10-19-15; The Biggest IL WC News Nobody Noticed; John Campbell, JD on ACA and the Coming Cadillac Tax; Certificates of Insurance--Are They Phony? and much more

Synopsis: The Biggest IL WC News No One Noticed.


Editor’s comment: We love when major changes happen and the only party to notice appears to be the defense team at KCB&A. If you were paying attention, you might have heard IL Governor Bruce Rauner recently announced the James R. Thompson Center where the Illinois Workers’ Compensation Commission has been housed since 1985 is being sold. The word is our struggling state government is losing $10-20M a year, every year to keep this pink elephant of a building open. Gov. Rauner’s plan is to auction off the architecturally odd Thompson Center, which probably will lead to the emptying and razing of the 16-story glass-paneled building. Rauner called the building an "inefficient" and "wasteful" use of space with its huge basement-to-roof indoor atrium and backlog of maintenance projects equaling roughly $100 million. He wants to scatter downtown state employees/agencies and put the building up for a cash sale this year.


"We think it's a home-run decision in every regard," he said at a news conference. A spokesman for State government didn't have a list of the possible sites that could house these displaced state employees when the Thompson Center is sold. But he didn't rule out office space in the suburbs, saying Chicago, the suburbs and Springfield are all possibilities.


The building, designed by architect Helmut Jahn and named for a former Illinois governor, opened in 1985. It cost the state roughly $170 million. Marked by a half-dome with pinkish-red and blue panels, the 1.2 million-square-foot building sticks out, particularly next to its more stately granite neighbor, Chicago City Hall. To our understanding, both House Speaker Madigan and Senate President Cullerton are generally okay with the plan, although they remain locked up with the Governor on most other issues, including the lack of a state budget. Every indication is once the goofy Thompson Center is sold and closed, it will be rapidly demolished by the new owner so more functional commercial buildings can be built on the valuable real estate upon which it sits.


Is that going to be a major change for the IL WC community?


Youbetcha—basically, there are now over 2,200 state workers in the Thompson Center who are going to be displaced. Where will they go? There is commercial property all over the Chicago loop available for the right price. A few problems for the IWCC is they have relatively unique real estate needs. You need to remember the current IWCC floor of the Thompson Center was sort-of designed for the IWCC’s needs--even though the original architects made a mess of several obvious issues that later had to be corrected. The IWCC needs:


·         Security to avoid having guns/knives/poisons and other lethal stuff that might be snuck in by challenged folks;

·         Mid-sized hearing offices or “mini-courtrooms” to hold hearings;

·         They need large hearing rooms for oral argument and status calls;

·         Lots of admin room and

·         Executive offices for the Chairman and other Commissioners.


Where will the IWCC move to? How will they pay rent?


Gosh only knows. Again remember there are 156 current IWCC employees. They need space, space and more space for all those workers. We feel their new and unexpected rent is going to be a substantial annual expense. The IWCC is going to be instantly competing with other state agencies/departments with the same immediate rental and security needs. Please also note the IWCC isn’t funded by the IL General Revenue fund that comes from our tax dollars—as we have advised, the WC Commission has their own specific Operations fund that is paid for 100% by Illinois business and insurance companies. Those businesses and insurance carriers aren’t going to want to see higher levies than they currently pay. The IWCC is probably going to have to pay rent and other real estate costs out of their own money. This might mean payroll or other service cuts because most of their 2015-2016 budget is already spoken for.


We hope they move to the less-expensive office buildings in the west Loop near the CTA headquarters where there is lots of available and relatively cheaper space and easy access to Metra and CTA. We are sure lots of law firms that chose to move near the current IWCC location are also going to want to move near their new “courthouse.”


So what is the odd legend of the Thompson Center?


Well, there are lots of interesting stories and gossip. The Thompson Center has been a filming location in several motion pictures, including 2000's The Watcher and 1990's The Kid Who Loved Christmas, The building was seen at the end of the 1986 film Running Scared.


Our favorite dumb story about the Thompson Center was the plan by someone to create a giant snowball in the basement during the winter and then blow fans on it all summer as a low-cost central cooling system. That entire concept quickly and hilariously failed and a new air conditioning system had to be installed at high expense.


Another weird story is the “fatal attraction” of the Thompson Center because the architect made the odd decision to create a giant “target” in the center floor of the building. Combined with the railings that go up 17 floors, this design created an interior that gives the impression of startling, vertiginous height. At least five-six suicides were reported by the IL State Police with some indication the jumpers may have been trying to hit the “target.” Even when troubled folks weren’t jumping off the railings, pens, papers, briefcases and all manner of junk was unintentionally dropped to fall to the floors below, creating their own hazard.


The older veterans of the IWCC will remember in 1985, the IWCC had towers with pay phones in them for convenience of attorneys and the visiting public. For the youngsters among our readers, “pay phones” were a concept among old-timers where you put coins into the phone and could then call claims adjusters or office phones. The pay phones were removed when they were replaced by cell phones about ten-fifteen years ago.


The building also was designed with a water fall to a wading pond from the ground floor to the basement or concourse food level below. The eminent Arthur O. Kane, one of the most storied of all IL WC attorneys, was at the annual WCLA Christmas party one year and tripped on the low tiled edge of the pond. He was moderately injured and taken for care. He brought an insurance claim against the property and advised us he settled it favorably. Another attorney whose name will be shortened to Jim G, tripped and fell backwards into the same wading pond during a different Christmas gala. When he didn’t arise quickly from the shallow waters, the plucky Francis O’Byrne slogged into the pond to swiftly save him from a watery fate. The waterfall and wading pond were later removed at some expense. Obviously, the WCLA Christmas party will also have to move elsewhere.


In our view, this building was poorly conceived and badly designed. The inefficient property couldn’t have used a fifth of the available office space of an entire city block, requiring the state to continue to pay to rent offices all over the Loop, at an additional cost to IL taxpayers. Other than to forecast uncertainty and challenges when the IWCC moves, we don’t think anyone will miss this massive monstrosity.


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Synopsis: Affordable Care Act impending penalties on “Cadillac Health Plans” may compel many U.S. employers to radically change their healthcare options offered to employees in the not-so-distant future. Analysis by John P. Campbell, Jr., JD


Editor’s Comment: Defense attorneys at KCBA were dispatched to conduct a seminar recently on The Affordable Care Act or what many folks call “Obamacare”. As we peeled back the onion on this complex Federal Statute, we noted an annual layering of additional taxes each year designed to fund this massive national healthcare system. We have a simple and easy to understand presentation for you, your company and your managers on this complex but important topic—if you have interest in such a presentation at your office or work site, send a reply.


First and foremost, it should be understood that the Affordable Care Act is largely a function of our Federal tax laws. Individuals may be subject to tax penalties via their tax filings for not having coverage. Conversely, depending on income level, citizens may also enjoy tax credits for what they spend on health coverage they purchased individually. In a similar way, businesses may be penalized via the tax code for not providing coverage options for their employees (there are small business exclusions depending on size of a company).


One of the more troubling aspects of this tax-driven health system is the “Cadillac Health Plan” tax slated to take effect in 2018. This is a very heavy 40% non-deductible excise tax on employer-sponsored health coverage which are deemed “high cost benefits”.


What is a “high cost benefit plan”?


The threshold for high-cost plan qualification are currently set at $10,200 for individual coverage and $27,500 for family coverage. So as an example, an individual with $11,000 plan in 2018 would pay 40% tax on the extra $800 over the $10,200 threshold. Therefore, an additional $320.00 excise tax would be charged for such an individual plan. This added tax has a two-fold purpose. First, the additional tax revenue will help fund the overall health system by acting as a cost-sharing mechanism for insurers. It is no secret there will be many folks on very basic, low-cost plans where their health costs far out-pace the premium paid. The added tax will distribute this cost to the rest of us.


Secondly, there is a blatant “social engineering” aspect to this law. Those who created this complex system knew there were limits to healthcare resources. Everyone cannot have absolute 100% access to every level of care all the time without a shortage of resources. So what do we do? We tax the snot out of those who “over use” healthcare resources. When your premium tips over the Cadillac line, you pay a heck of a lot more for coverage in the following years.  This excise tax is designed to compel the healthcare consumer (read; all of us) to make careful choices so as to not “overuse” our healthcare access.


How do we avoid such a heavy tax?


Obviously, to goal for employers and employees alike is to remain below this trigger point for premiums and avoid the heavy excise tax. Many observers predict employers will promote “wellness plans” to compel better overall health of employees. Some reports even suggest nurse consultants will be made available for employees to “manage” their healthcare choices from year to year. We may see more people postponing major procedures to reduce their healthcare “footprint” if you will –thereby keeping their renewal  low and their plan below this Cadillac trip-line. We may also see employers offering far different plans to their employees with either reduced coverage options or simply transferring a significant portion of the additional cost on to their employees. This is an unfortunate result, to be sure.


Like it or not, national healthcare is here to stay, having survived two Supreme Court challenges. We are now faced with navigating these ongoing changes to healthcare law.  We will continue to report on implementation and changes to this law affecting all of us, offering our best suggestions to help employers and individuals manage the new world of healthcare this country.


This article was researched and written by John P. Campbell, J.D., Law Partner at Keefe, Campbell, Biery & Associates, LLC. You can easily reach him at jcampbell@keefe-law.com.




Synopsis: Are COI’s or Certificates of Insurance Phony and Misleading?


Editor’s comment: We note COI’s are very important when you are hiring an “independent contractor” to perform any service for your company. We assure you most contractors aren’t truly “independent” in the workers’ comp arena if they can’t prove to you they have requisite WC coverage for themselves and their workers. We note the IWCC has staff and the statutory power to immediately shut down any job where there isn’t WC coverage for everyone on the site. We also want our readers to know one facet of workers’ comp fraud is to present a phony COI.


We also are asked if you should allow the owners or partners of an independent contractor to “opt out” of their own WC coverage that is otherwise provided for their employees. The IL WC Act allow owners to opt out. We consider this a very bad business choice. If you want all the reasons why, send a reply.


In a recent IRMI [International Risk Management Institute] Expert Commentary, David Dybdahl disclosed when his risk management firm audited hundreds of COIs and their underlying policies over a period of years, they found more than 90% had, in their estimation, at least one material misrepresentation between the insurance coverage shown on the COI and the coverage provided by the actual underlying policy. A major percentage of Dybdahl’s 90% was additional insured disconnects. His firm repeatedly found two key oversights relating to endorsements such as ISOs CG 20 33, CG 20 10 and CG 20 37 that led to gaps in additional insured (AI) status between what the COI stated and the reality:


·         Improper usage and evident misinterpretation of “blanket” additional insured endorsements such as the ISO CG 20 33. One problem is represented by the common reference to this and similar endorsements as “blanket.” That word is not only never used in the actual endorsement (the proper term is “automatic status”) but its misleading. “Blanket” implies every party asking to be an additional insured is covered. But automatic status as an AI only applies to those “for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured to your policy.” Although that may cover quite a few potential AIs, it also leaves a lot of commonly requested AIs off the list. For example, consider an agreement in which your insured has a written contract with Company B, wherein B also requests AI status for its subs, vendors, affiliates, local municipalities, and so on. Because your insured only has a written contract with Company B, only Company B is automatically added as an AI—none of the rest. Company B is only an AI while your insured is actively performing operations for B. When those operations are completed or suspended—or perhaps, have not yet begun—the ISO CG 20 33 provides no AI status to B either.


·         Improper usage of scheduled AI endorsements. For situations in which it’s preferable to nail down specific AI status for any person or organization—or, in the case of completed operations, exposures not covered by the CG 20 33—ISO provides other endorsements. Some affirm AI status to entities (such as the CG 2010); others may address specific exposures (such as the CG 20 37 for completed operations). Although these endorsements have their own requirements and conditions for coverage to apply, Dybdahl’s firm found an abundance of errors resulting not from coverage technicalities but rather from simple failure to properly execute the endorsements.


To minimize confusing a COI with actual coverage, every agent who has frequented an E&O session should know the requirements: only use ACORD forms, never alter the language of the COI, do not represent coverages on the certificate — especially in the “Descriptions” section—that do not exist in the actual policies, et al. Follow the proper path and let the ACORD disclaimers provide the protection for which they were designed, and the agent is in as good a position as possible to defend against COI E&O claims.


But none of those precautions may protect an agent where the COI clearly states a certain coverage has been provided, and it hasn’t. It may simply be a clerical error, but to a certificate holder it sure looks like outright fraud. And no state regulation, insurance department memo or ACORD disclaimer, is going to protect you for fraud.


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Synopsis: KCB&A is Looking for an IL WC Defense Lawyer with three to five years’ experience. The position is open right now. Need resumes.


Editor’s comment: We are adding to our legal staff—if you are or know a candidate, have them reply to this Update!!


We have one opening for admin staff. If you have or know someone with litigation experience, send a reply with resume asap!