Author Archives: Caroline McDonald

About Caroline McDonald

Caroline McDonald is a writer and former senior editor of the Risk Management Monitor and Risk Management magazine.
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Tenn. Legislators Introduce Workers Comp Option Bill

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A bill that would give companies in Tennessee a free market alternative to state-mandated workers compensation insurance was introduced yesterday by Sen. Mark Green (R-Clarksville), a physician and vice-chair of the Senate Commerce and Labor Committee, and Rep. Jeremy Durham (R-Franklin), House Majority Whip.

The Tennessee Option draws from the best practices of Texas nonsubscription and the Oklahoma Option, according to the Association for Responsible Alternatives to Workers’ Compensation (ARAWC). The Option is designed to provide Tennessee employers an alternative for funding and responding to occupational injuries while still protecting employees and their families. The key components are employee accountability, medical management, employee-employer engagement, and free-market competition.

“The core focus of the Tennessee Option is to help injured employees get back to work faster,” Sen. Green said in a statement. “Making that happen requires good benefits, strong communication, and will lead to higher employee satisfaction. An Option will also give job creators a way to save more than 50% on workers’ comp costs, so they can invest in growth and more employees.”

ARAWC spokesman, Brent Buchanan told the Monitor that the bill has been in the works for about six months and the next step is a committee hearing. Because of its strong sponsorship, there is a good chance it will pass this legislative session, he said.

Janine Kral, president of ARAWC and vice president of risk management at Nordstrom said in a statement, “The Tennessee Option is a local effort driven by the bill sponsors with the support of Tennessee employers and associations. ARAWC will serve as a resource to this local group that is focused on providing a free-market alternative to workers’ compensation insurance.”

Oklahoma passed Option legislation in 2013. Texas has allowed alternative injury benefit programs for more than 100 years, ARAWC said, adding that Texas employers using the Option have saved billions of dollars while increasing return-to-work rates.

According to ARAWC:

Private employers can elect the Tennessee Option. Current Tennessee law allows cities, counties and school districts to opt out of the workers compensation system and several have elected to do so. Tennessee law already exempts employers with less than five employees from the requirement to provide workers compensation insurance. The Tennessee Option legislation will not amend those current exemptions. The Option will not be available to construction or coal mining companies due to their unique industry requirements.

By removing various third parties from between the true stakeholders – employees and employers – the Tennessee Option will encourage more collaboration between the parties. At least a mandated level of benefits must be paid. Many Option employers will pay higher wage replacement benefits than workers’ compensation. The employer must prove that financial security is available to pay the benefits, and a guaranty fund will be established. Stringent appeal rights are included in the Option to provide employees due process. Due to disclosure requirements, employees in an Option will be more aware of their injury benefits and the processes for procuring them. And more employee accountability will lead to better medical outcomes, which is good for all parties.

 

Highway Traffic Deaths Preventable with Better State Laws

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A report on highway safety urges state legislatures to examine safety laws and take proactive steps to enact effective rulings. The Advocates for Highway & Auto Safety report “2015 Roadmap of State Highway Safety Laws: Lethal Loopholes,” found that more than 5.6 million crashes in 2013 caused about 32,700 fatalities and 2.3 million injuries. Motor vehicle crashes cost society $871 billion, based on 2010 data.

Federal action and safety requirements can address part of the problem, but state laws have direct impact on promoting safer driver and occupant behavior, according to the report, released in January. An example of the difference state laws can make is with seat belt use, which has been shown to save lives. In 2013, states with primary enforcement seat belt laws for front seat passengers had a 91% belt use rate, while states with secondary enforcement laws had an 80% belt use rate, according to NHTSA data. A study conducted by the Insurance Institute for Highway Safety (IIHS) found that, when states strengthen their laws from secondary to primary enforcement, driver death rates decline by about 7%.

“In 2015, Advocates urges state leaders to close lethal loopholes in their highway safety laws,” Jacqueline S. Gillan, Advocates president, said in the report. “The emotional, economic and societal cost of inaction to improve safety is too high especially considering we know what steps can be taken. Complacency and lack of action have resulted in a dangerous and deadly patchwork of laws across the nation. Lethal loopholes in traffic safety laws are literally killing us—we can and must do better.”

Key facts, according to Advocates:

  • 32,719 people were killed in motor vehicle crashes in 2013—a decrease of 3% from 2012. Automobile crashes remain a leading cause of death for Americans between the ages of five and 34.
  • About 2.3 million people were injured in motor vehicle crashes in 2013.
  • In 2013, almost half (49%) of passenger vehicle occupants killed were unrestrained.
  • Crashes involving young drivers (aged 15 – 20) resulted in 4,333 total fatalities in 2013.
  • 4,668 motorcyclists died in 2013. Though this is a decrease from 2012, this death toll accounts for 14% of all fatalities.
  • 1,149 children age 14 and younger were killed in motor vehicle crashes in 2013.
  • 300 children aged four through seven were killed in motor vehicle crashes in 2013.
  • More than 3.5 million people have been killed in motor vehicle crashes in the U.S. since 1899.
  • The more than 5.6 million police-reported motor vehicle crashes in 2013 had a societal impact in excess of $870 billion. Thirty-two percent of this figure ($277 billion) is economic costs including property and productivity losses, medical and emergency bills and other related costs. Dividing this cost among the total population amounts to a “crash tax” of $897 for every person, every year.

To meet basic safety recommendations, Advocates said states need to adopt 327 new laws:

  • 17 states need an optimal primary enforcement seat belt law for front seat passengers.
  • 33 states need an optimal primary enforcement seat belt law for rear seat passengers.
  • 31 states need an optimal all-rider motorcycle helmet law.
  • 19 states need an optimal booster seat law.
  • 174 graduated driver licensing laws need to be adopted to ensure the safety of novice drivers; no state meets all the criteria recommended in the report.
  • 42 critical impaired driving laws are needed in 39 states and D.C.
  • 11 states need an optimal all-driver text messaging restriction.

Insurers Will Be Found Not Guilty of Fraud in Sandy Payouts, Expert Says

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Insurers will be vindicated of accusations of fraud for rejecting flood damage claims made by Superstorm Sandy victims, an insurance industry expert predicts.

New York’s Attorney General Eric Schneiderman has opened an investigation into accusations against insurers Wright National Flood Insurance Co., units of Travelers Cos. and Hartford Financial Services Group Inc., which contract with the government’s National Flood Insurance Program (NFIP), of rejecting property flood damage claims of Sandy victims based on falsified engineering reports, Bloomberg reported this week.

Called a Write Your Own program (WYO), the Federal Emergency Management Agency (FEMA) allows participating property and casualty insurers to write and service the Standard Flood Insurance Policy in their own names.

Under the WYO program, insurers receive an expense allowance for policies written and claims processed while the federal government retains responsibility for underwriting losses.

The WYO Program operates as part of the NFIP, and is subject to its rules and regulations, according to FEMA, which oversees the flood insurance program.

“I am confident that the attorney general will be satisfied that insurers involved with the Write Your Own program were operating in a manner consistent with NFIP guidelines,” said Robert P. Hartwig, Ph.D., president of the Insurance Information Institute.

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Lawsuits in federal court accuse the insurers of colluding with engineering firms and others to deny or reduce damage payouts based on fraudulent reports. Schneiderman is investigating whether any crimes were committed. According to The Hartford Courant, more than 1,000 lawsuits are involved, alleging that homeowners were underpaid by insurance companies. Attorneys said insurers accepted altered engineering reports in a “peer review” process.

Insurers point out that the property disputes involve only about 1% of all flood claims and that the peer-review process is common practice—a quality control measure to make sure the federal government doesn’t overpay on flood claims.

Regarding the lawsuits that have been filed, Hartwig said, “I am equally confident that the evidence will indicate once again that insurers were operating in a manner consistent with NFIP guidelines.”

He explained that the lawsuits lodged against insurers alleging that certain insurers and firms hired to perform engineering analyses on flood-damaged properties were acting together to reduce or deny claims, “reflect a fundamental  misunderstanding of how the NFIP WYO program works. Engineering firms routinely and appropriately use a peer review process to review work performed. Occasionally, that process leads to additional opinions being reflected in an engineering report, which can thus impact the dollar amount received by claimants. This is part of a routine and necessary quality-control process.”

Hartwig said that this process is “no different than peer review in other technical and scientific disciplines. Using medicine as an example, test results are routinely reviewed by more than one medical professional before a diagnosis and course of treatments are rendered.”

Moreover, he added, insurers and the engineering firms hired are not financially motivated “to pay claimants anything other than a fair and accurate assessment of the losses compensable under the NFIP policy purchased. Insurers that consistently underpay or overpay claims can be removed from the program by the NFIP/FEMA.”

The New Reality of Weather Risk

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What do you do when you are responsible for the safety of town, county or state residents and forecasts call for drastic weather conditions? Risk professionals can come under criticism if they are overly cautious, yet under-reacting can mean lives are at stake.

Take the current situation here in New York, New Jersey and Connecticut. Predictions called for one- to three-feet of snow and blizzard conditions over a wide swath of the tri-state area and states of emergency were declared. Governor Andrew Cuomo of New York yesterday called for a full travel ban in 13 counties, beginning at 11:00 p.m. Those breaking the ban were subject to fines of up to $300, he said.

“With forecasts showing a potentially historic blizzard for Long Island, New York City, and parts of the Hudson Valley, we are preparing for the worst and I urge all New Yorkers to do the same – take this storm seriously and put safety first,” Gov. Cuomo said.

In actuality, however, the storm moved east and north, driving the brunt of the heavy snow and blizzard conditions through Long Island, New York and north through Connecticut and towards Boston.

Today at 7:30 a.m. the travel ban was lifted in most areas of New York and it was announced that public transportation would resume on a weekend schedule. Travel is also permitted in New Jersey and parts of Connecticut. But with snowfall much less than anticipated in many areas, some are questioning the travel ban. Connecticut Gov. Daniel Malloy, however, credited the travel ban and people’s cooperation, for the low number of automobile accidents during the storm—only 15 in the entire state.

“I would rather lean towards safety, because I have seen the consequences the other way, and it gets very frightening very quickly,” Cuomo told the media this morning. He noted, “Recently in New York we weren’t prepared in Buffalo.” In November, more than six feet of snow was dumped on Buffalo, claiming four lives. He also pointed out that the impacts of Hurricane Irene were underestimated. The belief was that most damage would occur in coastal areas, when the reality was that most destruction happened upstate.

This dilemma is widespread, from hurricanes to thunderstorms to wildfires. How far does a state’s governor go when preparing for an emergency? As Cuomo and many others have said, the responsible action is to put safety first.

New York City Mayor Bill de Blasio defended the decision to shut down the city in a press conference today. “We prepare for the worst and hope for the best,” he said, adding that the good news is that “the people of the city understood how serious this was.” The travel ban kept people safe and allowed the sanitation department—2,400 workers—to more easily clear the roads and deal with the storm’s aftermath, he said.

Asked if he is concerned that New Yorkers won’t take precautions next time, as was the case with Superstorm Sandy, de Blasio said he is not. “The world has changed a lot in the last few years. Point one: we are going to be very forceful in our messages to people when we sense danger. This is what you saw in the last 48 hours—there is no guarantee what you will get with the weather.”

In the future, he said, “I guarantee, if we ever get to the point in any crisis where we say the word ‘evacuate’ it’s going to be very forceful. It’s going to be constantly reiterated and we are going to put a lot of muscle into that.”

Another reality, he said, is that “Extreme weather is becoming much more common” as we have seen extreme weather events “over and over again, in a kind of progression that was unimaginable just a few years ago. People understand it. They understand that global warming is one of the causes and they understand the vulnerability and that we have to look at things differently. That is one of the reasons they took last night so seriously and acted accordingly.”