Things continue to evolve and develop all over the country regarding Workers Compensation insurance
and the COVID-19 pandemic.
One fundamental issue that many states have been wrestling with is
if and when COVID-19 infections could be the
basis for Workers
Compensation claims by workers who feel they
likely contracted the virus through work.
At the moment, the best answer appears to be that may be
difficult for some workers, quite
possible for some others, and subject to change depending on
future actions by state authorities
(which has just happened in Ilinois).--the governor's original
emergency rule got shot down by the courts after business groups
objected, but then in early June the Illinois legislature passed
legislation that restored the governor's earlier order and made it
law (a law that was promptly signed by the governor.)
So once again, Illinois goes further than many states, extending a
rebuttable presumption that COVID-19 infection is covered as an
Occupational Disease under the Workers Compensation Act for a great
many types of employments. This essentially extends Workers Comp
statutory coverage for COVID-19 to a considerable list of workers,
as long as their employment required the worker to have contact with
the public or groups of other employees numbering more than 15
In California, state legislators and the governor are about
to establish an even broader presumption for workers, using
a so-called "4 and 4" test, where an infection is deemed to
be work relatred if there are four diagnosed cases
within two weeks at an employer of 100 or fewer workers.
For larger employers, the test would be if 4% of workers
test positive over 14 days.
Workers Compensation is primarily a state matter, and the
particulars of Workers Compensation statutes can vary significantly
from one state to another. Many states exclude "ordinary diseases of
life" from the occupational diseases covered by Workers
Compensation. But there are occupational exposures where that could
be a different matter--healthcare workers, for example, and
so-called "first responders".
Here is a
recent review of the Workers Comp situation across the U.S. And
here is a recent article on Workers Comp for teachers who
At the moment, a number of states have accepted COVID-19 as a
covered occupational disease for at least certain kinds of
employments, according to a
recent report by NCCI, the National Council on Compensation
Iin most states, Workers Compensation coverage is provided
by private insurance companies (although mandated by state laws and
subject to the specific benefits established by the varying states)
initial decisions about coverage for COVID-19 will be made by
insurance company claims people, subject to review and determination
by state adjudicators, when a worker disagrees with a decision by an
Another potential complication: health insurance routinely
excludes coverage for injuries and illness covered by Workers
Compensation. And employers commonly use different insurers for
health insurance and Workers Comp insurance.
It is conceivable workers could be caught between different
insurance companies, each claiming the other should be responsible
for paying for COVID-19 medical costs. And while those insurers try
to pass the buck between themselves, the healthcare providers may
well come after the worker for the unpaid bills.
Some state legislatures have already voiced interest in addressing
these issues, so it may be likely that at least some states will
address COVID-19 coverage issues in the near future. But given the
patchwork nature of the Workers Compensation system in America,
these decisions will also likely be a patchwork of differing rules.
For businesses that survive these initial
disruptions, there may well be later significant financial threats
to them, thanks to Covid-19 and Workers Compensation. And that has
to do with the fact that in most states, businesses obtain their
Workers Compensation coverage from insurance companies. And those
insurance companies base premium charges, in large part, on payroll.
On March 26, 2020, the National Council on Compensation Insurance
(NCCI) issued a FAQ on
the subject of COVID-19 and Workers Compensation insurance. NCCI is
the insurance industry trade organization that writes the manual
rules that govern Workers Compensation insurance premiums in most
states. And in that FAQ, NCCI revealed the likely causes of this
coming financial threat to employers.
For one, NCCI spells out that, in cases where employers
continued to pay people even when they
were not working, insurance companies will count
that payroll when they compute
premium charges for Workers Compensation
insurance. So if employers pay out significant remuneration to
workers who are not actually working, no
good deed will go unpunished when it comes
time to compute Workers Compensation insurance premiums. Insurance
companies, according to NCCI, will
count that remuneration when they compute premiums.
NCCI also made it clear that employers will need to clearly
document when certain workers shifted
their duties in response to the crisis in such
a way as to potentially become eligible for a less
expensive rate for Workers Compensation
such documentation, the NCCI's arcane rules
will deny any adjustment in rate by insurance companies.
Worse yet, NCCI is telling insurance companies that the payroll for
these workers should go into whatever classification
the workers were assigned to back when they were, you know,
actually doing work.
So if your company has carpenters who are now just at home
watching Netflix, NCCI and your insurance company are saying any
payroll you provide gets counted for
still gets classified
as carpenter work.
4/15/2020--NCCI has now announced that payroll paid to
workers who are not, in fact, working, will not be counted for
Workers Compensation insurance premiums.
Now, if somehow your workers are doing actual work from
home, but the nature of that at home work is different from what
they used to do, pre-pandemic, you need
to document that change carefully, in terms of when it occured and
the nature of the change.
Because Workers Compensation insurance premiums are based on
payroll, and use obscure rules to determine the rates assigned to
those payrolls, there can be very
significant additional premium charges that
are billed to employers after
a policy ends. This is a routine and fairly
well understood aspect of Workers Compensation insurance, although
newer businesses can often be unpleasantly surprised by it.
Insurance companies audit
the payrolls and operations of insured
policies end, and sometimes those audits produce
unexpectedly large bills for additional premiums. Given the
complexity of the rules involved, it is not
uncommon for insurance companies to make
errors in computing these additional premium
charges, even in normal times. These
times are not normal.
Insurance companies are not currently conducting in-person audits
for Workers Compensation insurance, and it is unclear at this
writing when they may resume that practice. They will still adjust
premiums after policies end, of course, but now they will rely on
information provided by phone or online. And since employers
typically don't understand the complicated rules about these things
(Does overtime pay get counted? Whose pay goes into the cheap
clerical class? What about vacation pay? Sick pay? COVID-19 time-off
pay?) the odds of errors and overcharges likely will increase.
So just when surviving businesses may be trying to get back on their
feet, the bills for additional Workers Comp insurance premiums may
be coming in. And insurance
companies historically have not been overly patient with
policyholders when they think those policyholders owe them money.
Now, to be fair, a number of insurance companies are announcing
temporary measures offering respite from billings during this
immediate phase of the crisis. And it's always possible that state
insurance regulators could require further lenient policies that
would apply in their particular states. A
number of states have now mandated premium refunds for multiple
lines of insurance, including Workers Compensation insurance.
Given these economic stresses imposed on insurers by this crisis, I think it would be
unrealistic for employers to expect that, at some point, insurance
companies will not seek to be paid the additional premium they
believe are owed them.
Worse yet, recent
changes to the rules allow for punitive premium increases if
an insurer feels a policyholder has not cooperated with a premium
audit. So business owners who have already been stressed to the
breaking point may find they unexpectedly are dealing
with an insurance company demanding money they
cannot afford to pay, based
on payrolls that happened in the past, before we were all
living in a disaster movie.
Insurance companies historically have not been hesitant to file
suit over additional premiums they feel are
owed them, even when those additional premiums have been erroneously
calculated. And insurers
have another powerful hammer to hold over
employers: they can get current
Workers Comp coverage cancelled over unpaid
bills for past policies.
Workers Compensation insurance is subject
to the oversight and regulation of the various state
insurance regulatory agencies. And those
agencies have been far
from vigilant in limiting errors and abuses by
insurers over Workers Comp insurance premiums. State insurance
regulators have, in recent decades, largely abandoned rigorous
oversight of Workers Compensation insurance premiums, adopting an
attitude that price competition will serve to prevent overcharges.
That laissez-faire approach
has left insurers
free to overcharge with abandon, in my
experience, even in normal times.
This crisis, however, seems to have awakened some sense of genuine
oversight by insurance regulators in a number of states. The
situation remains fluid, however, and it appears that insurance
companies are going to be financially stressed to a significant
degree by this crisis.
Of course, for the moment, workers and employers have far more
immediate concerns. But once this storm runs out of rain, we will be
mopping up for quite a while.
And in related news, it is reported that
wrongful death lawsuits against employers over COVID-19
deaths are increasingly being filed. Such lawsuits seek to
sidestep the Workers Compensation system and its exclusive
remedy limitations by charging negligence by the employers
that resulted in the death of a worker via the coronovirus.
and Business Insurance