6-15-15; Warning--Radioactive WC Legislation Pending Before IL Senate; Liberty Mutual May Prove WC Profitability is Over-Stated; One More WC Bill You Need to Know Of and more
/Synopsis: Warning--Radioactive WC Legislation Pending Before IL Senate!
Editor’s comment: We aren’t reporting actual radioactivity, folks. Our concerns for our readers and IL Business are with IL House Floor Amendments 5, 6, and 7 to HB 1287 that are being presented to the IL Senate as “WC reforms” when they are certain to increase the cost of WC in this state. We note Senate President John Cullerton is sponsoring this legislative morass and we hope this solid leader drops his sponsorship and sends this whole concept to the nearest shredder.
IL House Floor Amendment 5 Is Certain to Cause IL WC Benefits to Skyrocket
House Floor Amendment 5 provides where an employee is required to travel away from his or her employer's premises in order to perform his or her job, the traveling employee's accidental injuries arise out of and in the course of his or her employment when the conduct in which he or she was engaged at the time of his or her injury is reasonable and when that conduct might have been anticipated or foreseen by the employer. In reasoned legal view, this is an enormous departure from the traditional concept of what a “traveling employee” might be and greatly expands workers comp coverage to just about anything a worker does when they are “in movement” or traveling. This language basically reverses the concepts turned aside/discarded by our IL Supreme Court in the ruling drafted by Chief Justice Rita Garman in Venture-Newberg-Perini Stone & Webster v. IWCC issued on December 19, 2013. We told our readers then and we restate right now, workers’ comp costs in this state will skyrocket to expand the “traveling employee” concept in this fashion. We again point out the term “traveling employee” isn’t in the IL WC Act and doesn’t have to be—this new and unprecedented legislative definition doesn’t help at all. If we simply follow the existing law about “arising out of” and “in the course of” employ, we have the needed limitations with arbitrators, commissioners and jurists who use the “English language” interpretations of those two phrases.
Please remember the traditional definition of a “traveling employee” was someone who is supposedly engaged in foreign travel. Such a worker faces unusual dangers and risks—there are language differences, varying kinds of currency, food that may cause lots of diseases or problems you wouldn’t face in your home state and other increased risks. In our view, the idea of expanding WC coverage for someone in a totally foreign and dangerous environment makes some sense. That said, “traveling employees” aren’t folks who are walking around their home town, like the city inspector in the IL WC Appellate Court ruling in Nee v. IWCC. The bordering-on-malpractice decision made by the defense attorney in that claim is they stipulated the worker was a “traveler” when he was in a totally familiar and risk-neutral environment. They made the mistake the IL House and maybe Senate could make if we enact this disastrous new legislation.
What is wrong with Amendment 5? Well, it defines a “traveler” as someone “required to travel away from his or her employer’s premises.” What in tarnation does that mean? What is a “premises?” Doesn’t that mean all truckers, bus drivers, construction workers, staffing employees, government workers of all sorts and anyone going to get coffee at Starbucks for their boss would be “travelers?” And what is covered for such workers—any “reasonable” activity leading to injury or illness that might be foreseen by the employer? Isn’t that just about anything short of playing with gasoline and matches?
IL House Floor Amendment 6 is almost as bad as 5—We Predict Passage Will Cause IL WC Claims and Resulting Contribution Litigation to Erupt
It greatly expands coverage to allow lots of employers to be brought into litigation and have to defend themselves with medical-legal opinions and more depositions. It sets forth provisions providing if an award is made for benefits in connection with repetitive or cumulative injury resulting from employment with more than one employer, the employer liable for award or its insurer is entitled to contribution or reimbursement from each of the employee's prior employers or their insurers for the prior employer's pro rata share of responsibility. This amendment provides after the Illinois Workers' Compensation Commission makes an award for benefits in connection with repetitive or cumulative injury, the employer liable under the award or its insurer may institute proceedings before the Commission for the purpose of determining the right of contribution or reimbursement. This collateral and post-award proceeding shall not delay, diminish, restrict, or alter in any way the benefits to which the employee or his or her dependents are entitled, but shall be limited to a determination of the respective contribution or reimbursement rights and the responsibilities of all the employers joined in the proceeding.
Some employers might innocently like the idea of contribution in repetitive trauma claims—we caution our readers and all observers it isn’t a solid idea. Why? Well, right now, one employer owes all of an IL work comp claim or none of it. If you allow for cross-claims for contribution, claimants are going to sue everyone they have worked for over the years. No single employer will have to lead the fight, insuring confusion. The statutory language and administrative outcome is going to insure WC benefits will be paid and rapidly due to the worker—thereafter all the carriers for all the employers are going to get to fight out who owes what and why. Trust us, you don’t want lots more “repetitive working” claims where it is almost impossible to avoid some tiny wedge of liability to then have to fight it out or settle with everyone who had the misfortune to hire the man or woman in the past. If you don’t see this as a legislative and administrative disaster—please let us know your thoughts as to why.
IL House Floor Amendment 7 Creates Another “Do-Nothing” Panel or “Task Force” That May Never Meet!
This Floor Amendment indicates the IL Department of Insurance shall report annually on the state of self-insurance for workers' compensation in Illinois and outlines the contents of their expected report. This Floor Amendment also creates the Workers' Compensation Premium Rates Task Force. The legislation provides for the membership and duties of the Task Force and requires the Task Force to issue its recommendations by December 31, 2015.
Yucch. We hate legislation that creates dopey “task forces.” To best demonstrate why we hate them, we remind everyone of the 2011 Amendments to the IL WC Act where they created advisory body or “task force” known as the IL State Workers’ Compensation Program Advisory Board designed to review, assess and make recommendations to improve the State workers’ compensation program. The Governor was to appoint one member of the Board with the Speaker Of The House and Minority Leader to appoint other members. The members of this board were to serve three year terms.
What happened after this was completed was about one year of fighting over who would make the Board and then…. Nothing. Absolutely nothing. We don’t think the IL SWCPAB ever met, even once. If they did, they didn’t do anything anyone is aware of. IL State WC claims remain high and costs are even higher. They still need someone to force IL State government to implement obvious and simple cost-saving concepts like bringing injured workers back to light work. When we consider what a failure the SWCPAB was, we predict the same sort of ennui and lack of action is going to happen with the IL WCPRTF. Such silliness sounds good and gives legislators grist for the campaign trail but in real-time, it is meaningless. We hope and pray this House Floor Amendment doesn’t pass either.
In summary, call your senator or state rep and ask them to put the kibosh on all this silliness. We assume the party-in-power might have floated these amendments out there to cause confusion and a crazy-counter-point to Governor Rauner’s proposals. We truly don’t want WC “de-form” legislation that would cause immediate consternation and confusion in the business community and lead to even more drainage across state lines.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
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Synopsis: If Work Comp Insurance is Wildly Profitable, Why is Liberty Mutual Making More Dough with Less Work Comp Insurance?
Editor’s comment: A familiar whine of the IL Trial Lawyers Ass’n and their supporters is the proposition that workers’ comp insurance is a definite money-maker. Both National Public Radio and ProPublica also take up the same mantra, asserting every WC insurer is rolling in mountains of cash. We are sure there are over 300 insurance carriers writing WC insurance in this state—that may be the reason for the minimal margins.
Joe Paduda who is a long-time industry observer and blogger rebuts that suggestion. In his blog, Managed Care Matters, he strongly asserts, over the past decade or so, work comp insurance is barely a breakeven proposition.
Liberty Mutual Holding Co. followed through on its announced plan to reduce its workers compensation exposures and reported lower comp premiums for 2014, which one expert said raises the question of whether the insurer plans to completely leave the work comp market altogether. Liberty Mutual reported its voluntary workers comp net written premiums declined 14% last year to $2.15 billion.
The Boston Globe reports Liberty Mutual, who used to be the U.S. WC industry leader has greatly cut back its work comp participation and exposure over the last few years. In doing so, they are now ramping up personal lines and other insurance business lines while reducing their WC premiums by over a third. Liberty has dropped to now be the 4th largest underwriter of WC and they are paying Berkshire Hathaway $3 billion to take over a big chunk of its exposure for legacy WC and some environmental claims.
It appears clear the decisions above have dramatically increased their corporate profitability. The math indicates Liberty Mutual’s overall profitability increased from $284 million in 2011 to $1.7 billion last year. This clearly means the national work comp insurer that controlled the U.S. WC industry for decades has moved away to seek other opportunities. We agree with Mr. Paduda, the reason is basic, work comp insurance simply isn’t as profitable as many claim.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
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Synopsis: One More Important Piece of Potential IL WC Reform Legislation You Need to Know About.
Editor’s comment: A bill requiring small to mid-sized IL WC insurers to collect collateral from employers with large-deductible workers' compensation policies was cleared by the IL Senate and has also been passed by the House. It now awaits Governor Rauner’s signature to become law. Our sources indicate this may be model legislation for the 30-something states that allow high-deductible WC policies.
Senate Bill 1805 sponsored by Sen. William R. Haine, D-Alton, would require any workers' comp insurer with less than an "A-" rating from A.M. Best Co. and less than $200 million in group surplus to require collateral from policyholders who purchase a policy with a deductible of $100,000 or more. The collateral could be posted in cash or securities, such as a bond or irrevocable letter of credit, held in trust by a third party.
The bill would require insurers to limit the size of a WC policyholder's obligations under a large-deductible agreement to 20% of the total net worth of the policyholder at each policy inception. This new bill would also give the state director of insurance authority to prohibit insurers that are determined to be in a financially hazardous condition from issuing or renewing large-deductible policies. The new bill would take effect July 1 if signed into law by Gov. Bruce Rauner.
Large-deductible workers’ comp policies have proven to be a headache for U.S. WC insurance regulators. The collapse of Park Avenue Co. and affiliate Providence Property & Casualty Co. -- blamed in part on the failure of policyholders to pay their deductibles -- have left insurance guaranty associations around the U.S. with more than $100 million in liabilities.
Problems Associated with Using a High Deductible WC Insurance Plan
- The shock of having to pay the insurance company the deductible – some employers go into deductible plans with the idea they will never incur a claim so they will never have to fund the deductible. This expectation creates lots of controversy. Small employers are enticed by the idea of significant premium savings. However, in reality, an employer with a guaranteed WC insurance premium of $20,000 might sign up for a $5,000 deductible plan, save $1,000 in up-front premium but then be charged with repaying the insurance carrier $5000 when the first WC claim occurs.
- Collection of the Deductible – Most states include a provision which kicks in when an employer does not pay the required deductible then the insurance company can quickly cancel the employers WC insurance policy for non-payment of premium. This now exposes an IL employer to civil and criminal liability.
- Payment of claims – Claims are handled by the insurance company claim department. There is the potential for bona fide WC claims not to be reported or disagreement as to how claims are accepted, processed and paid.
Now, if this new law is signed by Governor Rauner, IL employers will have to post collateral to even get a high-deductible policy in place. We appreciate your thoughts and comments. Please post them on our award-winning blog.
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