Mass workplace shootings can directly affect workers comp rates

A candlelight vigil was held in Manchester, Conn., in August, 2010, after a gunman killed eight co-workers. Such incidents take a financial toll as well as an emotional toll./ AP PHOTO

Mass workplace shootings result in millions of dollars in workers compensation-related costs.

Policyholders across Connecticut, for example, are paying higher workers comp rates this year due in part to a 2010 mass shooting that is expected to generate about $7 million in total workers comp costs, according to Boca Raton, Fla.-based NCCI Holdings Inc.

In that Manchester, Conn., incident, a worker accused of theft at a beer distributor opened fire with two pistols, killing eight co-workers and seriously wounding two others before killing himself.

In another case, the city of Kirkwood, Mo., has incurred $9.9 million in workers comp costs so far and claims remain open in a 2008 shooting in which a gunman opened fire at a city council meeting, killing five and wounding two, although one of the wounded died months later. Police shot and killed the gunman, who reportedly was dissatisfied with prior treatment by city officials.

Multimillion-dollar workers comp losses can be expected after mass workplace shootings because of wounds requiring hospitalization and physical therapy, survivors' needs for psychological help, wage replacement expenses, benefits paid to family members and litigation, sources said.

“You could easily have a $10 million to $20 million comp event,” said Duke Niedringhaus, vice president at broker J.W. Terrill Inc. in Chesterfield, Mo.

The cost severity of mass shootings shows the balance-sheet protection that workers comp insurers provide policyholders by assuming statutory or unlimited liability for such claims, Mr. Niedringhaus said.

Civil litigation adds to the costs of mass workplace shootings.

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After a 2003 rampage in Meridian, Miss., for example, Lockheed Martin Corp. sought to limit its liability to workers comp costs, court records show. In that incident, a plant worker shot 14 co-workers, killing six before committing suicide.

Families of the deceased sued in civil court, alleging Lockheed allowed an employee known for racial hatred and threatening behavior to bring weapons onto its property. By proving an intentional tort, the plaintiffs could have circumvented an exclusivity provision in Mississippi law limiting employers' liability to workers comp benefits.

Two years later, the 5th U.S. Circuit Court of Appeals ruled the shooter acted outside the course and scope of his employment. The court concluded that the state's workers comp law provided the exclusive remedy in the case, although sources familiar with the litigation said Lockheed reached confidential settlements with the plaintiffs.

Despite headlines about mass shootings, though, most workplace homicides are not crimes of passion committed by disgruntled co-workers, according to 2012 research by NCCI.

Most workplace homicides result from robberies committed by people outside the organization, the workers comp research and ratings organization concluded by evaluating data collected through 2009.

U.S. Bureau of Labor Statistics data shows that of 518 workplace homicides in 2010, 77 involved two or more workers killed. Homicides accounted for 11% of U.S. workplace fatalities in 2009, according to NCCI.

With workers comp systems capping employer liability, a single shooting death might generate a relatively small claim if, for example, there were no young children eligible for survivor benefits through their college years, sources said.

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A claim for a back injury requiring surgery could generate greater workers comp costs than death benefits for a deceased worker who did not have young dependents, said John A. Mastropietro, chairman of the Connecticut Workers' Compensation Commission.

The average cost among 28 shooting-related indemnity claims closed during 2012 by Sedgwick Claims Management Services Inc. was $105,000, according to the Memphis, Tenn.-based third-party administrator.

However, workers comp system costs mount when mass shootings affect several employees.

Connecticut, for example, raised loss costs paid by policyholders by 7.1% for 2013 based on an experience period that included 2010, the year of the beer distributor shooting, said Laura Backus Hall, state relations executive for NCCI in Boca Raton, Fla. While typical workers comp expenses drove most of the need for the rate increase, the shooting had a “measurable impact” on 2013 rates, she added.

In addition to benefits, employers also face workers comp legal battles.

After the Connecticut beer distributor shooting, a deceased worker's fiancée argued that she was entitled to workers comp benefits. The employer disputed the claim, arguing that workers comp survivor benefits are normally provided only to family members.

A trial commissioner ruled in favor of the woman as a “dependent in fact,” coupled with the claim payer's failure to respond to the claim within the legally required time, Mr. Mastropietro said

The employer appealed, but then settled the claim, he said.