Synopsis: Desperate Governor Quinn hits IL Insurers and Insured with New Stealth Tax on Captive Insurance.

Editor’s comment: When you have to actively pay billions for Illinois’ seven “Fake Pension” programs and you are already over $100B in debt, you have to start squeezing out new taxes/tolls and fees everywhere. Under Gov. Quinn, we have the second-highest real estate taxes in the U.S.; we dramatically raised highway tolls and three years ago, Illinois reinstated our estate tax. Gov. Quinn wants state income taxes to be 5%, House Speaker Madigan wants our state income tax to top off at 8%. Now we see another new tax quietly enacted.

In a move we consider completely surprising during a heated election, Governor Quinn quietly signed SB 3324 a couple of weeks ago. SB 3324 imposes a new and unprecedented tax on Illinois-based companies that self-insure their risk in captive insurance programs. The new law, which amends the IL Insurance Code was confusingly promoted by the IL Department of Insurance as a technical bill designed to close “loopholes” created by the federal Dodd-Frank Act. We assure our readers it wasn’t a “loophole” the way the federal law worked created an advantage for Illinois companies in relation to other states. God forbid Governor Quinn and his minions would allow Illinois business to have an advantage compared to pro-business climates in all our surrounding states.

The tax aspects of this new law were not debated in a legislative committee and the bill’s sponsor, Senator William Haine was unaware the bill imposed a new tax on captive insurance plans when it was called for a vote. The new tax will cost Illinois business 3.5% on the premiums paid for captive insurance. All 47 IL House Republicans signed a letter to the Governor asking him to veto this bill. They also confirmed:

· The new and unprecedented tax established by SB 3324 has one of the United States’ highest rates for a self-procurement or direct placement tax and will fall solely on the shoulders of businesses headquartered in Illinois.

· SB 3324 will eliminate a long-standing benefit of being an Illinois-based business. Under the Non-admitted and Reinsurance Reform Act of 2010, which was enacted as part of the federal Dodd-Frank Act, only a business entity’s home state may tax “industrial insureds” –businesses that are not required to purchase insurance from an authorized insurer because they meet certain employment-force size or minimum annual gross revenue amounts. To date Illinois has wisely chosen not to tax industrial insureds or companies that choose to establish their own insurance program which provides an important advantage over other states. Oops, that ends January 1, 2015.

· Regulatory oversight of self-insurers is not needed. SB 3324 is not needed for the purpose of regulatory oversight. Revenues from our existing insurance premium taxes are intended primarily to fund Department of Insurance oversight of the insurance industry for the purpose of protecting individual consumers from faulty insurance products or other fraudulent or deceptive activities. Illinois-industrial companies that self-insure or use captive insurance companies assume only their own insurance risk --they do not sell to consumers and no government oversight of their activity is necessary. Such companies rely on professional risk managers to assess their insurance needs and to manage their own insurance programs.

· SB 3324 acts as a tax disincentive for self-insured companies to use actual cash set-asides and captive insurance companies to ensure that they have sufficient funds to address any unanticipated liabilities. This is an activity that should be encouraged to assure the ongoing fiscal stability of our Illinois-based companies. SB 3324 would now penalizes this responsible corporate behavior.

· SB 3324 has not been adequately vetted by members of the General Assembly. Quite simply, it flew under the radar and many members of the General Assembly did not realize that they had voted to impose a new tax on Illinois headquartered companies.

Our problem with the new law is Governor Quinn, his staff and election supporters are desperately in need of cash to pay for the Fake Pensions and will try to find it anywhere they can. They have to in order to pay the seven Fake Pensions Illinois offers to “retired” government workers. We always wonder why taxpayers don’t treat such largesse with the same disdain accorded to welfare payments, as government workers contribute a miniscule amount to get these generous and ever-increasing lifetime benefits. Please also remember, the “pension fix” for only three of these Fake Pensions sponsored by Governor Quinn is almost a lock to fail when our Supreme Court rules on the constitutionality of the reform legislation. The Seven Fake Pensions include:

1. The hundreds of state workers out on “odd-lot” workers’ compensation total and permanent disability claims who could be brought back to work and get off our dime today. We regularly point out the term “odd-lot” doesn’t appear in our IL WC Act and was created by our courts. If Governor Quinn would use vocational rehabilitation and job retraining and find such folks new government positions, they would be back working and actually earning a living, as the rest of us do. These benefits cost IL Taxpayers a minimum of $26,150.80 each year and currently cap at $69,735.64 per year. The benefits are tax-free. These workers also get COLA increases via the Rate Adjustment Fund that is a levy on IL business and local governments.

2. The line-of-duty disability pay to firefighters and police officers who can and will work after becoming “disabled” only from working as a firefighter or police officer. That legal standard is based upon a very strained version of applicable law and, in our view, it was also created by our Courts. If a supposedly disabled IL firefighter or police officer can work and make $50,000 or $100,000 a year or more, it is hard to understand how and why they need taxpayer’s money for this Fake Pension. We have no problem with provision of such benefits when such workers can never work anywhere again but our courts created a loophole to only require the workers be unable to work as firefighters or police officers to get lifetime pay with COLA increases.

3. The other five “Fake Pensions” are

a. The State Employees' Retirement System (SERS),

b. The Judges' Retirement System (JRS)—this plan can pay a judge/justice over $1M per year for each year of judicial service if they live long enough—if you don’t believe this, send a reply.

c. The General Assembly Retirement System (GARS)—this plan can pay a legislator over $1M per year for each year of legislative service—again, if you don’t believe it, send a reply.

d. The Teachers' Retirement System (TRS), and

e. The State Universities Retirement System (SURS).

4. All of these Fake Pension programs are hilariously de-funded—by that we mean the money for Fake Pension payments aren’t from employee contributions, matching state money or investment income. At the end of last year, IL State Auditor General William Holland pointed out the State has about 40% of what is needed to make required Fake Pension payments—during this year, IL taxpayers are going to have to spend $7B from current tax dollars to make the needed Fake Pension payments to folks who don’t work for the State any more.

5. Please also note all of the Fake Pensions have very generous COLA provisions that require us to quickly pay more to the retirees than they made while working for us. If a state retiree lives long enough, it is possible their pensions could be more than double what they made while working.

If you aren’t sure, every TV commercial you see for Governor Quinn, including his quaint and silly “beer-powered” lawnmower commercial is being paid for by the folks that want to keep these Fake Pensions in place. The debt we all owe on the Fake Pensions is well over $100B now. Please also remember this same debt was $54B in 2009 or just five years ago. It is going up exponentially. If it simply doubles in the next five years, we will be looking at more than $200B in pension debt alone. They are clearly running out of money. At some point, they are certain to run out of money, like the Titanic was certain to sink.

If we don’t make some changes in Springfield, please assume we are going to continue to see more and more taxes, tolls and fees coming at Illinois business from every angle. The new 3.5% tax on IL captive insurers’ premiums is a sad note for our clients and the overall business environment in this state.

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Synopsis: Didn’t Know They Were Hiring—Four New Arbitrators Appointed to the IWCC.

Editor’s comment: We remain amazed to see how the secret WC hiring process continues under this administration. We regularly check to see the IWCC’s “jobs” link and note Arbitrator’s job openings never seem to make it there. The IWCC has announced the appointment of four new arbitrators

Ø Maria Bocanegra who was with the Katz, Friedman firm representing Petitioners. Her photo and resume are online at: http://www.kfeej.com/maria-bocanegra/

Ø Stephen Friedman formerly of Rusin, Maciorowski & Friedman, Ltd. He is one of the top WC defense lawyers in our state. His photo and lengthy resume is at: http://www.rusinlaw.com/attorneys/stephen-friedman/

Ø Steven Fruth who is leaving the legal department at the CTA or Chicago Transit Authority. We assume he is used to handling a high number of claims. An interesting article and photo of new Arbitrator Fruth from five years ago are online at: http://www.oakpark.com/News/Articles/8-18-2009/Two-Oak-Parkers,-one-judge's-seat/

Ø Michael K. Nowak of Becker, Paulson, Hoerner & Thompson, P.C. New Arbitrator Nowak’s photo isn’t online but his extensive resume can be found at: http://bphtlaw.com/nowak.html

It appears these choices may have been somewhat political but you can also readily argue these are some of the better WC lawyers in our state and will bring extensive experience, legal knowledge and professionalism to the IWCC. While the choices were made in secret, they appear to be solid selections.

We wish the new IL WC Arbitrators all the best as they take over their new roles.

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Synopsis: Dog Bites Man--Dealing with Bug Bites, Dog Attacks and Claims Coming from Contact With Animals/Pets in Workers’ Comp.

Editor’s comment: Animal attacks on humans are not uncommon events. In a typical year, about 4.7 million dog bite incidents occur, and something like 800,000 of such attacks require medical attention or result in death. In 2011, there were 31 fatalities in the U.S. due to dog attacks.

Please remember subrogation may be a factor in some animal attack claims. A person injured by an animal would have a legal case against the animal’s owner, or possibly against the owner of the premises where the attack occurred. Workers’ comp law in most states provides medical, lost time and possibly permanency for a person injured by an animal attack, if the risk of the attack is heightened due to work. As defense lawyers advising our clients and their adjusters, the key measure is demonstrating an “increased risk” of accidental injury versus a “risk common to the public” in dealing with bug-bites and animal/pet attacks.

We know that any worker can be vulnerable to any type of injury while on the job, but each type of injury has its own distinctive incidence pattern. As workers’ comp defense lawyers we find these sorts of workers most vulnerable to insect stings, animal bites, and pet attacks:

Building workers. Construction workers may encounter nests of stinging or biting insects in the course of employment, as well as raccoons, opossums, rats, skunks, or other wild animals adapted to urban living.
Delivery Workers. Such workers may be required to enter other peoples’ homes, where they can be bitten by dogs or other household pets. Wasps, fleas, mosquitoes, hornets, and other stinging and biting insects can present a threat to delivery workers as well.
Nursing professionals. Home health care workers and nurses who visit home-bound patients may be injured in animal attacks. They are also exposed to insect bites and stings.

Bite injuries are the most common result of an attack by a household pet. Attacks by dogs and other large pets can inflict severe and even deadly wounds to disable or disfigure the victim. Serious on-the-job injuries, infections, and complications caused by insects and animals include:

Infected wounds. Pets’ mouths and claws typically teem with bacteria. A bite or scratch injury can spread bacterial diseases or parasitic diseases. The rise of antibiotic-resistant bacteria makes such infections potentially deadly.
Cat scratch fever. Bacteria causes cat scratch disease, which can be transmitted to humans from a feline bite or claw scratch. Typical symptoms include swollen lymph nodes, fever, headache, fatigue, and listlessness.
Insect and spider bites. A few varieties of insects and spiders have a venomous bite that can cause dangerous-or even fatal-reactions in some vulnerable persons. A few species of biting insects carry bacterial or viral pathogens that can be transmitted to humans during a bite; these infectious agents are responsible for grave diseases, including Lyme disease, West Nile disease and encephalitis.
Lyme disease. Another bacteria is responsible for Lyme disease. Ticks carry the bacteria from animal hosts-dogs, horses, or rodents are the most common-to humans. Many people who are exposed have no symptoms at all, and many get mild effects: a distinctive “bull’s eye” rash, muscle or joint aches, fever, and headaches.
Rabies. A bite from an infected animal can transmit the rabies virus to humans. Unfortunately, the disease is usually fatal once those symptoms are evident.
Rocky Mountain spotted fever. Tick bites transmit this disease from infected dogs to humans. The earliest symptoms of Rocky Mountain spotted fever develop in a week or two: rash, chills, fever, muscle pain, and confusion.
Toxins from stinging insects. Bees, hornets, wasps, and some ants have stings at the end of their abdomens. These stings inject a venom that can paralyze or kill other insects, but would normally be only a mild irritant to humans. For some people, exposure to an insect toxin can trigger a severe allergic reaction, ranging from hives to life-threatening anaphylactic shock. Yellow jackets-a variety of wasp-are responsible for most of the stings to humans.
West Nile virus. This viral disease is transmitted by bites from infected mosquitoes. Most people who contract West Nile virus have no symptoms at all, but about one-fifth of all human cases will involve fever and intense flu-like symptoms. For about one percent of the people who are exposed, the disease can trigger life-threatening neurological complications, including meningitis and encephalitis. There is no treatment for West Nile virus other than palliative care for the symptoms. For some people with serious reactions to the pathogens, symptoms can persist for as long as five years.

If your workers have been injured on the job from a stinging-biting insect or a larger animal attack, it is important to get them to immediate medical care. Then try to document, document and document what happened and why. You need to lock in evidence when possible so take statements and investigate thoroughly, if it is a severe injury.

If you need help in determining compensability or investigating an animal attack or insect bite claim, send a reply any time to ekeefe@keefe-law.com.

KCBA Blog

9-8-14; Desperate Gov. Quinn Hits IL Insurers/Insured with New Stealth Tax on Captives; Four New IWCC Arbitrators Appointed; Dealing with Dog Attacks and Bug Bites in WC and more