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Presumption of compensability: Workers compensation's Achilles heel?

State laws affecting first responders could be troubling for public entities

By Michael J. Moody, MBA, ARM

Workers compensation has become one of the most important lines of coverage for any business. Conceptually, it is a no-fault system; however, the employee typically has to prove that he or she was injured on the job in order to collect workers comp benefits. For the most part, workers comp is a system that has worked well for both the employer and the employee for more than 100 years.

Despite the long-term viability of workers compensation, several issues over the past few years have tested the concept. Exclusive remedy, opt-out feature, repetitive stress, and other trends that threaten basic policy elements have been potential trouble spots, but generally speaking, the coverage has continued to fulfill its original goals.

Serious challenge

Today, however, a specific situation has arisen that could potentially have a devastating effect on the entire workers comp market; the issue at hand is known as "presumption of compensability."

Before we get too far into the discussion of this topic, the article author wishes to go on record as strongly supporting this country's first responders. I have nothing but praise and admiration for them and realize that they put their life on the line daily. I, like most others, think of first responders as our country's newest heroes.

Having provided the above disclaimer, the fact remains, that presumption of compensability is a serious challenge to the workers comp market. The current problem deals with governmental entities but could have ripple effects throughout the entire workers comp industry. Most of the current legislation, effective in 43 states, deals with first responders, primarily police and firefighters and less frequently with emergency medical technicians (EMTs). In essence, this section of the law, according to Gene Maier, senior vice president of workers compensation underwriting for Safety National, places the burden of proof on the employer, since the statutes presume that specific diseases are presumed to be work-related.

Many people, including insurance agents and brokers, may not be familiar with the concept of presumption laws. Those who are, usually think of them in the context of the "presumption of innocence" that occurs in criminal law cases. When used in this context, it basically holds that the prosecution bears the burden of proof under most criminal actions. This, of course, is one of the central concepts of our legal system. However, presumption under the workers comp system is quite different and is still relatively unknown since it deals with such a narrow group of employees.

First, it's important to recognize that for the most part, the "presumption of compensability" laws are state laws that rule that certain, specific diseases, originally those that dealt with heart- and lung-related diseases, according to Maier, "were presumed to be work related, regardless of when the diseases were contracted. The laws typically applied to police and firemen; however, EMTs have been added more recently. He also notes it is important to realize that, in recent years, we have seen an expansion of these laws by the individual states, causing "every state's law to differ slightly."

"While it is difficult enough to fight these types of claims in any employment situation, when it comes to doing so in situations involving public safety employees, it may create an unpopular public opinion." -Gene Maier Senior Vice President of Workers Compensation Underwriting Safety National

Case in point

A number of these state laws have been on the books for some time. However, Maier points out, since 9/11, it has become more of an issue, and it has typically expanded into cancer-related issues. Currently about two dozen states have cancer-related legislation. Take New Jersey, as a case in point, where a new, proposed revision (Assembly No. 1196), would greatly expand the scope of coverage. While at the time this article is written, it has not yet passed, it appears certain to be headed for the governor's desk in the near future, and, if it does pass, it will open a number of very costly issues. It should be noted that New Jersey has already passed one presumption law, but 1196 goes much further.

For example, the new wording as it pertains to firefighters in governmental agencies states, "Any injury, illness, or death of a firefighter which may be caused by cancer shall be presumed to be an occupational disease." In essence, this single provision would apply to any cancer whatsoever at any time in the life of the firefighter. This provision, like several others in the proposed law, uses the word "may" instead of "is" caused by cancer. This calls into question whether or not a clear medical diagnosis on the part of the employee is ever needed in order to file a claim.

Equally troubling is that the proposed bill, while providing the possibility of rebuttal for the employer, does so only with "clear and convincing proof" to the contrary. This new wording is significantly more restrictive than the prior portion of the law which only required "satisfactory proof." Many experts believe that the inclusion of the "clear and convincing proof" will make it extremely difficult for an employer to defeat any cancer-related claim.

Further, the proposed legislation also contains a provision that attempts to create a presumption of compensability in favor of public safety workers who suffer an injury or death while responding to a catastrophic emergency. It appears to make death, injury, and disability (including disability arising from post-traumatic stress disorder) compensable under this section of the Act. This provision even extends to situations where the employee witnesses death and suffering of a magnitude sufficient to cause significant psychological trauma, whether or not the catastrophic emergency was caused by a terrorist attack or not.

Unintended consequences

Adding to the difficulty of cancer-causing situations is the long latency period for the disease to manifest itself. Maier notes that "this will make it much more difficult to determine what the ultimate effect will be." And unlike mesothelioma, which also has a similar latency issue, a cancer-related case will lack the direct connection with asbestos that mesothelioma typically requires. Cancer-related illness can occur anywhere.

Cancer is one of the most frequent causes of death and disability in the United States. Thus the creation of these state laws greatly increases the likelihood of higher claims activity on the part of employees. And as Maier points out, "While it is difficult enough to fight these types of claims in any employment situation, when it comes to doing so in situations involving public safety employees, it may create an unpopular public opinion."

Another group that may well experience a negative impact from these changes is volunteer firefighters. Volunteer firefighters have traditionally been covered in most states by workers comp laws; however, under the new broader approach to presumption, they may find it more difficult to obtain coverage. Maier points out that some of these individuals "could potentially have other jobs that expose them to other conditions and, in some cases, are members of the aging workforce as well." Both of these situations could tend to make contracting cancer more likely, he says.

Previously, many of the presumption laws required employees to have a minimum of service before the laws took effect. Maier says this typically would vary from 3 to 12 years. But the New Jersey legislation also has provisions for those employees with less than minimum time requirements, thus expanding the number of potential cancer-related claims.

All of this translates into serious potential costs for local governmental agencies. "Insurers have a variety of ways to deal with increases in these types of claims costs," Maier states. "We can utilize everything from increasing Self-Insured Retention or deductibles, to raising rates." But here again, "the governmental agencies, and, ultimately, the taxpayers will bear the brunt of these increases."

Conclusion

Agents and brokers who have governmental entity employers need to keep a close eye on potential changes to their states' workers comp laws. They should also make certain to keep their governmental entity clients up to speed on any potential actions. The landscape for presumptive compensation is changing and usually expanding rapidly, and agents/brokers need to continually monitor the situation for pending changes.

While there are few effective ways to mitigate the effects of these claims, there are some. Agents and brokers should encourage their governmental clients to establish a baseline program that begins with pre-employment physicals and provide for annual updates. Additionally, many states allow the employer a chance for rebuttal. However, Maier notes that the burden of proof is on the employer and it is difficult to prevail. Bottom line, the effects of a rash of these types of claims could have a devastating effect on governmental agencies that are already strapped for revenue. While the effect of these laws is well meaning, they could quickly become a massive future exposure for all public entity employers. 

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