance of virtually any illness under workers' compensation.
COVID-19 has challenged the status quo. The news has been an uninterrupted parade of impacts and imports of this for weeks. Virtually every type of business has been impacted. Government operations have been impacted in a variety of ways. Workers' compensation systems have not been immune from those changes. Those systems have seen change as government struggles to respond to our first pandemic in years.
Seemingly the broadest recent intervention came in Illinois in Emergency Amendments filed April 16, 2020. These changed rules regarding workers' compensation in the Prairie State, founded on the COVID-19/Wuhan/SARS-CoV-2 response. Citing "unprecedented and extreme exigencies," the Workers' Compensation Commission enacted a "narrowly tailored" presumption of compensability for certain workers: if the petitioner is a:
"First Responder or Front-Line Worker as defined in Section (a)(2), if the petitioner's injury, occupational disease, or period of incapacity resulted from exposure to the COVID-19 virus during the Gubernatorial Disaster Proclamation 2020-38 and any subsequent COVID-19 disaster proclamations, the exposure will be rebuttably presumed to have arisen out of and in the course of the petitioner's COVID-19 First Responder or Front-Line Worker employment."
This is regulatory reaction. Certainly, the time period is narrow ("during the Gubernatorial Disaster Proclamation 2020-38"). Some took issue, however, with the breadth of the "front-line worker." Politico reported on the "challenge" of otherwise proving compensability in this viral setting. The Illinois rule was interpreted as including "grocery store employees as "front-line." A constitutional judge issued a restraining order regarding the rule. There were allegations that the Commission exceeded its authority. The Commission retreated by withdrawing the rule on April 27, 2020, according to the Chicago Tribune.
Politico likened the breadth of the Illinois action to Kentucky. It noted that there Governor Beshear issued an executive order April 9, 2020, which "presumed that removal of (certain) workers from work by a physician is due to occupational exposure." The covered employees included:
"employees of a healthcare entity; first responders (law enforcement, emergency medical services, fire departments); corrections officers; military; activated National Guard; domestic violence shelter workers; child advocacy workers; rape crisis center staff; Department for Community Based Services workers; grocery workers; postal service workers; and child care workers . . .."
Some have made mention of their perception that this is an appropriately broad inclusion of occupations. Others have noted various perceptions of occupations excluded from the list.
Not to be outdone, however, California issued a mandate bringing its workers' compensation compensability in line with Hawaii's, but specifically for the COVID-19. TheCalifornia Executive Order applies to all employees there that report to their place of employment, and then tests positive within 14 days. The presumption is rebuttable (disputable) and an employer could set out to prove that the disease was contracted somewhere outside of work. The fact is that proving where you were exposed to some germ or virus may border on the impossible. In that regard, it may be that the operation of law in assigning the burden of proof will be the determinant of compensability or deniability in such claims of disease.
California's executive action is clearly the broadest thus far. Unlike orders in other states that have focused on the first-responder or the front line, or specific roles, this order impacts every employee that presents to a workplace outside of her/his home. It is not without limit. Paid sick leave must be exhausted before workers' compensation indemnity entitlement begins. The effect extends only 60 days from its issuance on May 6, 2020 (July 5, 2020). It is retroactive to March 19, 2020. Effectively, it changes the law in California for a period of 108 days. While it proclaims that it does not impair the ability of insurance carriers to "adjust the cost of their policies," there has nonetheless been concern expressed about cost and premium.
On March 20, 2020, Michigan's Governor created an Executive presumption of compensability for "first response employees." The presumption is rebuttable ("unless proven otherwise"). The order says that "denial of a claim by a first response employee" is a violation of law and "subject to the penalties" provided in the workers' compensation law. The Order defines "first response" to include "state police," "correctional officer," "police officers, fire fighters, medical techicians," "members of rescue teams," "physicians, physician assistant, nurse, emergency medical technician, paramedic, respiratory therapist," home health aid, ambulance operator, and those working in care services, care facilities, homes for the aged, hospices, hospitals, or nursing homes."
Arkansas similarly acted through executive order in mid-April. The Governor suspended various broad portions of the state's statutes regarding occupational disease in workers' compensation. Previously, "compensation for exposure to disease to which the general public is exposed" was not compensable. The executive order changed that for "first responders and front-line healthcare workers." Neither of those terms is defined in the order, and thus potentially subject to some debate (it is possible those terms are already defined elsewhere in the statute). The order removes a prohibition on such disease claims, but leaves the burden of proof on the individual seeking compensation, requiring that she/he "demonstrate a causal connection, as required by law." Describing this as a "presumption" might thus be inappropriate.
Similar "first responder" executive orders were published in Missouri, New Hampshire, New Mexico, North Dakota, and Washington.
There has also been legislative action. Alaska introduced a new statute March 22, 2020; it became law April 10, 2020. This is a broad statutory approach to various challenges presented by COVID-19/Wuhan/SARS-CoV-2. To illustrate the broad nature of the law, it imposes various legislative impairments to various existing contracts precluding eviction and repossession of automobiles. For workers' compensation, the law creates a conclusive presumption that the cause of COVID-19 is occupational for someone who is a "firefighter, emergency medical technician, paramedic, peace officer, or health care provider." Most of the law is effective only after April 10, 2020. The workers' compensation presumption (Section 15) is retroactive to March 11, 2020.
Utah passed a bill to create a presumption for workers' compensation compensability for "first responder(s)," but the disease must be "contracted" "by accident" "during the performing of first responder's duties as a first responder." The law defines first responder to include physicians, health care providers, and "emergency responders" as defined by federal law. Minnesota passed a similar new law providing for a presumption of COVID compensability for:
"a licensed peace officer . . . firefighter; paramedic; nurse or health care worker, correctional officer, or security counselor . . . at a corrections, detention, or secure treatment facility; emergency medical technician; a health care provider, nurse, or assistive employee employed in a health care, home care, or long-term care setting . . .."
Louisiana, Massachusetts, New York, Ohio, Pennsylvania, and Vermont saw presumption language in bills filed during their legislative sessions. Business Insurance provided a May 5, 2020 update on the progress of some of these. As a rule, legislative change is the subject of much debate and compromise. Generally, legislative reaction will be less rapid than action by the Executive Branch.
Not to be outdone, there is an expectation reported recently by WorkersCompensation.com for Congress to consider legislative change regarding federal workers' compensation benefits for employees of the Transportation Security Administration (TSA). The article notes that more than 500 such employees have been diagnosed with COVID-19. There is a perception exhibited that if such an employee contracts the virus, it must be from the work environment. It is noted, in explaining the risk, that many travelers do not wear masks. There are a fair few customers at the local supermarket that likewise do not wear masks. When one becomes ill, how can it be determined to have been a risk at work versus a fellow customer at the store, a pedestrian on the street, or other mere happenstance that is the cause?
In late April, as California's Governor was contemplating his executive order, there were also two bills pending in the California legislature, according to CalMatters.com. The article predicts that "a wave of workers' compensation claims . . . could top $33 billion" there. By mid-April there were already a significant volume (1,527) of "COVID-related claims" in California. The article notes that one insurer, a state fund, had already elected to accept COVID claims regarding those it insured.
In late March, the Florida Chief Financial Officer issued a Directive, citing the onset of the virus, and Executive Orders declaring an emergency. This Directive describes the Division of Risk Management, which provides workers' compensation coverage to Florida state agencies. It concluded this Division "shall process Workers' Compensation claims submitted by Frontline State Employees who have tested positive for COVID-19, through a reliable method, as compensable claims." This directive implicates state employees directly. However, some have queried the meaning and definition of "frontline." Attorneys have expressed varied views as to whether this Directive will influence decisions of counties or municipalities regarding compensability decisions involving "first responders"; it is valid to discuss similar voluntary decisions of all employers.
A common sentiment from employees regarding workers' compensation reaction was expressed by a first responder in the CalMatters.com article: making employees prove compensability of the virus is "a ridiculous burden on people protecting us." The perception is that this virus presents risk and instills fear. There is prediction that some may decline to present for work out of fear of exposure. Others may miss work secondary to the mandate of self-quarantine (as an aside, the origins of quarantine were recently discussed on the BBC). To some extent, there has been recognition that actual occupational roles and perceived risks may influence such governmental decisions. Some might argue that requiring an employer that is similarly protecting us to disprove an employee caught a virus at work is similarly disconcerting.
The discrimination in favor of first responders is noted in various perspectives and commentary. The broader impact of reaction in Kentucky is noted. However, the broadest impact is in California. The time limitation of executive reaction is compared by some to the more permanent change of legislative reactions elsewhere. There are numerous impacts and implications. And, there are a variety of lawsuits underway across the country as individuals and industries seek determinations that various executive orders exceed constitutional or statutory authority. It is possible that the workers' compensation orders, presumptions, and expansions might face such challenges and may suffer the fate of the broad Illinois expansion of liability.
There has been discussion of the financial impact of coverage changes in workers' compensation. By its nature, workers' compensation operates through the collection and setting aside of funds from a large pool of employment. Those funds or premiums fund the cost of losses that are suffered (hopefully) by a comparative few. The balance is similar in all insurance; many buy auto coverage but relatively few have accidents; many buy health insurance but relatively few require treatment. Those who cover those risks make educated decisions or predictions about the probable liabilities, and they set their prices accordingly.
When the landscape changes unexpectedly, the actuarial predictions change, and then the potential exists that those prices charged (premium) will have been insufficient. The landscape change could come in the form of legal definitions or statutory delimitation of what is or is not covered such as the executive and legislative reactions discussed herein. Landscape change could come in the form of financial markets not performing as predicted, and thus affecting the investment return of those premiums collected. A variety of potentials exist that may lead to uncertainty.
That may be less true of public workers' compensation. A municipality, county, or state may be self-insured (paying the losses itself rather than purchasing insurance). The workers' compensation liabilities of that entity may be thus backed by its ability to impose and collect taxes. In that setting, if losses are greater than anticipated, the entity might adjust other spending or increase taxes in response. The risk, through those decisions, is spread to the population of that jurisdiction.
Similarly, the cost of insurance premiums may increase in the commercial market in reaction to these changes. Those costs will be included as restaurants, hotels, manufacturers, law firms, and more set their prices for goods or services. Those costs of workers' compensation will be incorporated into the costs that American consumers pay. In some ways, that inclusion is no different from, though perhaps less visible and more regressive than, taxation in the public sector example.
Ultimately, when there is injury or illness, there is loss. Someone has to Pay the cost of that loss, as I wrote in 2016. Professor Duff was recently quoted,regarding the California executive order, saying "costs never go away, they shift." His sentiment is the same. The actions and reactions to COVID do not change costs, but merely who will pay them. As states contemplate socialization of risk, there has been a demonstrable sentiment to shift cost to workers' compensation, a relief in the short term to employees and insured employers alike. In the long term, however, whether the socialization of such costs is sustainable as regards "ordinary diseases of life" remains to be seen.
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Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.