Workers’ Comp Premiums Could Skyrocket With COVID-19 Claims

Source: Bloomberg Environment

  • Health-care workers likely eligible for workers’ comp
  • Grocery, delivery workers will argue for eligibility

Health-care workers and emergency responders will benefit from rules eased in some states around workers’ compensation that will allow them to collect benefits if they can prove they caught Covid-19 on the job. Some say essential workers like grocery store employees and delivery workers also should qualify.

But employers need to be aware of the changing rules, and be prepared for the likely end result—skyrocketing premiums.

State workers’ compensation boards around the country are amending rules for benefits payouts to include health-care workers exposed to the virus and then quarantined.

Attorneys are keeping a close eye on the questions, such as who should be eligible to receive benefits, how does a worker prove they caught Covid-19 on the job, and how will an influx of successful claims affect businesses’ premiums to insurance carriers.

“If everybody who gets sick on the job is able to file a compensation claim and everyone is successful, it may bankrupt a company,” said Michael Duff, a workers’ compensation professor at the University of Wyoming.

Quarantined Workers

Workers’ compensation is a state-mandated insurance program that provides pay to workers who are injured on the job—in return, the worker agrees not to sue their employer. Like unemployment insurance, workers’ compensation rules vary by state.

In early March, Washington’s Department of Labor & Industries announced that it “will provide benefits to these workers during the time they’re quarantined after being exposed to COVID-19 on the job.”

And on March 13, Kentucky Gov. Andy Beshear’s office announced that Kentucky Employers’ Mutual Insurance will “expand coverage benefits to include the quarantine period for first responders and medical personnel,” a news release stated.

Still, many states haven’t changed their policies, and experts say proving causation can be tough for workers.

Proving Exposure at Work

Earlier this month, the Occupational Safety and Health Administration declared that coronavirus was a recordable injury—meaning an employer would have to notify the federal safety agency when a worker caught the disease at work—and issued guidance to that effect.

Safety attorneys said the guidance left confusion about how to prove whether a worker actually contracted the virus on the job, said Joshua Henderson, partner at Norton Rose Fulbright US LLP in California.

“At the moment, the question of causation is where there is a lot of uncertainty,” Henderson said. “Whether it was caused by a condition at work.”

Some lawyers and activists think grocery store workers and delivery drivers are eligible for workers’ comp benefits, since their employers deem them essential workers and they could be at higher risk of COVID-19 exposure based on their persistent contact with the public as the pandemic rages across the country.

Duff argues that there are scenarios where a worker could establish causation is by citing one’s essential employee status.

“If you’re required to come in and deemed essential employees, because you are by definition required to come into work during a pandemic, then I think the argument would be, ‘My risk of contracting this disease is by definition higher than the general public.’ What you’re basically saying is, ‘My workplace increases the risk of me contracting the disease’,” Duff said.

He said he believes many workers will qualify for claims, causing employer premiums to rise, and the pandemic exposes fissures in workers’ compensation rules and labor law as a whole.

“If I was in management, I’d figure out a strategy that is fair but won’t hasten my demise or subject me to extraordinary financial pressure,” Duff said. “I would be thinking about how I would responsibly contest claims in a way that doesn’t make me look like an ogre.”

Jeff Eddinger, regulatory business management specialist at the National Council on Compensation Insurance, told Bloomberg Law that no national data is available that can outline the impact of COVID-19 on premiums. Assuming there’s an influx of workers’ compensation claims from the health-care sector, “that would certainly cause some upward pressure on claim costs in the system, but then I would say on the other side of that, during this time where people are telecommuting and some industries shut down, that creates downward pressure because people aren’t working. Those two things could offset each other.”

Duff said employers should develop practices and policies that can reasonably contest claims, but “don’t unreasonably respond to workers because my customers aren’t going to feel good about it.”

Grocery, Delivery, and Essential Workers

Edward W. Guldi, a New York plaintiff’s workers’ comp attorney at The Perecman Firm, P.L.L.C., also said it’s not likely grocery or delivery drivers would be successful in worker’s comp claims.

“Nurses are going to get their claims, the hospital workers, too,” Guldi said. “The people who aren’t are grocery store workers, waiters, office workers and delivery drivers and basically everybody else who doesn’t qualify.”

He compared their position to the Sept. 11 firefighters and first responders in New York who initially were denied workers’ compensation. Later, the state legislature passed Article 8-A, which addressed the complications caused by the two-year statutory filing deadline, allowing those injured or sickened in rescue, recovery, and cleanup efforts access to compensation.

The New York Committee for Occupational Safety and Health—an organization of unions, worker centers, and activists—already has begun lobbying for sick workers to receive workers’ compensation in New York. A representative from the organization wasn’t available for comment.

John Ruser, president and CEO of the independent, nonprofit Workers Compensation Research Institute, said one way to ensure nonhealth-care workers are covered by workers’ compensation is through state legislation.

“In some cases, legislators passed a law that said certain conditions are presumed to be work-related, therefore all claims that come from a class of workers related to COVID-19 would be compensable. Legislators can pass that,” he said.

Guldi said maybe the New York State Assembly “will do the right thing for those who have this illness. I know when George Pataki was governor, it took unions and police unions and 9/11 widows and lobbying to make that happen.”

To contact the reporter on this story: Fatima Hussein in Washington at fhussein@bloombergenvironment.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

Department of Labor Issues Final Rule to Allow Associations and PEOs to Sponsor Retirement Plans

REIT
Final rule defines a PEO as an employer under ERISA and clarifies rules for PEOs to offer retirement benefits

On July 29, 2019, the Department of Labor (the “Department”) issued a final rule to facilitate and expand the availability of multiple employer defined contribution plans (“MEPs”). The final rule provides clarity regarding the types of “bona fide” groups or associations of employers as well as professional employer organizations (“PEOs”) that are permitted to sponsor retirement plans.

NAPEO supports the rule, as it is another step in in formalizing the legal framework for PEOs to provide benefits for their client’s shared employees. This action, along with the passage of the Small Business Efficiency Act contained in the Tax Increase Prevention Act (H.R. 5771, Public Law 113‐295) which created the voluntary IRS PEO Certification Program, demonstrates the federal government’s recognition of the PEO industry and the important role it plays in supporting our nation’s small businesses.

With respect to PEOs, the final rule does two things. First, it states that a “bona fide” PEO is capable of establishing a MEP. The rule then creates a safe harbor criteria for determining whether a PEO that sponsors a MEP is performing essential employment functions.

A copy of the final rule can be found here.

A summary of the final rule can be found here.

A detailed analysis on this issue from the Groom Law Group can be found here.

A recording of a NAPEO-sponsored webinar on this issue can be found here.

A copy of NAPEO’s comments on the proposed rule can be found here.
NAPEO Article can be found:

https://www.napeo.org/advocacy/what-we-advocate/federal-government-affairs/peos-retirement-regulation/dol-meps-finalrule

 

 

Workers’ Compensation Claims for Leased or Temporary Workers

Many companies are increasingly turning to staffing agencies to meet their personnel needs for a variety of reasons, including increased workloads and high employee turnover rates. Companies that use staffing agencies can save money because they avoid selecting, hiring and training new full-time employees. In addition, using staffing agencies frequently offers companies peace of mind because they know that workers will show up and perform their duties consistently.

But what happens if one of the staffing agency workers is hurt on the job? Who is responsible for covering the injury? What if the injured worker wants to sue the staffing agency’s client company for negligence? Answering these questions requires a thorough understanding of the employment relationships between the staffing agency worker and the client company. And the way employees are classified affects how the staffing agency and the client company’s workers’ compensation and commercial general liability (CGL) policies apply to work-related injuries.

Workers’ Compensation Versus CGL

Generally, companies are required to cover an injured employee’s medical treatment and lost wages through a workers’ compensation policy. This is a system of no-fault insurance that affords employees some security while recovering from work-related injuries. In exchange for these benefits, employees waive their right to sue their employers for negligence and related damages. Workers’ compensation provisions apply only where an employer-employee relationship exists between a company and its workers.

CGL policies protect companies when third parties (non-employees) are hurt because of the company’s negligence or misconduct. The issue of CGLs is particularly important for companies with staffing agency workers because it is not always clear whether an employment relationship exists between the company and the staffing agency workers. To fully appreciate the complexity of the issue, companies must be able to properly

Leased Versus Temporary Workers

The definitions for leased and temporary workers vary from state to state, so an adequate classification of staffing agency workers requires a solid understanding of state and local requirements.

For CGL purposes, a leased worker is an individual leased to a client company by a labor leasing firm under an agreement between the company and the labor leasing firm to perform duties related to the conduct of the company’s business. The leased worker category does not classify staffing agency workers as either leased workers or temporary workers.

Leased Versus Temporary Workers

The definitions for leased and temporary workers vary from state to state, so an adequate classification of staffing agency workers requires a solid understanding of state and local requirements.

For CGL purposes, a leased worker is an individual leased to a client company by a labor leasing firm under an agreement between the company and the labor leasing firm to perform duties related to the conduct of the company’s business. The leased worker category does not include temporary workers. Under this definition, leased workers are considered employees of the client company and are, therefore, excluded from the client company’s CGL.

CGL policies define a temporary worker as an individual furnished to a client company to substitute for a permanent employee who is on leave or to meet the company’s seasonal or short-term workload conditions. Temporary workers are considered employees of the staffing agency and are covered by the staffing agency’s workers’ compensation policy and could be covered by the client company’s CGL.

The Coverage Gap

An insurance coverage gap exists when a leased employee is injured while in the client company’s employ. Leased employees are considered to be employees of the client company for CGL purposes, but they may not necessarily qualify as employees under applicable workers’ compensation regulations.

This results in employing individuals who could sue the client company for negligence (because they are not limited by applicable workers’ compensation provisions). A company with no CGL coverage must pay any court-ordered damages (because CGL coverage does not apply to the company’s employees).

Solutions to the Coverage Gap

To bridge the gap created by leased workers, companies can look at shifting work-related injury liability to the staffing agency through an alternate employer endorsement or an extension of their CGL coverage to injury to leased workers.

  1. Alternate Employer Endorsement

Client companies can negotiate with staffing agencies to include an alternate employer endorsement on the staffing agency’s workers’ compensation and employer liability policies. This endorsement protects the client company, providing coverage to the client company in the case of a tort action and by giving the client company all the workers’ compensation coverage the staffing agency enjoys.

  1. Coverage for Injury to Leased Workers

This endorsement can be added to the client company’s CGL policy by changing the language that excludes leased workers and temporary coverage from CGL coverage. However, companies should recognize that insurance carriers will disfavor this solution as it effectively removes an exception they intentionally built into the CGL policy.

Why James River Insurance Dumped Uber Account

Interesting article published today out of the Insurance Journal by Suzanne Barlyn about insuring Uber.  Not surprisingly, carriers continue to be perplexed with gig-economy exposures.

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A Bermuda-based insurer that recently severed ties with an Uber Technologies Inc. affiliate said on Thursday the risk of providing driver ride-hailing coverage had become too great and that it had mispriced policies during its initial years on the account.

James River Group Holdings Ltd said on Oct. 8 it would cut ties with a unit of Uber, its largest client, and cancel all related policies as of Dec. 31 this year.

Florida was an “outsized contributor” to the insurer’s Uber problems, especially in 2016, given a large number of uninsured and underinsured motorists, said James River Chief Financial Officer Sarah Doran in a call on Thursday with analysts to discuss its third-quarter financial results.

The insurer cut back on its exposure to Uber’s Florida market in 2017, Doran said.

James River boosted its cash reserves by a total of $57 million during the 2019 third quarter. Of that, $50 million was for 2016 and 2017 losses stemming from its Uber account, the insurer said.

James River late Wednesday said it withdrew $1.2 billion in funds held as collateral in a trust created by an Uber affiliate to cover current and future claims.

Insurance is one of the largest expenses for ride-share companies, an issue that many analysts cite as a risk for the ride-share industry’s profitability.

“In Uber, we wrote a new type of risk that originally seemed to be highly profitable,” J. Adam Abram, James River executive chairman and chief executive officer, said in the Thursday call.

But the nature of that risk changed as Uber rapidly expanded into new regions, added tens of thousands of drivers, and moved into other business lines, Abram said. Uber’s businesses now include food delivery and freight.

“Candidly, in some years, we mispriced the risk,” Abram said.

James River’s poor results for its Uber account in 2016 and 2017 spurred it to negotiate a “substantial pricing increase” for 2018 and charge similar rates for 2019, Abram said.

James River bought reinsurance for a third of the Uber account in 2019, but does not expect profits on the account for 2018 and 2019 to offset earlier losses, Abram said.

A new California law designed to limit the use of “gig” workers ultimately swayed James River to cancel the Uber account, despite coverage now being “well-priced,” Abram said.

The law, which goes into effect on Jan. 1, 2020, spells out when companies must treat “gig economy” contract workers, such as ride-hailing drivers, as employees. “We believe (it) will adversely alter the claims profile for ride-share companies,” Abram said.

James River expects to process about 18,500 Uber-related claims while winding down the account, Abram said.

California Rating Beaurau looks to Lower Rating Thresholds, Classification Changes & More

Please see the attached article about the proposed workers compensation rule changes in California.

https://www.wcexec.com/flash-report/compline-to-provide-2020-x-mods-daily-plus-lower-rating-thresholds-classification-changes-more/

Since 1982 Compline has proven to be a reliable, responsible and reasonable resource in California.  Their ongoing responsiveness to legislative changes in the state speaks to their continuing value.  Libertate is a proud subscriber to Compline.  We access and utilize their portal for a number of great resources, such as Modwatch, Lead Generation, Pure Premium Behavior Metrics, Strategic Rate Comparisons, Carrier XMOD Comparisons , Carrier Territory Rate Mapper and much more.

We will continue to keep our eye on the changes occurring in this state and are committed to keep you informed.

If you feel your PEO could benefit from an analytical analysis, in CA or elsewhere, please don’t hesitate to reach me at 321-436-8214.

Delaware Workers’ Comp Rates Decline December 1st

Employers in Delaware will experience another decrease in workers compensation rates effective Dec. 1.

Comp rates will decline an average of 7.3% for the residual market and about 10% for the voluntary market, according to a statement by Delaware Insurance Commissioner Trinidad Navarro on Monday.

“I am delighted to approve yet another decrease in workers’ compensation rates in Delaware and even happier to see a double-digit average decrease in the voluntary market,” he said in the statement.

For the second year in a row, all actuaries reviewing the comp rate filing agreed that another rate drop was warranted, he added.

Original Article 

 

Are YOUR Client Companies Profitable?

The business model of many PEO’s includes utilizing the resale of workers’ compensation as a profit margin. For this to be successful, the PEO must understand the liabilities and assets affiliated with each of their workers’ compensation policies and price them appropriately. Both guaranteed cost and loss sensitive platforms have many variables which need to be understood over the course of the policy term to do this successfully. Because of this, understanding profitability at a portfolio or even a policy level can sometimes be a challenge. Understanding the profitability of individual client companies within master policies or with exposures spread over multiple policies adds an additional level of complexity.

At RiskMD we are able to seamlessly solve this problem! By tracking assets (premium) and liabilities (claims) of each client company based on their unique FEIN we are able to understand loss ratios and loss/profit margins on each client company within a given book of business. This holds true regardless of how coverage for the client company is structured, i.e. master policies, MCP’s (multiple coordinated policies), client direct policies or a combination thereof. This also holds true year-over-year regardless of changes in carriers or policy structure for any given client company.

This analysis of each client company can be performed using the carrier’s billed premium or the PEO’s charged premium. This allows us to understand performance of clients and policies as the carrier would view them, giving us greater leverage for negotiating pricing at renewals. Additionally, this allows us to understand client and policy profitability to the PEO itself.

To learn more about RiskMD’s patented process and how to understand YOUR data, contact David Sink at (407)613-5489 or by email: dsink@riskmd.com