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Workers compensation exclusive remedy provisions under attack

Posted On: Feb. 1, 2015 12:00 AM CST

Workers compensation exclusive remedy provisions, under attack in Florida and Oklahoma, face challenges in more states where workers comp reforms have reduced benefits.

Often referred to as the “grand bargain,” exclusive remedy in most states means workers injured on the job can receive benefits only through the workers comp system. A liability lawsuit may be allowed in the case of gross employer negligence.

Exclusive remedy is being challenged strongly in Florida and Oklahoma, which have had significant workers comp reforms, said Albert B. Randall Jr., Baltimore-based principal at law firm Franklin & Prokopik P.C. and president of the National Workers' Compensation Defense Network.

At least a dozen states have enacted changes to their comp laws in recent years. California and New York are among the states that made significant comp reforms.

“As a result of those reforms, the plaintiffs attorneys see an opportunity with new statutes to try to carve some additional exceptions into exclusive remedy,” Mr. Randall said. “Perhaps there are instances within each system where there's been at least a perceived reduction in benefits.”

In one Oklahoma case, a Pottawatomie County judge ruled Jan. 9 that the state's workers comp law no longer provides the exclusive remedy for “foreseeable” injuries, so Darrell Duck can sue his employer, Hibdon Tire Plus, a division of Bridgestone/ Firestone Retail Operations L.L.C., for neck and back injuries he sustained while using a tool to loosen a wheel. The Feb. 19, 2014, incident occurred nearly three weeks after Oklahoma's workers comp reforms took effect.

The law, which moved the state from a court-based adjudication system to an administrative process, also allows employers with at least 100 workers and $1 million in net assets, among other conditions and with certain exceptions, to self-insure or buy private workers comp insurance.

In addition, under the new workers comp law in Oklahoma, permanent partial disability benefits are allowed for a maximum of 350 weeks rather than 500 weeks, which was the maximum duration under the previous law.

Bob Burke, Mr. Duck's attorney, said Hibdon Tire accepted the claim under the state's comp system, but given the reduced benefits available under the new law, “I no longer believed workers comp was a good replacement. After 100 years … the grand bargain has now been breached. Exclusive remedy is dead.”

Both sides filed petitions last week asking the Oklahoma Supreme Court to immediately review the decision. While Mr. Burke also expects quick action by the state Legislature to address the issue, “you've still got over a year of injuries here that are subject to this,” he said.

Similar arguments have been made in Florida, where a Miami-Dade County judge ruled in August that the state's law might have been a reasonable alternative to tort litigation 40 years ago, but “the benefits in the act have been so decimated since then that it no longer provides a reasonable alternative” to civil court.

The ruling states that a workers comp law should provide some level of permanent partial disability benefit, absent from the Florida Workers Compensation Act as a result of 2003 workers comp reforms.

However, in a strong signal that exclusive remedy remains alive in Florida, the 11th U.S. Circuit Court of Appeals ruled Jan. 22 that Zenith Insurance Co. is not liable for a $9.5 million judgment secured by the estate of a worker killed on the job at Lawns Nursery & Irrigation Designs Inc. due to the state's exclusive remedy provision.

While the ruling was a big victory for Florida workers comp payers, “that's the result that all employers and insurers, frankly, would have expected,” Mr. Randall said. “When the workers compensation system was designed … there was that trade-off where employers paid more in benefits under the no-fault theory, but perhaps saved a little bit under the (resulting ban on) tort” litigation.

To figure out which states might experience exclusive remedy challenges next, look “to states that have had significant workers compensation reforms in the last 10 years, and to the extent that those reforms have made those workers compensation systems less litigious,” said Trey Gillespie, Austin, Texas-based senior workers comp director with the Property Casualty Insurers Association of America. “You're going to see a bunch of hungry plaintiffs attorneys out there trying to attack the reforms through constitutional challenges and/or attack the exclusive remedy provisions of the workers compensation act through creative litigation.”

Even in states where there haven't been significant, recent workers compensation reforms, there are still attempts “to chip away at exclusive remedy,” Mr. Randall said.

In Nebraska, a bill would waive workers comp as the exclusive remedy if it's determined that an employer was guilty of willful negligence.

A West Virginia bill, on the other hand, would better protect employers by tightening the definition of “deliberate intent,” which is an exception to exclusive remedy.

The idea is that, to recover benefits, an employee has to prove his or her supervisor or co-employee “deliberately committed an act with the intent to injure,” Mr. Randall said. But sometimes it's defined as intending “to commit an act which was likely to injure, which is a very different interpretation.”

In Oklahoma, the “case is a reminder that words matter,” said Bruce Wood, Washington-based vice president and associate general counsel at the American Insurance Association.

The word “unforeseen” was likely meant to distinguish accidents from intentional injuries, but there are few accidents that are truly unpredictable, Mr. Gillespie said. Workplace slips, falls and lifting accidents all are foreseen to some degree, he said.

To protect exclusive remedy provisions and keep “issues out of the tort system,” Mr. Wood said some states impose penalties on employers and/or award increased benefits to injured workers in cases of employer misconduct.

“We would say that this is a sound compromise between preserving … a no-fault system and recognizing that, in certain cases, a state may want to provide additional compensation for employer conduct that's deemed to be truly egregious but does not rise to the level of true deliberate intent to injure,” Mr. Wood said.

Challenges to exclusive remedy provisions are of concern for payers who are “subject to the whims of the court system,” Mr. Randall said. “The only thing they can do is just try to continue to create policies to enhance their safety. But once a claim is being made, at that point they're subject to the legislative mandate and the court interpretation.”