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2012ABATipsNewsletter-SafetyMisconductDefenses1.pdf
Carbon nanotubes (CNTs) hold p r o m i s e f o r m a ny b e n e fi c i a l applications. However, there have been concerns and calls for a moratorium raised over “mounting evidence” that CNT may be the “ n ew a s b e s t o s ,” 1 o r a t l e a s t deserving of “special toxicological attention” due to prior experiences with asbestos.2 The shape and size of some agglomerated CNTs are similar to asbestos—the most “desirable.” And because CNTs for structural utility are long and thin—characteristics thought to i m p a r t i n c r e a s e d p o t e n cy t o
asbestos fibers—discussions of p a r a l l e l s b e t w e e n t h e s e t w o substances are natural. Thus, given the legacy of asbestos-related injury and the thousands of cases litigated each year, consideration of possible implications of the use of CNTs in research and in consumer products is prudent.
First reported in 19913, CNTs epitomize the emerging field of nanotechnology, defined by some as the “ability to measure, see, manip ul ate , and ma nu fa ctu re things usually between 1 and 100 nanometers.”4 CNTs are a type o f c a r b o n - b a s e d e n g i n e e r e d nanoparticle generally formed by
Uniting Plaintiff, Defense, Insurance, and Corporate Counsel to Advance the Civil Justice System
Fall 2009
Toxic Torts and Environmental Law Committee
IN THIS ISSUE Carbon Nanotubes: The Next Asbestos . . . . . . . . . . . . . . . . . . . . . . . 1
Editor’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tatera v. FMC Corporation: When Is A Product No A Product? . . . 3
Mexico’s National Wastes Management Program. . . . . . . . . . . . . . . 4
Environmental Risk During Restructuring And Bankruptcy . . . . . 5
Upcoming TTEL Programs And Meetings . . . . . . . . . . . . . . . . . . . . 6
Limitations Of Toxicogenomic Studies To Assess Toxic Exposures And Injury From Benzene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Burlington Northern: The Requisite Intent For Arranger Liability Under Cercla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2009-2010 TIPS Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Continued on page 18
Committee News
Committee News
CARBON NANOTUBES: THE NEXT ASBESTOS? Fionna Mowat, Exponent, [email protected] Joyce Tsuji, Exponent, [email protected]
1 Miller, G. 2008. Mounting evidence that carbon nanotubes may be the new asbestos. Friends of the Earth Australia. Available at http://nano.foe.org.au. 2 The Royal Society and Royal Academy of Engineering (RS/RAE). 2004. Nanoscience and nanotechnologies. Royal Society and Royal Association of Engineers. London: The Royal Society. Available at http://www.royalsoc.ac.uk/. 3 Iijima, S. 1991. Helical microtubules of graphitic carbon. Nature (London) 354:56–58. 4 National Science and Technology Council (NSTC). 2007. The National Nanotechnology Initiative. Strategic P l a n . Wa s h i n g t o n D C : N S T C , C o m m i t t e e o n Technology, Subcommittee on Nanoscale Science, Engineering, and Technology. December. Available at http://www.nano.gov/ NNI_Strategic_Plan_2004.pdf.
Fall 2011 / Winter 2012
Uniting Plaintiff, Defense, Insurance, and Corporate Counsel to Advance the Civil Justice System
Besides fraud, many employers would say that the most frustrating and perplexing workers’ compensation claims are those where an injured
worker has been awarded benefits despite the fact that they were violating a safety rule, not using a provided safety device, or using drugs or alcohol at the time of injury (collectively referred to by this article as “Safety Misconduct”). Largely, the sole reason that these employers get upset about this scenario is the seemingly high degree of unfairness. After all, various statutes and regulations require employers to develop safety rules, deliver safety training, provide safety devices, and, in some cases perform drug and alcohol testing as measures to protect employees from injuries and illnesses. Furthermore, in almost all instances the employer must implement and maintain these measures at their own expense. Therefore, when the employer must bear the expense for providing unused or violated prevention measures, and then must also bear the expense of the accident, it appears to be a very unfair outcome.
At the heart of employer and insurer frustration is the reality that most statutory defenses which allow for an injured employee’s benefits to be denied or reduced when a safety misconduct is present, appear to have little to no practical effect. Despite adequate provisions for occupational safety, active drug-free
workplace programs, and the presence of a statutory defense, it still appears extremely difficult to deny or reduce workers’ compensation benefits because of safety misconduct. This article seeks to explore why this arguably anti-employer reality exists. To do so, three adjoining states which have safety misconduct defenses in varying forms will be analyzed; Kentucky, Indiana, and Tennessee. The conclusion of this article will comment on the practical utility of the statutory safety misconduct defenses in these three states. Additionally, it will explain pitfalls and remaining
Workers’ Compensation And Employers’ Liability Law Committee
IN THIS ISSUE:
IN, KY & TN: THE ELUSIVE SAFETY-RELATED MISCONDUCT DEFENSE FOR WORKER’S COMP CLAIMS: By: Barry S. Spurlock, Spurlock & Higgins, Louisville, KY
Continued on page 9
IN, KY & TN: The Elusive Safety-Related Misconduct Defense for Worker’s Comp Claims: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chair’s Column . . . . . . . . . . . . . . . . . . . . . . 3 IA: Penalty Provisions Amendments . . . . . 5 IL: 2011 Amendments to the Work Comp Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 PA: Late Answers by Uninsured Employers – Are they Binding? . . . . . . . . . . . . . . . . . . . .7 2012 TIPS Calendar . . . . . . . . . . . . . . . . . . 21
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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Chair Lindsey Ellen Mills
900 Des Moines St, 3rd FL Des Moines, IA 50309-5501
(866) 286-1743 [email protected]
Chair-Elect Kara Miller
Franklin & Prokopik PC 32 S Washington St
Easton, MD 21601-3016 (410) 820-0600
Council Representative Janice F Mulligan Mulligan & Banham
2442 4th Ave, Ste 100 San Diego, CA 92101-8647
(619) 238-8700 [email protected]
Last Retiring Chair Alan S Pierce
Alan S Pierce & Associates 27 Congress St, Ste 301 Salem, MA 01970-5523
(508) 527-0974 [email protected]
Law Student Vice-Chair Stephanie A Diemer
38 Lake St Islip, NY 11751-2044
(631) 514-5192 [email protected]
Membership Vice-Chair Joshua Glade Holden
Fish Nelson LLC 3100 Lorna Rd, Ste 104
Birmingham, AL 35216-5450 (205) 332-3430
Newsletter Vice-Chair Sharon Funcheon Murphy Robinson Wolenty & Young LLP 8415 Allison Pointe Blvd, Ste 210
Indianapolis, IN 46250-4208 (317) 587-7820
Website Vice-Chair Leonard Y Nason
Law Office of Leonard Y Nason 113 Great Rd
Bedford, MA 01730-2715 (781) 271-9296
Vice-Chairs Janet M Coulter
Division of Workers Compensation 1065 N Pacificenter Dr, Ste 170
Anaheim, CA 92806-2141 (714) 414-1830
Thomas M Domer Domer Law
3970 N Oakland Ave, Ste 701 Milwaukee, WI 53211-2265
(414) 967-5656 [email protected]
Michael Fish Fish Nelson LLC
3100 Lorna Rd, Ste 104 Birmingham, AL 35216-5450
(205) 332-1448 [email protected]
Saba B Hashem D’Angelo & Hashem LLC
60 State St, Ste 700 Boston, MA 02109-1894
(617) 624-9777 [email protected]
Deborah Kohl 191 Bedford St, Ste 301
Fall River, MA 02720-3050 (508) 677-4900 [email protected]
William R Levasseur William R Levasseur Atty at Law 22 W Pennsylvania Ave, Ste 202
Towson, MD 21204-5008 (410) 321-0402
Hervey P Levin Law Offices of Hervey P Levin
6918 Blue Mesa Dr Dallas, TX 75252-6140
(972) 733-3242 [email protected]
Terrence A Low Law Office of Terrence A Low
244 Bridge St Springfield, MA 01103-1410
(413) 785-1510 [email protected]
Anthony J MacAuley Hanna Brophy et al
606 S Olive St, Ste 1020 Los Angeles, CA 90014-1665
(626) 844-7526
Channing Migner Law Office of Channing Migner PC
446 Main St, Fl 41 Worcester, MA 01608
(508) 792-6060 [email protected]
Chris J Scheldrup Scheldrup Blades et al
PO Box 36 Cedar Rapids, IA 52406-0036
(319) 286-1743 [email protected]
Andrew Z Schreck Downs & Stanford PC
522 Brooks St Sugar Land, TX 77478-3234
(713) 234-7542
Todd B Seelig PA Dept of Labor & Industry
110 N 8th St, Ste 401 Philadelphia, PA 19107-2413
(215) 560-2488 [email protected]
Emily A Spieler Northeastern Univ Schl of Law
400 Huntington Ave Boston, MA 02115-5005
(617) 373-3307 [email protected]
Cliff Stubbs McAnany Van Cleave & Phillips PA
PO Box 3363 Kansas City, KS 66103-0363
(913) 371-3838 [email protected]
Karen Tashima Choy & Tashima Attorneys at Law
345 Queen St, Ste 603 Honolulu, HI 96813-4715
(808) 526-9561 [email protected]
David Brooks Torrey Workers Comp Ofce of Adjudication
411 7th Ave, Ste 310 Pittsburgh, PA 15219-1944
(412) 565-5277 [email protected]
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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By: Lindsey E. Mills, Scheldrup Blades, Des Moines, IA
I am honored to be the 2011-2012 chair of the Workers’ Compensation and Employers’ Liability Law Committee. Our committee is made up of some of the foremost leaders in workers’ compensation law in the nation, including those representing plaintiffs, defendant employers, insurance companies, the government and the judiciary. Our committee strives to create educational programming, publications and various other activities that lead the way on the most important national issues affecting workers’ compensation. Current plans are underway for the 2012 MidWinter Conference to be held March 7-11, 2012, at the beautiful 4-star Westin Riverwalk Hotel in San Antonio, Texas . Mark your calendars
for this “can’t miss” three day seminar. Program chair, Kara Miller, is working closely with the Labor and Employment Law Section’s Workers’ Compensation Committee to provide top notch speech and cutting edge topics such as: Veterans’ Benefits, and Federal Workers’ Compensation, Natural Disasters, Causation, The Personal Comfort Doctrine and many more.
This year marks the 100th year anniversary of the first workers’ compensation act and retiring chair, Alan Pierce, commemorated this milestone with a fabulous symposium and dinner in Boston, Massachusetts in April. Having an opportunity to take a look back at how this unique area of law originated and developed provides not only our committee, but all those involved in the field, with a stronger foundation and understanding as we shape the future. If you are already a member, we have an exciting year planned. If you are not a member, I encourage you to become involved in our committee and enjoy the great people and resources our committee has to offer. As a member of the ABA and TIPS, you can join our committee for free and will immediately receive our committee’s newsletter and access to archived editions, in addition to notice of our committee’s activities and continuing legal education programs, including conferences and seminars. Feel free to contact me or Chair Elect, Kara Miller, for any additional information. We look forward to meeting you!
Chair’s Column
©2012 American Bar Association, Tort Trial & Insurance Practice Section, 321 North Clark Street, Chicago, Illinois 60654; (312) 988- 5607. All rights reserved.
The opinions herein are the authors’ and do not necessarily represent the views or policies of the ABA, TIPS or the Workers’ Compensation and Employers’ Liability Law Committee. Articles should not be reproduced without written permission from the Tort Trial & Insurance Practice Section.
Editorial Policy: This Newsletter publishes information of interest to members of the Workers’ Compensation and Employers’ Liability Law Committee of the Tort Trial & Insurance Practice Section of the American Bar Association — including reports, personal opinions, practice news, developing law and practice tips by the membership, as well as contributions of interest by nonmembers. Neither the ABA, the Section, the Committee, nor the Editors endorse the content or accuracy of any specific legal, personal, or other opinion, proposal or authority.
Copies may be requested by contacting the ABA at the address and telephone number listed above.
VISIT US ON THE WEB AT: www.americanbar.org
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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To commemorate the 10th anniversary of the tragic events of September 11, 2001, this ten-part series, addresses issues arising out of disasters caused by foreign and domestic acts of terrorism, by negligent acts, by natural events, and by other forces that threaten our security. Hear from leading experts as they explore an array of issues including risk management, recovery and response, regulations, ppolicy, insurance, and litigation.
If you missed the live broadcast of the September 2011 series on Disaster Preparedness and Response, each one of the ten recordings is available now on demand at your convenience. Go to West LegalEdcenter to learn more about this series and related content:
• On Demand Programs (recorded from TIPS September 2011 series) •• Podcasts (a new free podcast each month) • ABA-TIPS Membership • Bundle Package
Visit westlegaledcenter.com/link/disasterresponse
DISASTER PREPAREDNESS AND RESPONSE
West LegalEdcenter and ABA Tort Trial & Insurance Practice Section presents a series of programs dedicated to Disaster Preparedness and Response
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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IA: Penalty Provisions Amendments By: Amy K. Bagge and Christopher R. Landherr, Scheldrup Blades, Cedar Rapids, IA
Continued on page 16
INTRODUCTION:
The penalty provision in Iowa’s Workers Compensation Act Iowa Code § 86.13, which outlines penalty awards in Iowa workers’ compensation, was recently amended effective July 1, 2009. (2009 Iowa Acts (83 G.A.) ch. 179 S.F. 478 Sec. 110). This new statute has been widely viewed as a victory for claimant’s bar. It is perceived as making it more difficult for an employer and/or insurer to deny benefits to a claimant and avoid penalty benefits. Whether or not this is true, the stringent requirement of the new penalty statute found in Iowa Code Section 86.13 makes it extremely important for workers’ compensation practitioners on both sides to know and understand what has changed and what is now required.
OLD PENALTY STATUTE & APPLICATION:
First enacted in 1957, Iowa Code section 86.13 has been amended throughout the years, although the newest amendment to the statute in 2009 has likely produced the most substantial modifications to date. Until recently, Iowa Code section 86.13 protected employers and insurance carriers being assessed penalties for failure to pay workers’ compensation benefits as a reasonable basis existed for the delay or denial. Under the old statute, a penalty was generally not assessed for a denied claim even if evidence supporting the denial did not come until after the denial. Essentially, the former penalty statute was vague and allowed employers and insurance carriers greater leeway in denying benefits without fearing penalty. The statute was as follows:
If a delay in commencement or termination of benefits occurs without reasonable or probable cause or excuse, the workers’ compensation commissioner shall award benefits in addition to those benefits payable under this chapter, or chapter 85, 85A, or 85B, up to fifty percent of the amount of benefits that were unreasonably delayed or denied.
The prerequisites for the imposition of a penalty under the old statute were clear: (1) a delay in the commencement of benefits or a termination of benefits (2) “without reasonable or probable cause or excuse.” With respect to the second requirement, the Iowa Supreme Court has defined that a reasonable cause or excuse existed if either (1) the delay was necessary for the insurer to investigate the claim or (2) the employer had a reasonable basis to contest the employee’s entitlement of benefits. A “reasonable basis” for denial of the claim was found to exist if the claim was “fairly debatable.” Christiansen v. Snap-On Tools Corp., 554 N.W.2d 254, 260 (Iowa 1996). Further, a claim was “fairly debatable” when open to dispute on any logical basis. Stated in another way, if reasonable minds could differ on the coverage-determining factors or law, the claim was “fairly debatable.”
Thus, when an employee’s claim for benefits was fairly debatable based on a good faith dispute over the employee’s factual or legal entitlement to benefits, an award of penalty benefits was not appropriate under the former statute. Further, an award of penalty was also inappropriate where a reasonable delay in payment was necessary to allow the insurer to investigate the claim. See Kiesecker v. Webster City Custom Meats, Inc., 528 N.W.2d 109, 11 (Iowa 1995). The reasonableness of the employer’s denial, delay, or termination did not turn on whether the employer was correct in its decision, but rather whether there was a reasonable basis for the employer’s position that no benefits were owing.
In addition, even though the former penalty provision provided for a broader interpretation than the 2009 amendment allows, the prior statutory provision did provide safeguards to protect against abuse by employers and insurers. These safeguards are still in place today. For example, an explanation for the delay, denial, or termination was required; otherwise, the imposition of a penalty was mandatory. Christensen, 554 N.W.2d 254 (Iowa 1996). Any delay without a reasonable excuse
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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IL: 2011 Amendments to the Work Comp Act By: James M. Gallen, Evans & Dixon, St. Louis, MO
In 2011 the Illinois General Assembly passed Amendments to the Illinois Workers’ Compensation Act which were signed by Governor Quinn. A summary of the changes is follows.
Wage Differential
This provision limits the collection of wage differential to age 67 or five years from the date that the award become final, whichever is later.
Carpal Tunnel Syndrome
This section reduces the number of weeks on which a carpal tunnel syndrome case is determined to 190 weeks. It also provides that the law should not exceed 15% loss of use to the hand except for cause shown by clear and convincing evidence in which case the award will not exceed 30% loss of use of the hand.
Intoxication
This provides that no compensation is payable if the employee’s intoxication is the proximate cause of the accidental injury or when the employee incurred the accidental injury the employee was so intoxicated that the intoxication constituted a departure from the employment. The amendment then goes on to provide how intoxication may be proven, including blood, breath or urine tests. If the employee refuses to submit to the testing of blood, breath or urine, then there shall be a rebuttable presumption that the employee was intoxicated and that the intoxication was the proximate cause of employee’s injury.
Temporary Partial Disability
This one word amendment clarifies prior language to provide that, in the calculation of temporary partial disability payments, the gross, rather than the net, earnings from the light duty program are to be deducted from the earnings of the old job.
AMA Guidelines
This section provides that physicians may prepare a permanent partial disability impairment report which will include the level of impairment in writing. The report shall include an evaluation medically defined and professionally appropriate measures of impairment that include, but not limited to: loss of range of motion; loss
of strength; measured atrophy of tissue mass consistent with the injuries; any other measurements that establish the nature and extent of the impairment. The most current addition of the American Medical Association’s Guides to Evaluation and Permanent Impairment shall be used in determining the level of impairment. The Arbitrators shall consider the impairment ratings along with the occupation of the injured employee, the age of the employee at the time of the injury, the employee’s future earning capacity and the evidence of disability corroborated by the medical records. No single enumerated factor shall be the sole determinative of disability. The relevance and weight of any factors used in addition to the impairment must be explained in the written order.
Utilization Review
This provision provides that, when the employer advises a medical provider, in writing, that it intends to use utilization review the provider must provide the necessary information to the reviewer. The reviewer at the final level of review must be available for interview and deposition either within Illinois either in person or electronically, at the employer’s expense.
The Preferred Provider Program
This program authorizes employers to establish a preferred provider program for medical treatment. The plan must provide coverage by specialty and to treat common industries experienced by injured workers in the geographic area where the employees reside. If the employee chooses, in writing, to treat outside of the employer’s preferred provider network, the preferred provider network will count as one of the employee’s two chains of choices. If the employer does not have a preferred provider network then petitioner would retain the current two chains of referral. If the employee seeks treatment outside of the provider network before giving notice to the employer of his injury any such non- emergency treatment will be counted as petitioner’s first choice. The Commission may order treatment outside of the provider network on a case by case basis if the medical provider network does not contain a physician who can provide the required treatment and if the employee has complied with any pre-authorization requirements of the preferred provider network. The Commission may authorize petitioner to seek treatment at employee’s expense outside of the network upon a
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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PA: LATE ANSWERS BY UNINSURED EMPLOYERS – ARE THEY BINDING? By: Wendy S. Smith, Weber Gallagher Simpson, Philadelphia, PA
finding that the employee’s second choice of provider within the employer’s network is improper or inadequate.
Fee Schedule
This provision changes the calculation of the Fee Schedule, lowers it 30%, includes drugs and implant charges and provides that the Fee for out-of-state treatment shall be based on the lesser of the billed amount, the Fee Schedule in the State in which the services rendered are the Fee Schedule for the county in which the employee resides. This provision provides that, in the event that the bill does not contain substantially all of the required data to adjudicate the bill, the employer must contact the provider in writing explaining the basis for the denial and describing additional data necessary within 30 days of receipt of the bill. Any payments made more than 30 days after the required information is received accrue interest at the rate of 1% per month.
Collective Bargainig Pilot Program
This section permits the Director of the Department of Labor to designate two labor unions in the construction trades to participate in collective bargaining for an Alternative Dispute Resolution Plan which would take its members out of the Workers’ Compensation Act. The provision includes requirements for approval, reporting and the provisions of such a plan.
Arbitrators
The terms of all Arbitrators terminated at the close of business July 1, 2011 but the incumbent continued to exercise all of the duties until appointments were made on October 14. All subsequent initial appointments shall be made by the Governor with the advice and consent of the Senate. All Arbitrators appointed in the future must either be authorized to practice law in the State or have previously served as an Arbitrator for the Commission. Eight arbitrators were not reappointed, one had previously resigned and one was appointed to the Commission. In November one arbitrator was appointed an Associate Circuit Judge and an arbitrator and commissioner swapped positions. Appointments were for terms concluding on Jauy 1, 2012, 2013 and 2014. Upon expiration of a term the chairman will evaluate the performance of the Arbitrator and may recommend that he or she shall be re-appointed to a subsequent term by the full Commission.
The Commission shall assign no fewer than three Arbitrators to each hearing site. Cases should be assigned to the Arbitrators randomly. No Arbitrator shall hear cases in any county, other than Cook County, for more than two years in a three year term. The Commission has consolidated some hearing sites and announced assignments commencing in January 2012.
In the world of Pennsylvania Workers’ Compensation, a new entity came to town a few years ago, called the Pennsylvania Uninsured Employers Guaranty Fund (“PA
UEGF”). With the arrival of the PA UEGF, issues arose as judges faced new challenges with regard to the new law governing the PA UEGF. One primary issue involves late answers to claim petitions by the uninsured employers. For years Workers’ Compensation defense attorneys have dreaded the Yellow Freight motion, which is the motion an employee’s counsel makes when the answer to a claim petition is late without an excuse, arguing all allegations of a claim petition be deemed admitted. The Yellow Freight terminology comes from the seminal case Yellow Freight Sys., Inc. v. W.C.A.B. (Madara), 423 A.2d 1125 (Pa. Cmwlth. 1981), which precludes the employer from raising an affirmative defense. An unexcused late
answer admits “facts” only, not conclusions of law, and admits liability only through the last date the answer could have been filed. Bensing v. W.C.A.B. (James D. Morrissey, Inc.), 830 A.2d 1075 (Pa. Cmwlth. 2003); Ghee v. W.C.A.B. (University of Pennsylvania), 705 A.2d 487 (Pa. Cmwlth. 1997, following Heraeus Electo Nite Co. v. W.C.A.B. (Ulrich), 697 A.2d 603 (Pa. Cmwlth. 1997)). In Heraeus, the Court opined that failure of the Bureau to serve the claim petition on the carrier does not excuse a late filing of an answer where service has been made on the employer. The employer can present rebuttal evidence to any element of the claim that is not well pleaded, including the continuing disability of the employee. However, a good attorney always watches for the deadline when a claim is filed and ensures a timely answer to avoid a Yellow Freight motion. This article by no means changes this best practice. However, with the new law, a new dilemma arose.
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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Act 147, Section 1601, 77 P.S. § 2701 et seq, created the PA UEGF, which provided a new remedy to an employee in the event the employer did not have workers’ compensation insurance. Under Act 147, the employee must first file a notice of claim, Form LIBC 551, against the uninsured employer and the PA UEGF. A claim petition for benefits against the PA UEGF (and uninsured employer) may not be filed until 21 days after the notice of claim against the uninsured employer has been filed. Therefore, there are two Claim Petitions; one against the uninsured employer and one against the PA UEGF and the uninsured employer.
Under Section 1604, of the Pennsylvania Workers’ Compensation Act, the PA UEGF cannot be bound under Section 416 by a late answer of the uninsured employer. Section 1604 of the Act clearly and unambiguously states, “… failure of the uninsured employer to answer a claim petition shall not serve as an admission or otherwise bind the Fund under Section 416.” Since there are two claim petitions, claimants’ attorneys still made Yellow Freight motions against the uninsured employer. This caused issues for the PA UEGF, as some judges would grant the Yellow Freight motions against the employers, and essentially use the late answer against the PA UEGF.
In a recent case, a Workers’ Compensation Judge granted benefits for a limited period up to the date full recovery was found by the medical expert for the PA UEGF thus allowing a termination of benefits. The judge erroneously found that she was bound to find that a work injury occurred based on the uninsured employer’s failure to file a timely answer. However, the judge admitted in the Findings of Fact that the claimant failed to submit legally sufficient medical evidence to support her contention of ongoing disability. The PA UEGF appealed the judge’s decision and the Pennsylvania Workers’ Compensation Appeal Board (WCAB) found, in this case of first impression, that Yellow Freight and its progeny have no applicability where there is a claim petition filed against an uninsured employer. The WCAB stated “to hold that Yellow Freight applies to an uninsured employer while not impacting UEGF’s liability in any way would create the potential for conflict because it would require Workers’ Compensation Judges to separately analyze the merits of the claimant’s claim petition under the theory that the allegations are deemed admitted, as against the uninsured employer, but not against the PA UEGF.”
Thus, theoretically, “the WCJ could grant the claim petition as it applies to the uninsured employer, but then deny a claim petition against the PA UEGF based on his or her review of the evidence”. Evangelista v. Trexler Park Manor and the Pennsylvania Uninsured Guaranty Fund, A10-1378/A10-1379, 2011 WL 2803009, Opinion Circulated June 8, 2011.
Therefore, the WCAB stated that the only logical conclusion is that Yellow Freight is not applicable in situations involving the uninsured employer, because it appears from Section 1604 that the legislature did not intend for the PA UEGF to be held liable, even secondarily, for the uninsured employer’s failure to file an answer. This may seem unfair to the claimant when most uninsured employers have no interest in responding or participating in the litigation of the claim. The WCAB stated that in that circumstance, as in the case where a defendant files a late answer, the PA UEGF should not be penalized by becoming secondarily liable for a claim that may not be warranted based on the particular facts at issue.
This issue has not gone before the Pennsylvania Commonwealth Court at this time; however, this is an issue that continuously arises in PA UEGF claim petition litigation. Fortunately, for the first time since the inception of the PA UEGF, defense counsel has a resolution to the late answer conundrum. Defense counsel representing the PA UEGF dealing with uninsured employer’s late answer/Yellow Freight situations, should argue the legislative intent behind the creation of the PA UEGF, and the PA UEGF’s role in the litigation process. The Commonwealth Court has always looked to the legislative intent of the laws of Pennsylvania and the WCAB could not have been any clearer that the legislature did not intend the PA UEGF to be held liable, even secondarily, for the uninsured employer’s failure to file an answer. Nor should the PA UEGF be penalized be becoming secondarily liable for a claim that may not be warranted based on the particular facts at issue. The WCAB provided this legal analysis as a framework for future cases, recognizing the need for a new prospective. Defense counsel who has this situation should cite to the WCAB decision, which, while not bindings, is persuasive authority. Simply stated the Yellow Freight motion practice involving late answers cannot be used when an uninsured employer is present and the PA UEGF is involved.
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uncertainties so that insurers and employers can better anticipate what issues and facts will be important when a safety misconduct defense is raised.
Safety Misconduct in Kentucky
Kentucky, in comparison to Indiana and Tennessee, statutorily provides the least amount of incentive for safety misconduct defenses as they relate to employer safety rules. Kentucky’s worker’s compensation statute, Ky. Rev. Stat. ann. § 342.165(1) (West 2010), only provides for a reduction in worker’s compensation benefits for intentional failure to follow an employer’s safety rule. Specifically, the statute provides for a 15% reduction in compensation if the injured employee fails to use safety appliances or obey an “order” of the labor commissioner or employer. Kentucky’s worker’s compensation statute, Ky. Rev. Stat. ann. §342.610(3) (West 2010), also specifically carves out an affirmative defense for voluntary intoxication. In order for this affirmative defense to be effectual, an employer / insurer must show that the intoxication was the primary, proximate cause of the injury. Kentucky’s statue also provides for a 30% increase in benefits when the employer violates an established safety standard, however that matter is beyond the scope of this article.
In Barmet of Kentucky, Inc. v. Sallee, 605 S.W.2d 29 (Ky.App. 1980), the Kentucky Court of Appeals addressed both employer and employee safety misconduct in one case. Mr. Sallee, a foreman with Barmet of Kentucky, Inc., was electrocuted while attempting to change a fuse in a machine. His widow sought an increase in the compensation award because wet floors were present around the machine in violation of a general industry OSHA regulation that requires floors to be kept clean and dry. Barmet sought to have Sallee’s award reduced because Sallee had violated Barmet’s rule that only maintenance personnel were supposed to change fuses. In addressing the safety failure of Barmet, the court focused on the statutory language that requires safety failures of either the employer or employee to be intentional, and that when assessing penalties against either an employer or employee, the degree of culpability necessary must be the same. It was
acknowledged that the worker’s compensation statute did not define intentional; therefore the court relied upon a common, straightforward meaning of intentional to determine whether a company or person has acted in such a way so as to violate a standard or rule.1
In Barmet, the court eventually found that the employer’s failure to comply with the OSHA standard regarding maintenance of dry floors was not intentional, and thus denied Sallee’s request for an increase in benefits.2 Similarly, the court ruled against Barmet concerning the issue of Sallee’s violation of their rule that prohibited employees other than maintenance personnel to change fuses. Therefore, the worker’s compensation board’s finding that the employer was not entitled to a reduction because of an employee’s violation of an employer’s safety rule was upheld. In making this determination, it was shown that it was routine practice within Barmet for other personnel, such as foreman, to change fuses. The court reasoned that even if the rule existed, it was not enforced, and therefore it could not be sustained that Sallee intentionally violated a rule of the employer. Barmet clearly shows that a Kentucky employer’s practice, notwithstanding its safety rule, will be determinative in deciding if an employee has intentionally violated an employer’s safety rule.
The degree of employee culpability necessary to constitute intentional violation of an employer’s safety rule has been discussed in Kentucky worker’s compensation cases dating back at least to 1925.3 In Black Mountain Corp. v. Higgins, that court stated that the current statute’s requirement of “willful misconduct” on the part of an employee amounted to intentional action or action taken with reckless disregard.4 That court went further to establish that even gross negligence was insufficient culpability to establish an employee’s willful or intentional violation of a safety rule.5
Many employers have a basic safety rule that prohibits horseplay. In Kentucky though, it is unclear how horseplay would be treated because in many instances injuries involving horseplay may not be considered to have arisen-out-of or occurred in-the- course of employment; thus horseplay can act as a complete affirmative defense.6 A parallel consideration applied to rules against horseplay that is also seen when evaluating the violation of a non-horseplay safety rule is
1 Id. 2 Id. at 33. 3 Allen v. Columbus Min. Co., 207 Ky. 183, 268 S.W. 1073 (Ky. 1925). 4 226 Ky. 7, 10 S.W.2d 463, 464-465 (Ky. 1928). 5 Id. at 464. 6 E.g.,Williams v. Nowak, 406 S.W.2d 408 (Ky. 1966).
IN, KY & TN: THE ELUSIVE... Continued from page 1
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the employer’s history of enforcing the horseplay rule.7 In Hayes Freight Lines, Inc. v. Burns, the Kentucky Court of Appeals found that even though the claimant employee actively participated in horseplay, his injury, which was sustained during horseplay, arose-out- of and in-the-course-of his employment because his employer knew of the horseplay and did not take action to discourage it.8 Therefore, it appears in order for horseplay to be an effective defense for the employer, the consistent enforcement against horseplay is necessary in order for the employer to succeed. Differing from violation of other safety rules though, if an employer can successfully raise a horseplay defense, the defense should operate to completely bar compensation for the injury as opposed to simply result in a 15% reduction. Even though there is a lack of authority to support this proposition, it is the theory of this author that a claimant employee is unlikely to question or appeal a 15% reduction for violation of an employer’s safety rule if he or she risks losing all worker’s compensation benefits should a horseplay defense showing that the injury did not arise-out-of or in the course of employment be successful on appeal.
As stated earlier with respect to safety misconduct involving drug or alcohol usage in Kentucky, the employer must show that the injured employee’s voluntary intoxication is the primary, proximate cause of the injury.9 In Campbell v. City of Booneville, the Kentucky Supreme Court discussed the matter of proximate and primary cause as it relates to voluntary intoxication in the worker’s compensation context.10 In this case, Campbell, a police officer who had blood alcohol level of 0.14, well in excess of the legal limits for being considered intoxicated, was injured when he crashed his police cruiser during a chase.11 In appealing the workers’ compensation board and Kentucky Court of Appeals decisions to deny compensation, Campbell argued that while his intoxication may have been a proximate cause, it was not, as the statute required, the primary proximate cause. In this case the Kentucky Supreme Court explained that being the primary, proximate cause does not require that the
injured employee’s intoxication be the sole cause of the accident, but only a showing of substantial evidence that the intoxication was the primary proximate cause.12
Another case decided by the Kentucky Court of Appeals, just one day after the Kentucky Supreme Court ruled in Campbell13, demonstrates the other end of the voluntary intoxication and primary proximate cause spectrum. In Perdue Farms Inc. v. Stogner, the Kentucky Supreme Court upheld a workers’ compensation board and court of appeals decision to allow compensation where an employee was found to have a blood alcohol level of at least 0.15 at the time of his injury.14 In this case an employee’s arm and hand were severely injured when his glove was pulled into a machine. Stogner was working the second shift of a scheduled, double-shift when the incident occurred. In the approximate three-hour break between the shifts, Stogner had consumed alcohol. When Stogner’s injury occurred, he was simply pointing to a particular area on the machine to show a maintenance worker where a malfunction was occurring. The court agreed with the workers’ compensation board and court of appeals decisions that there was reasonable evidence presented that showed even though Stogner was intoxicated, his fatigue, lack of sleep and the mere mechanism involved in the injury were notable cause factors.15 Because of these cause factors, it was reasonable to believe that Stogner’s intoxication was not the primary, proximate cause of his injury. The Stogner court made this decision despite the public policy consideration that was asserted by the employer.16
With respect to the safety misconduct defense involving voluntary intoxication, a Kentucky employer is not assured success even when proof of intoxication at the time of injury is uncontroverted. There must be a showing of substantial evidence that the intoxication was the primary proximate cause of the injury. ALJs and courts will consider all of the circumstances surrounding an injury where intoxication is involved, and determinations of whether the intoxication was the primary proximate cause will be made in light of the totality of the circumstances.
7 290 S.W.2d 836 (Ky. 1956). 8 Id. at 839. 9 Ky. Rev. Stat. ann. §342.610(3) (West 2010). 10 85 S.W.3d 603 (Ky. 2002). 11 Id. at 604. 12 Id. at 607. 13 Cathy M. Jackson & Shane Crase, A Survey of Kentucky Workers’ Compensation Law, 30 n. Ky. L. Rev. 31, 58 (2003). 14 2003 WL 22160347 (Ky. 2003). 15 Id. at 2. 16 Jackson & Crase, supra.
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In summary, while Kentucky has statutory provisions for defenses involving safety misconduct, there is rather broad, no-fault protection for employees. It appears that defenses for safety misconduct involving voluntary intoxication have been raised with a greater degree of success than those involving violation of safety rules. The burden for showing that an employee intentionally failed to follow a safety rule or use a safety device presents a significant barrier for the employer to overcome. Not only must the employer show that the claimant employee intentionally violated a safety rule, there must not be evidence that the employer has failed to consistently enforce the rule or constructively disregarded the rule. Historically, there are very few instances in Kentucky of employer success with reducing benefits because of this type of employee misconduct. The burden for employers to raise a voluntary intoxication defense is to show that the intoxication is the primary proximate cause of the claim. While this burden can be great in some instances, it is largely controlled by the circumstances, and an employer’s chances of success are good only if the intoxication is the overriding cause of the accident. This degree of success can be attributed to the fact that primary proximate cause does not equate to sole proximate cause.
Safety Misconduct in Indiana
Indiana’s workers’ compensation statute provides for an affirmative defense, barring compensation for all types of safety misconduct contemplated by this article. (Ind. Code ann. § 22-3-2-8 (West 2010)). Besides the fact that Indiana’s statute provides a complete affirmative defense for failing to obey a safety rule or use a safety appliance, it is further distinguishable from Kentucky in that it only contemplates a “knowing” failure by the employee. Interestingly though, Indiana’s statute requires that the safety rule be reasonable and either be written or printed and be posted in a conspicuous position in the place of work. Finally, the affirmative defense of employee intoxication is also embodied in this provision of the statute.
In some instances, an employee’s failure to obey a safety rule of the employer has been analyzed under the basic compensability tests of arising-out-of and in-the- course-of employment. In U.S. Steel Corp. v. Cicilian, 133 Ind.App. 249, 180 N.E.2d 381, (Ind. App.1962) an employee died as a result of a fall from an elevated
surface he had climbed to, and evidence tended to show that he had climbed to this height while on his lunch break. Prior to the fall, the employee had been specifically instructed that he was strictly prohibited from performing any climbing. The employee was prohibited from climbing because approximately 10 years earlier he had lost an eye, and the employer’s medical department feared this might make him susceptible to falls while working at any elevated height. Ultimately, the decedent employee’s wife was denied benefits because the court found that his injuries did not arise-out-of his work with the employer. While the most significant factor in making this determination was that the injury likely occurred while on his lunch break, the fact that the employee had been given strict instruction to not climb to any heights was a consideration in the court’s conclusion that a violation of such instruction takes the conduct involved in the violation out of the scope of employment.
While the 1966 Cicilian decision may lead one to believe that Indiana courts are more generous in affording employer’s protection through this type of safety misconduct, prior cases and cases thereafter are contrary to this theory. In fact, despite the lower employee culpability threshold implicit in the “knowing” language, it is still quiet difficult under the current statute for an employer to successfully raise a defense based upon employee failure to obey a safety rule or use a safety appliance.17 While employers need not show that the injured employee’s conduct was willful, as was required with previous wording of the Indiana statute, they must however show something more than nonconformity, thoughtlessness, heedlessness or inattention.18
It appears that Indiana courts have taken a similar approach to Kentucky when determining whether employer acquiescence or failure to enforce a safety rule should overcome safety misconduct defenses.19 In Whitaker, the Kentucky Supreme Court stated that when an employer fails to enforce it’s own rule, it cannot prove that an employee who violates that rule has done so knowingly.20 While the Indiana Court of Appeals was not persuaded by the Kentucky Whitaker case, in Wimmer Temporaries, Inc. v. Massoff, it also clearly announced that when an employer fails to enforce one of its safety rules, it cannot establish that the injured employee knowingly violated that rule.21
17 29 Ind. PRaC., WoRKeRS’ ComPenSatIon §3:25 (2009-2010 ed.). 18 Id. 19 See Whitaker, 891 S.W.2d at 82; Wimmer Temporaries Inc. v. Massoff 740 N.E.2d 886, 892 (Ind. App. 2000). 20 Whitaker, at 82. 21 Wimmer Temporaries, Inc., 740 N.E.2d at 892.
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In Wimmer, Mr. Massoff worked as a temporary employee at a casting foundry and was injured while cleaning a part on a casting machine. The employer had developed and communicated a procedure that required the machine to be shut down prior to cleaning. However, it had become common practice at the facility to clean the machine while it was operating in order to save time and reduce scrap. A written safety notice was posted that warned employees they were not permitted to clean the machine while it was running, and if any employees were caught doing so they would face disciplinary action. Even though Massoff stipulated that he knew of the safety procedure, it was determined that during Massoff’s hands-on training he was instructed to clean the machine while it was running. Furthermore, supervisory personnel had observed Massoff cleaning the machine while it was running and had failed to counsel or discipline him for the safety violation. Citing Kuhner Packing Co. v. Hitchins, the Wimmer court found that these factors constituted sufficient acquiescence of the safety violation to nullify Massoff knowingly violating the foundry’s safety rule.22 Therefore, it follows that even in cases where an employee actually knows of a safety rule and violates that rule, the safety misconduct defense can fail; particularly when the employer has failed to enforce the rule.
Even if an Indiana employer can show that an employee knowingly violated a safety rule, it must still present sufficient facts that show the rule was written, reasonable, posted, and that the posting location was a conspicuous place.23 A survey of Indiana case law, exclusive of administrative adjudication, does not reveal any decisions wherein these additional requirements for a safety misconduct defense was at issue. Whether or not the rule was written and posted appear to be fairly straightforward factual determinations. However, determining whether the particular rule was reasonable or whether it was conspicuously posted is certainly more difficult. In Nordyke & Marmon Co. v. Swift, a 1919 case, an employee was killed while trying to obtain clean gasoline to clean the floors instead of using dirty gasoline as was required by policy.24 Even at this early year, the Indiana appellate court considered that the rule requiring use of dirty gasoline was not one related to
safety, but rather a rule instituted to conserve gasoline and therefore not grounds to bar Swift’s workers’ compensation benefits because of safety misconduct.25
Concerning Indiana’s affirmative defense for workers’ compensation claims wherein the claimant employee was intoxicated, it appears that Indiana courts more closely parallel Kentucky’s treatment of this type of safety misconduct. A distinction however in Indiana’s statute is the absence of language that requires the intoxication to be the primary proximate cause.26 However, the statutory absence of the words “primary” or “proximate cause primarily” does not necessarily equate to an Indiana employer being able to more easily raise an affirmative defense for intoxication. The Indiana Court of Appeals in Jones ex rel. Jones v. Pillow Express Delivery Inc., clearly stated that the mere presence of a controlled substance that causes an intoxicating effect in an injured employee is insufficient by itself to bar that employee’s workers’ compensation benefits.27 However, the court went on to state that if the intoxication contributes directly to the cause of the accident, such showing is sufficient to carry the affirmative defense of intoxication.28 In Jones, the employee was intoxicated from the use of a medication patch that was prescribed to him by his doctor, and was killed in a motor vehicle crash.29 In this case the court found that Jones was knowingly intoxicated (even though not a stated requirement in the statute) and that the intoxication was a direct cause of the accident. It therefore denied workers’ compensation benefits to Jones’ wife.30 While the statutory language in Indiana relating to safety misconduct may appear to be more favorable to employers raising affirmative defenses, there still exist significant challenges for employers to raise these defenses. Indeed there are affirmative defenses for all three areas of safety misconduct. But, issues such as employer failure to enforce safety rules or provide sufficient evidence to show intoxication was a proximate cause of a work-related accident are nonetheless significant obstacles.
IV. Safety Misconduct in Tennessee
Tennessee is one of the minority states that provides a
22 Id. at 892 (citing Kuhner Packing Co. v. Hitchins, 97 Ind.App. 228, 186 N.E. 262 (1933)). 23 29 Ind. PRaC., WoRKeRS’ ComPenSatIon, supra. 24 71 Ind. App. 176, 123 N.E. 449, 450 (Ind. App. 1919). 25 Id. 26 Ind. Code ann. § 22-3-2-8 (West 2010). 27 Jones ex rel. Jones v. Pillow Express Delivery, Inc. 908 N.E.2d 1211, 1212 (Ind. App. 2009). 28 Id. 29 Id. at 1212. 30 Id. at 1214.
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general, employee willful misconduct affirmative defense in worker’s compensation.31 Additionally, Tennessee’s statute provides for complete affirmative defenses specifically for intoxication or illegal drug usage, or the willful failure or refusal to use a safety device.32 An employee’s violation of a safety rule is a specific type of employee willful misconduct, and, consistent with Larson’s observation, Tennessee has traditionally treated this type of safety misconduct as any other instance of general, willful misconduct.33 Interestingly, Tennessee’s statute has a specific provision for the willful failure or refusal to use a safety device,34 but the statute is silent on a failure to obey an employer’s safety rule that does not pertain to the usage of a safety device. Many safety rules do not call for the usage of a safety device, however these rules are important, administrative controls for workplace hazards.35 Over the years, and in the majority of cases, the Tennessee courts have not usually found an employee’s failure to use a safety device or follow an employer’s rule pertaining to safety as being willful so as to bar an employee’s right to worker’s compensation benefits.36
In recent times the defense of an employee willfully failing to use a safety device(s) has produced varying outcomes. Therefore the Tennessee Supreme Court set forth and adopted a more definitive standard on what is necessary to successfully raise this defense in its decision in Nance v. State Industries, Inc.37 Interestingly, as will be pointed out in the proceeding discussion of Nance, usage of safety devices is many times inseparably tied to obeying a safety rule. Therefore, Nance is instructive for analyzing defenses when an employee’s safety misconduct involves a willful violation of a safety rule, and not just for the failure to use a safety device.38 Nance involves an industrial accident where a maintenance worker was injured when he fell from a ladder while performing lubrication of equipment.39 The injured worker, Mr. Nance, fell from a ladder when the equipment he was servicing unexpectedly started up and caused him to fall. Nance had failed to apply the proper locks to the equipment’s energy source as required by OSHA and his employer, thus allowing for another employee to
activate the equipment while Nance was lubricating it. Nance’s employer, State Industries Inc., had provided the necessary locks to Nance and other maintenance employees; developed formal policies and procedures requiring locks and tags to be used; and it also had a safety consulting firm perform approximately two hours of training for all maintenance staff, including Nance, on performing lockout-tagout as well as the dangers associated with failing to properly do so.40
Despite the training, provision of safety devices (locks) and formal policy, Nance failed to perform lockout-tagout in the instance in question. Furthermore, Nance admitted that after he was issued the lock and received the training, he simply put the lock in his toolbox and did not follow lockout-tagout requirements. Nance and other maintenance employees stipulated that they indeed knew of the requirement to use locks and that failing to properly use the locks could result in disciplinary action. However, noncompliance with lockout-tagout requirements, at least concerning Nance and his co-workers, was the general practice at State Industries. Two of Nance’s maintenance co-workers testified in the matter and stated that they infrequently adhered to State Industries’ lockout-tagout requirement. The two workers reasoned that because they worked on their own during the night shift, it was highly unlikely that their failure to use lockout tagout would be detected by their manager. One of the two workers conceded that he knew he could “get in trouble” if his failure to use lockout was discovered.
A focus of the Nance court that was key to their holding and judgment was State Industries’ nonspecific disciplinary action for failing to abide by the lockout policy. This focus is also instructive for the court’s crafting of one of the tests in the standard it developed to evaluate affirmative defenses for failing to use a safety device. In addressing this issue, the court’s opinion states:
There is, however, no indication as to what kind of trouble would be visited upon a violator of the safety rule. The record is silent as to what, if any, discipline policy had been adopted by the employer to ensure enforcement. Indeed, no warning signs had been posted to remind
31 tenn. Code ann. §50-6-110 (a) (West 2010). 32 Id. 33 Audrey A. Hedrick, Workers’ Compensation-Nance v. State Industries, Inc.: Tennessee Adopts Affirmative Defense Standard for Willful Failure or Refusal to Use a Safety Appliance, 31 U. Mem. L. Rev. 727 (2001). 34 tenn. Code ann. §50-6-110 (a). 35 Barry S. Spurlock & Keith R. Wertz, ChomP ComP: the SmaLL BuSIneSS GuIde to LoWeR WoRKeR’S ComPenSatIon PRemIumS. 166 (Lighted Path Publishers 2008). 36 Hedrick, supra., at 737. (citing Nance v. State Indus., Inc., 33 S.W.3d 222 (Tenn. 2000). 37 Id. at 737. 38 See generally Id. (The analysis of both pre and post Nance cases for willfully failing to obey a safety rule provides support for this proposition.) 39 Nance, 33 S.W.3d 222. 40 Nance, 33 S.W.3d at 228.
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employees of the rule. Neither is there any evidence in the record that any employee had been disciplined for a violation. Apparently, Nance’s continuous violation of the safety rule for seventeen months either had not been detected, or had been overlooked by the employer. The record is silent as to any policy or procedure put in place by the employer to encourage compliance or prevent employees from disregarding the rule.41
This portion of the opinion illustrates the concern of the court in this matter, and explains their reasoning behind the element of their standard that requires the employer to carry out strict, continuous and bona fide enforcement of a policy in order for this affirmative, safety misconduct defense to be effective.
The standard that the Tennessee Supreme Court set forth as its holding in Nance, has four parts that an employer must satisfy to successfully raise a willful failure or refusal to use a safety device defense, all of which must be satisfied: 1) at the time of the injury the employer had in effect a policy requiring the employee’s use of a particular safety appliance; 2) the employer carried out strict, continuous and bona fide enforcement of the policy; 3) the employee had actual knowledge of the policy, including a knowledge of the danger involved in its violation, through training provided by the employer; and 4) the employee willfully and intentionally failed or refused to follow the established policy requiring use of the safety device.42
Turning to the affirmative safety misconduct defense involving intoxication and drug usage, Tennessee’s statute contains more detailed provisions than does Kentucky’s and Indiana’s, and these provisions are tied to the Tennessee certified drug-free workplace program. Tennessee’s certified drug-free workplace program came about as a result of worker’s compensation reform in 1996. The current statute explains that the employer has the burden of proof for raising an intoxication or drug use defense, but then provides a rebuttable presumption that if found, intoxication or drug use will be deemed the proximate cause of an accident involved in a workers’
compensation claim if the employer has implemented a state certified drug-free workplace program.43 The injured employee then has the opportunity to rebut, by preponderance of the evidence, that the intoxication or drug use was not the proximate cause of the accident in question.44 Especially unique to Tennessee’s statute is the provision that treats an injured worker’s refusal to submit to a post-accident drug test as creating the presumption, in the absence of a preponderance of the evidence to the contrary, that the proximate cause of the injury was the influence of drugs.45 As seen with Kentucky and Indiana, the issue of whether intoxication or drug usage is a proximate cause of the work-related accident is key for this defense.
This certified drug-free workplace program did not alter the standards by which proximate cause is determined; it only changed which party has the burden of proof when the employer has implemented a drug-free workplace program in accordance with Tennessee law.46 There is remarkable pre-1996 Tennessee case law dealing with the issue of intoxication as an affirmative defense for a worker’s compensation claim.47 Furthermore, this case law demonstrates that determining whether or not such intoxication was a proximate cause of the accident has been a central issue for a considerable amount of time.48 As seen in the Tennessee Supreme Court’s decision in Industrial Mechanical Contractors, Inc. v. McIntosh, the method of analysis employed for determining whether intoxication was a proximate cause of an accident has not changed.49 With respect to the affirmative intoxication or drug usage defense, the only change brought about by the adoption of the Drug-Free Workplace Act was making injured employees prove, by a preponderance of the evidence, their intoxication or drug use was not a proximate cause of the accident wherein they were injured.50
Tennessee decisions dealing with the determination of intoxication being a proximate cause of injury, such as Industrial Mechanical Contractors, Inc. v. McIntosh, Solomon v. Hall and Overall v. Southern Subaru Inc., show that cases involving intoxication or illegal drug
41 Id. 42 Id. 43 tenn. Code ann. §§50-6-110 (b), (c) (West 2010). 44 Id. 45 tenn. Code ann. §50-6-110 (c). 46 See Id. 47 See Id. 48 McIntosh, 229 S.W.3d at 681(citing Overall v. Southern Subaru Star, Inc., 545 S.W.2d 1 (Tenn.1976); Solomon v. Hall, 767 S.W.2d 158, 161 (Tenn.Ct.App.1988); Dobbs v. Liberty Mut. Ins. Co., 811 S.W.2d 75, 77 (Tenn.1991)). 49 See McIntosh, 229 S.W.3d at 681. 50 See Id.
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use will be treated in similar fashion as in Kentucky and Indiana when an injured employee of a certified drug-free workplace decides to rebut the presumption of proximate cause. In doing so, an injured employee must present sufficient evidence that shows were it not for the intoxication or drug use, the injury would not have occurred. The McIntosh ruling is fairly recent and there are limited subsequent decisions by lower courts to indicate whether any further contours of this defense are yet to be determined.
V. Conclusion
Whether they act as a complete defense or one that simply reduces benefits, defenses involving the violation of safety rules or failure to use a safety device face two distinct challenges in the jurisdictions analyzed by this article. First, employers in all three states must show that they have consistently enforced the safety rule or the usage of the safety device in question in order for the defense to have any chance of survival. In Indiana, the employer must additionally ensure that the rule was written and posted in a conspicuous place; and conspicuous begs further factual determinations in each case. In Tennessee, the employer must show that the employee had more than mere constructive knowledge of a rule requiring the usage of a safety device, and they must also show that the employer has made a strict, consistent bona fide effort to enforce the rule. In determining whether strict, consistent bona fide efforts to enforce the usage of a safety device has occurred, Tennessee courts will consider an employer’s efforts to monitor for compliance and not simply the presence or absence of disciplinary action for known violations. Regardless of the jurisdiction, when evidence can be shown by a workers’ comp claimant that there has been inconsistent enforcement of the safety rule or requirement to use a safety device, the defense is very likely doomed.
The second distinct challenge is to show that the necessary degree of employee culpability exists. In Kentucky and Tennessee, this showing is a willful or intentional violation or failure of the employee. Kentucky and Tennessee precedents do not consider negligent, reckless and thoughtless conduct as being willful. In fact, Kentucky has even excluded gross negligent behavior from being considered willful in the worker’s compensation context. Being able to show an employee’s violation of a safety rule or failure to use a safety device was willful is an extremely difficult burden
in raising this defense. Indiana’s statute establishes an employee’s culpability at knowingly, and while this seems to be more favorable for sustaining a safety misconduct defense, in practicality its advantage for the defense is only negligible.
While there are certainly more instances of employers successfully raising defenses for intoxication or illegal drug use, these defense are no less susceptible to being defeated by the circumstances of a particular case. In the three jurisdictions considered by this article, an injured employee’s intoxication will minimally have to be proven to be the proximate cause of the accident in order for the affirmative defense to prevail. In Kentucky, the intoxication must not only be considered the proximate cause, but the primary proximate cause. While Indiana’s statute does not expressly require the intoxication to be the primary proximate cause, a review of Indiana case law shows that the intoxication should be considered a direct cause; a term that is, for all practical purposes, very similar to primary cause. Even though Tennessee has fairly robust statutory language and a drug-free workplace provision that creates a presumption of proximate cause, employers will, in most cases, still have to show that were it not for the intoxication or drug use, the accident would not have occurred. While the chances of successfully raising an intoxication or drug use affirmative defense is greater than raising one for safety rule violations, there are still substantial challenges, and quiet frequently these defenses fail.
Finally, the essential inquiry of this article has been to evaluate the utility of safety misconduct defenses in three neighboring jurisdictions. A review of statutes and case law in these jurisdictions reveal that the practical utility of safety misconduct defenses in a worker’s compensation claim is minimal at best. Safety misconduct defenses raised for intoxication or drug use certainly stand a better chance of survival than those raised for safety violations or failure to use a safety device. In fact, one could argue that statutory workers’ compensation defenses for safety rule violations are mere nicety language included in statutes to give employers the illusion of considering the fault of employees. The no-fault premise of workers’ compensation laws is a wall that safety misconduct defenses have little chance of scaling. Even so, employers should continue to strive for excellence in employee safety and drug deterrence efforts so that they can reap the other economic and social benefits that this article does not discuss.
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could lead to the imposition of penalties, whether or not the employee requested them. Burnett v. Webster City Custom Meats, 728 N.W.2d 851 (Iowa App. 2007). Thus, the former section 86.13 did not give employers and insurance carriers a right to deny claims without conducting any investigation. Even under the former statute, employers and insurers had a duty to “fully and fairly investigate a claim rather than to stand back and deny a claim simply because they wish to deny it.” Pickering v. Squealer Feeds, unpublished, 2000 WL 961920, at *9 (Iowa Ct. App. July 12, 2000). The duty to investigate required the insurance carrier to act reasonably under the circumstances that were known or reasonably available. In other words, an employer’s bare assertion that a claim is “fairly debatable”, without more, did not make it so. Meyers v. Holiday Express Corp., 557 N.W.2d 502 (Iowa 1996).
Perhaps one of precipitating cases that provoked the passage of the new penalty statute, is Keystone Nursing Care Center v. Craddock, 705 N.W.2d 299, 308-09 (Iowa 2005), wherein the Iowa Supreme Court stated that an employer did not necessarily have an obligation under all circumstances to inform the employee of the reason for a delay of benefits or suffer penalty. It maintained that penalty benefits could only be awarded for the absence of a reasonable basis to delay or terminate benefits, and not independently on the basis of failure to notify the employee. As such, the reasonable basis was to be viewed from the objective point of view of the deputy at the time of hearing with the benefit of hindsight, and not necessarily on what the employer knew or did not know at the time of the delay or denial.
Despite Keystone, even prior to the 2009 amendment to the statute, Iowa courts and the industrial commissioner had been increasingly narrowing their interpretation of the former statute, increasing the ease for which to impose penalty awards against employers and insurance carriers when benefits were denied. Such decisions were more and more stringent in their requirements of a reasonable investigation both prior to and after a decision to deny benefits, and in requiring a greater correlation of timeliness and contemporaneousness in decisions and reasoning to deny benefits. The new penalty statute has simply substantiated this trend and codified the attendant requirements.
NEW PENALTY STATUTE AND APPLICATION:
The New Statute
The newly revised Iowa Code 86.13(4) states:
4. a. If a denial, a delay in payment, or a termination of benefits occurs without reasonable or probable cause or excuse known to the employer or insurance carrier at the time of the denial, delay in payment, or termination of benefits, the workers’ compensation commissioner shall award benefits in addition to those benefits payable under this chapter, or chapter 85, 85A, or 85B, up to fifty percent of the amount of benefits that were denied, delayed, or terminated without reasonable or probable cause or excuse.
b. The workers’ compensation commissioner shall award benefits under this subsection if the commissioner finds both of the following facts:
(1) The employee has demonstrated a denial, delay in payment, or termination of benefits.
(2) The employer has failed to prove a reasonable or probable cause or excuse for the denial, delay in payment, or termination of benefits.
c. In order to be considered a reasonable or probable cause or excuse under paragraph “b”, an excuse shall satisfy all of the following criteria:
(1) The excuse was preceded by a reasonable investigation and evaluation by the employer or insurance carrier into whether benefits were owed to the employee.
(2) The results of the reasonable investigation and evaluation were the actual basis upon which the employer or insurance carrier contemporaneously relied to deny, delay payment of, or terminate benefits.
(3) The employer or insurance carrier contemporaneously conveyed the basis for the denial, delay in payment, or termination of benefits to the employee at the time of the denial, delay, or termination of benefits.
Contemporaneous Reasonable Excuse for Denial, Delay, or Termination of Benefits
Although section a. of the new penalty statute carries over much of the language used in the former statute. The first noticeable difference is that where the previous language only applied to a delay in commencement of benefits or termination of benefits, the new language
IA: Penalty Provisions... Continued from page 5
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incorporates exposure for penalty on a denied claim. However, in practice, denials were already covered under the prior penalty statute, as a delay in benefits (when a claim was later found to be compensable). What this language might clarify is the potential situation where imposition of a penalty is required for a denial without contemporaneous reasonable excuse, even if the denial is eventually found to be correct and the injury non- compensable at hearing. Theoretically, the claimant could receive penalty benefits for a non-compensable claim where no medical or indemnity benefits are recoverable. While to date, this theory has not been tested in any published decision, it remains a very real possibility under the new statute.
The most important language included in the new penalty statue is: “. . . known to the employer or insurance carrier at the time of the denial, delay in payment, or termination of benefits. . . ” As explained supra, under the old penalty statute, if a claim was denied on a solid suspicion, and then a few weeks later obtained evidence was obtained corroborating the suspicion and supporting the denial, there was little risk for penalty exposure. The new statutory language, however, requires the employer or insurance carrier’s reasonable cause or excuse to exist and be known at the time the denial, delay, or termination. The new statute clearly requires the factual or legal reason for the denial, delay or termination of benefits exist contemporaneously with the decision for such denial, delay, or termination. Now, if the defense does not have the required evidence in hand at the time of the denial, imposition of penalties is likely even if a reasonable suspicion supporting the denial exists at the time but the necessary evidentiary support does not become known until a later date. The new contemporaneousness requirement essentially removes the ability of the fact-finder to use hindsight, and requires decisions to be based on what was actually known by the employer or insurer at the time of the delay, termination or denial.
No Discretion in whether or not to Award Penalty
The language in section a. kept the word “shall” from the former statute when dictating imposition of penalty benefits. This elicits the question as to whether or not penalty must be pled by a workers’ compensation claimant, or whether the agency is required to independently award penalty.
Must Penalty be Asserted in the Petition
Although both the old and new statutes stated that the commissioner “shall” award penalty benefits, there still
appears to be some confusion on whether penalty must be an issue asserted by a claimant in the litigation process, or whether it may be independently imposed by the agency. In Burtnett v. Webster City Custom Meats, Inc., unpublished, 728 N.W.2d 851 (Iowa Ct. App. 2007), the defendants argued that a penalty should not have been assessed because the issue was not raised at hearing, the claimant did not assert penalty in its interrogatory answers when asked, and where they were never put on notice of the issue. The Iowa Court of Appeals affirmed the agency’s imposition of penalty despite claimant’s failure to raise it as an issue.
However, later in the decision of Gomez v. Des Moines Asphalt & Paving, File no. 5034039 (Arb. Dec. Oct. 2011), the hearing deputy refused to consider penalty as it was not raised by claimant prior to hearing but it was asserted in the claimant’s post-hearing brief. The hearing deputy in Severson v. St. Luke’s Hospital, File no. 5029545 (Arb. Dec. Dec. 20, 2010) also refused to consider penalty when it had been pled in the petition but the claimant had refused to answer interrogatories requesting information regarding the basis for the penalty claim, and went so far as to say it would be a denial of due process to consider the same. As this issue remains in dispute, practitioners on both sides should be conscious of the possibility of an assertion of penalty at hearing even if it has not been raised.
Discretion in Amount of Penalty
The remainder of section a. of the new statute is consistent with the previous version, in that although the imposition of penalty benefits might be mandatory, the agency maintains full discretion on the amount of penalty to be awarded. Conceivably this discretion ranges all the way from one penny to 50% of the benefits wrongly delayed or denied. (See Sylvara v. Hancock/Winnebago Counties Home Health Care Aide & Nursing Services, File no. 1134322 (Rem. Dec. Feb. 19, 2003) (“While penalty can be expressed as a precise computation based upon a percentage it is equally appropriate to award a penalty in a lump sum that is not a precise computation of any particular percentage of the amount subject to penalty.”). In practice, although the maximum 50% is often awarded, extremely low awards are rare, and awards never seem to fall below the 5% range. The new penalty statute, as with its predecessor, does not articulate any factors or tests to apply in deciding the amount of penalty to be awarded.
Prior case-law therefore remains applicable which dictates that the commissioner is to correlate the penalty award with consideration of factors such as the length of
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the delay, the number delays, the information available to the employer regarding the employee’s injury and wages, and the employer’s past record of penalties. Robbennolt v. Snap-On Tools Corp., 555 N.W.2d 229, 238 (Iowa 1996).
Burden Shifting for Reasonable Cause or Excuse & Notice Requirement
Section c. of the new statute strictly identifies what proof is required for a reasonable cause or excuse in order for an insurer or employer to avoid imposition of a penalty. While some of these requirements had been articulated in existing case law, the new statutory language arguably makes the defense’s investigation and communication of a denial, delay, or termination to an employee much more rigid. Section c. also codifies a burden shifting scheme, whereby once a claimant has established a denial, delay, or termination of benefits, the burden is then shifted to the defense to show that its denial, delay, or termination was reasonable. This was previously understood, but set forth only in case law. See Christensen, 554 N.W. 2d 254. The statute now compels workers’ compensation defendants to show that a reasonable investigation and evaluation preceded any excuse for nonpayment of benefits, that the results of such investigation and evaluation were the actual basis on which the excuse is based, and that such excuse and its basis are contemporaneously conveyed to the employee at the time of the denial, delay, or termination of benefits.
The requirements of the notice itself, other than that it be contemporaneously conveyed to the claimant, is not spelled out in the new statute. It is not required to be in writing, and the reasonable excuse which is the basis for the denial, delay, or termination need not be set forth in any great detail. See e.g. Dudley v. North American Nutrition Co., File No. 5028984 (Arb. Dec. March 23, 2010) (Defendant’s responses to the claimant’s requests for admissions “substantially” met the notice requirements of Sec. 86.13(4)(c)); Cloud v. Big Tomato Pizza, File No. 5030143 (Arb. Dec. Dec. 21, 2010) (Defendant’s answer provided specific reasons why benefits were not paid). However, under the new statute, it is questionable whether the decisions in Dudley and Cloud would still stand based on the new contemporaneousness requirement. Of course, it is always good practice to put the decision in writing to avoid proof issues at hearing.
What Benefits are Applicable for Penalty
It should be noted that the only benefits for which an unreasonable denial, delay, or termination can translate
into penalty benefits are indemnity benefits – meaning temporary/healing period benefits and/or permanent disability benefits. Benefits excluded from penalty include payment of medical bills (Klein v. Furnas Elec. Co., 384 N.W.2d 370 (Iowa 1986)) and the late payment of interest on benefits (Weishaar v. Snap-On Tools Corp., 506 N.W.2d 786 (Iowa Ct. App. 1993) (However, any payments made will first be allocated to interest and then to principal). Notwithstanding, whether or not it is proper, some deputies considered an unreasonable delay in payment of such benefits as a factor in determining the amount of penalty imposed for a delay or denial in the payment of indemnity benefits. (See Garner v. Wal- Mart Stores, Inc., File no. 5017363 (Arb. Dec. 20, 2006)
Despite the apparent inconsistencies in the date for application of the new penalty statute, it is recommended that practitioners follow the new penalty statute on all claims going forward. This issue will likely soon become moot as pre-2009 injuries become fewer and fewer.
RECOMMENDATIONS FOR PRACTIONERS:
In light of the changes in the statutory penalty law, defense practitioners must be more diligent than ever before. First, a reasonable investigation into whether benefits are owed to an employee must be performed timely. Benefits should not be denied before an investigation takes place. Second, benefits should only be denied as a result of the information obtained during reasonable investigation. This information must be the actual basis upon which benefits are being denied, delayed, or terminated. Third, the actual basis for the denial must be contemporaneously conveyed to the employee at the time of the denial, delay, or termination of benefits. A reasonable investigation resulting in the actual basis for denial, combined with contemporaneous notice to the employee, should protect the employer and insurer from penalty exposure.
The notice conveyed to the employee should be a written document which clearly communicates the basis of the denial to the employee. The notice should make some reference to the investigation which was performed, and include at some basic level of fact and law supporting the delay or denial. In practice, many times this will be a medical opinion. This notice should be sent out as soon as possible, and avoid referring to other issues which were not the actual basis for the denial, even if they do raise other questions. It is recommended that the employee be given a chance to respond, and a chance to offer any information which is contrary to the decision. It is also recommended that
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denials, particularly to unrepresented employees, inform the employee of time limitations under section 85.26 for seeking further relief and their right to contact the industrial commissioner for information.
The reasonable basis and excuse for the denial, delay, or termination of benefits should be continually investigated and reassessed as the case develops. It is advisable that after each major event in a case (such as
medical causation opinions, depositions or statements, or decisions during an appeal process) such reassessments actually take place and be documented.
To date, it is unknown whether the new penalty statute is retroactive top injuries occurring before July 1, 2009. Therefore, as a final recommendation, all cases going forward should be handled as if the new penalty statute is applicable.
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Edmund S. Muskie Pro Bono Service Award
_____________________________________________________________________________________________
Submit Your Nomination Today!
The Edmund S. Muskie Pro Bono Service Award recognizes TIPS members who have the attributes embodied by Senator Muskie: his dedication to justice for all citizens, his public service, and his role as a lawyer and distinguished leader of TIPS.
In addition to individuals, formal or informal groups, such as corporate legal departments or persons working cooperatively on a pro bono project, may be nominated, so long as a significant number of members of the group belong to TIPS. (Only TIPS Officers, Immediate Past Section Chair and immediate past and present Public Service Committee members are ineligible.)
For more information and to submit a nomination, please contact Jennifer LaChance at [email protected]
Nomination Deadline: February 28, 2012
A special thanks to The Edmund S. Muskie Archives and Special Collections Library for their use of the Edmund S. Muskie photograph.
Workers’ Compensation and Employers’ Liability Law Committee Newsletter Fall 2011/Winter 2012
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2012 TIPS CALENDAR January 2012
12-14 Midwinter Symposium on Insurance Don Cesar Beach Resort and Employee Benefits St. Pete Beach, FL Contact: Ninah Moore – 312/988-5498 25-27 Fidelity & Surety Committee Midwinter Mtg. Waldorf~Astoria Contact: Felisha A. Stewart – 312/988-5672 Hotel, New York, NY
February 2012 2-5 ABA Midyear Meeting New Orleans Marriott Contact: Felisha A. Stewart – 312/988-5672 New Orleans, LA February 3, 3:00 – 5:00 p.m CLE Program: Disaster Preparedness & Response Series
16-19 Insurance Coverage Litigation Arizona Biltmore Midyear Meeting Resort and Spa Contact: Ninah Moore – 312/988-5498 Phoenix, AZ
March 2012 8-10 Workers’ Compensation CLE Program The Westin Contact: Donald Quarles – 312/988-5708 Riverwalk Hotel San Antonio, TX
29-30 Emerging Issues in Motor Vehicle Product Arizona Biltmore Liability Litigation National Program Resort and Spa Contact: Donald Quarles – 312/988-5708 Phoenix, AZ 30-31 Toxic Torts & Environmental Law Committee Arizona Biltmore Midyear Meeting Resort and Spa Contact: Felisha A. Stewart – 312/988-5672 Phoenix, AZ
April 2012 14–18 TIPS National Trial Academy Grand Sierra Resort & Casino National Judicial College Reno, NV Contact: Donald Quarles – 312/988-5708
